NAICOM Warns Insurers, Brokers Against ORC
The National Insurance Commission (NAICOM) has warned insurance brokers to stop the practice of demanding for an Overriding Commission (ORC) from insurers.
The Commissioner for Insurance, Muhammed Kari who gave the warning at the last edition of the bi-monthly Members’ Evening of the Nigerian Council of Registered Insurance Brokers (NCRIB) in Lagos said that there is nothing like overriding commission in the industry, describing the practice as illegal and that the commission will not spare an erring broker forthwith.
According to him, the unethical practice has been giving leverage to some weak companies who would want to have businesses by all means by offering an ORC to brokers even when they cannot be able to meet the claims obligation at the end of the day.
It would be recalled that the regulatory agency recently lamented that the industry made over a trillion Naira in premium income in 2017, but ended up giving out discount to the tune of N650 billion while retaining about N350 billion, a development the Commission has frowned at, noting that the industry has to move up to its billings as a key economic segment of the financial subsector.
Due to the poor performance of some companies especially the quoted insurance firms, the Commission has been preaching a merger and acquisition as a milestone for industry consolidation. Kari has prompted that companies should think voluntary merger or risk being forced to merge or forfeit license.
During the last Brokers Members Evening in Lagos, the CFI said: “The need for further consolidation of the industry cannot be over-emphasised, adding that the industry leaders have unanimously agreed that there is the need for consolidation at least on the minimum statutory level.
“I want to tell you that if you don’t leave voluntarily, you will do it compulsorily. We believe there should be a consolidation of all insurance companies in Nigeria because companies have gone so weak.
“We have companies that cannot pay salaries. We have companies that cannot pay claims. I can prove to you intelligibly that majority members of the NCRIB would rather take the business to these companies that cannot pay salaries because those companies offer you extra for ORC.
“What I want us to know which we have been claiming ignorant of is that there is nothing like immediate ORC in this industry. So, tomorrow when they (NAICOM officials) come out, chasing after some of you, please that your helpdesk committee should not come to my office.
“I’m trying to make it clear to people that didn’t know this thing exists. When they’ll be found to have been doing it, members of the helpdesk committee, avoid them since they don’t know what they are doing”, Kari warned.
The NAICOM boss disclosed that the roadmap for consolidation would soon be out to enable companies strengthen themselves financially, according to him, not many companies have the capacity to meet their financial obligations to their publics not to mention paying dividends over the years.
He noted that out of the 27 quoted companies, only about 6 or 7 have paid dividends in the last three years, a situation he pointed out that it has not been attractive to investors to look the direction of insurance stocks.
The CFI is worried that with the removal of the share ceiling by the Nigerian Stock Exchange there is no hiding place for insurance stocks on the floor as insurance stocks will drop to a zero level. He added: “Definitely, there is no attraction to investors if you don’t pay your dividend or if your trade is not marketable.
And for those of you that are interested in the stock exchange, you’ll know that also they have removed the bottom for price. So, there is no price par now.
With the bottom removed, it means you have no (par?) price. You can go down to zero. We cannot afford to allow our market to be exposed. So, the insurance companies must consolidate. This will answer a lot of questions that have been nagging us, he said.
Source: Independent
