How Unethical Conduct Plod Insurance Sector Growth 

Recently some insurance underwriters raised the alarm over much exploitation by insurance brokers in form of gratification. In this report, Ebere Nwoji highlights some unprofessional practices hindering the industry’s growth

It is often said that one of the biggest challenges facing Nigerian insurance sector, which has led to its stunted growth when compared with the banking sector, is poor perception and lack of awareness among others.

This, analysts believe. Is why the sector has not been able to contribute meaningfully to Nigeria’s gross domestic products (GDP). The duo have over the years stood as giant blocking the masses from patronising the industry.

Both the sector operators and regulator have made strategic efforts to roll away the  big stone to grow the annual premium, profit and assets of the industry but success is not yet fully achieved.

Unknown to the operators, in addition to these problems, the retrogression and pains inflicted on the industry through various forms of unprofessional and unethical practices have stood as stronger giant against realisation of their dream of transforming the industry to global competitive market in terms of market size, asset base and market capitalisation.

Evidence of this is the fact that it took the industry 15 years instead of the targeted three years to realise its set goal of transforming to a trillion Naira market from its annual premium figure of N260 million in 2009 to N1 trillion premium which it realised in 2003.

A critical look at the industry and various forms of unethical and unprofessional practices operators involve themselves in showed that indeed many practitioners don’t know, have forgotten or do not want to differentiate between activities that constitute professionalism and unprofessionalism in their day-to-day business conduct.

Alarm by Underwriters

Recently, some insurance underwriters the raised alarm that insurance brokers have turned them into professional beggars and slaves through high level of demands they make before they can place businesses with their underwriting firms.

According to the underwriters, some brokers have turned underwriters into ATM machines where they frequently collect money any time they have one occasion or the other that requires finance.

The underwriters said the brokers often turn them to financiers of their children’s wedding ceremony, burial of their relatives and sponsors of their birthday parties.

According to them failure to contribute to these deprives the underwriter of businesses from the broker.

A management staff of an insurance firm told THISDAY that some brokers go the extra mile of printing burial invitation for their relatives that died over 10 years ago and bring such invitations to underwriting firms for sponsorship of the burial expenses.

It was learnt that another unprofessional practice trending in the industry is the fact that virtually all the Managing Directors or Chairmen of insurance underwriting firms have brokerage firms. As such, objective assessment of underwriting firms for risk placement in the industry becomes very difficult. According to reports, certain risks are placed not because the underwriting firm was capable but because he has connection with the brokerage firm.

It was also gathered that brokers often share a business that supposed to be insured by two insurance firms to about ten insurance firms in order to collect multiple commissions and gratifications.

Insurers’ involvement

The insurers are also said to involve themselves in unprofessional practice like placing a risk and at the same time crystallizing the risk in order to demand for claims after which he would collect his share. These and more are some of the unprofessional conducts perpetrated by both insurance underwriters and brokers raising the question on the place of professionalism and ethical conduct in today’s insurance business practice in Nigeria.

This is despite all the annual rituals of insurance professionals’ forums and annual education conferences as well as various annual retreats and conferences organised by various arms of the industry to institute regime of ethical conduct and professionalism in the industry.

Meaning of professionalism

Professionalism is a powerful quality. It allows a worker to fulfilll his role to the best of his ability. It helps him to impress and inspire others. And it gives a deep sense of satisfaction and self-worth.

As the saying goes, Professionalism is not the job you do, it’s how you do the job.

Professionalism according to experts, involves consistently achieving high standards, both visibly and “behind the scenes” – whatever your role or profession.

Professionalism involves being reliable, setting your own high standards and showing that you care about every aspect of your job. it’s about being industrious and organised and holding yourself accountable for your thoughts, words and actions.

Professionalism in a work place gives one a competitive advantage over other candidates and helps one build a strong reputation within a company. 

Among insurance practitioners, absence of professionalism in business conduct is one of the contributors to poor perception problem of the industry as well as lack of trust, which has remained the bane of the industry’s growth.

NNPC Account

Unlike in the banking industry uniform interest rate is the norm, in the insurance industry, it is difficult to agree and maintain a single premium rate without seeing different practitioners quoting their own company’s rate just to corner the business.

This practice is much more prevalent in placement of government businesses.

A case in point was the controversy that trailed the selection of Lead insurance broker for underwriting of 2024 NNPC Account. 

While stakeholders and industry watchers assumed that the tussle among insurance managers for underwriting of government business have simmered down, what happened in this particular business showed that it   is still on as there was growing controversy over   brokerage firm that would lead others for this year’s NNPC account.

According to the insurers, unprofessional and unethical conduct arose from selection for 2024 NNPC insurance programme which commenced towards the end of 2023 as the insurers alleged that the exercise saw the emergence of what leaders in the brokerage market termed an unpopular brokerage firm named Zebra Insurance Brokers as the leader in the business.

Against this backdrop, the selection process has been described as non-transparent while the emergence of the leaders was shrouded in mystery.

In the words of the brokers, the annual bid process ritual of NNPC Limited has always been shrouded in mystery, “but the 2024 exercise is a calamitous outing,” the brokers stated.

The brokers alleged that what happened in the selection process was what you get when an ineffective and an inefficient non-insurance practitioner assumes the position of authority that they do not merit.

They alleged that NNPC Limited has become a laughing stock in the insurance industry for pretending to be running a free, fair and transparent process whereas the process is a negotiated transaction under the supervision of the leadership”.

“How can anyone explain or justify the emergence of Zebra Insurance Brokers as a leader of the Non-Oil Insurance programme above all the most capitalised and experienced companies in Nigeria,” stated one of the participants.

They alleged that it was notorious for most of the widely criticised vices in the insurance industry, accusing the managers of contacting the leadership of various insurance companies and brokers on the 2024 NNPC programme, striking deals on how much to be refunded to the Head of Risk Management and Insurance and the Chief Non-Energy Investment Officer of NNPC Limited. This is very common scenario that occur in insurance of government business every year as bribery often exchange hands before the business will be given to the highest payer.

Operators’ view

Commenting, former Chairman Nigeria Insurers Association (NIA) and Principal Consultant Carefirst Consult, Gus Wiggle said the insurance industry was part of the larger society,  and its practices couldn’t  be isolated. 

According to him the practice of paying gratification to brokers has been on for a long time ago, but that he was happy the underwriters have come to realise that this couldn’t be sustained any longer.

Describing it as an unfortunate self-inflicted injury by the underwriters, Wiggle said not all companies engage in these unethical practices, but that it was essential to recognise those who prioritise fairness and transparency.

“I’m not against celebrating relationships, but it shouldn’t be tied to patronage or inducements. However, companies should strive to minimise or eliminate such practices through deliberate efforts and robust corporate governance. The NIA should self regulate itself and take ownership of addressing these issues rather than relaying on the regulator. 

NAICOM can provide guidance and support but not to be the sole solution to the problem.

The NIA and NCRIB should develop industry wide codes of conduct to address these unethical practices and promote a culture of fairness, transparency, and ethical practices,” he stated.

Also, the Executive Secretary Nigerian Council of Registered Insurance Brokers (NCRIB), Mr Tope Adaramola, said insurance as we all know thrives on comradeship.

According to him, right from the evolution of insurance in coffee house in Britain it started on the friendship and comradeship, so whatever transpired within the insurance industry fraternity should be seen first from the point of view of relationship”, he said 

He however said but if the relationship or handshake goes beyond the elbow then it would be appropriate for alarm to be raised.

“Coming specifically to the relationship we have always had this allegation of brokers wanting to exploit underwriters by way of demanding for all sorts of things. But we have not really had anybody coming out emphatically or affirmatively to say this and this brokers are culpable. We promote ethics in the council and cases like that are cases that ordinarily we will like to treat whether by punishment or by moral suasion but we have not heard it. It is like the case of saying insurance companies do not pay claims and when you ask who does not pay you will hear it was my brother that told my uncle, my uncle told a friend. But we cannot thrive on hear say. Let any underwriting company that feels that brokers are looking for monetary inducement which is unethical come out and report,” he said

He noted that every professional must practice with value and no body can deny value.

He pointed out that some clients despite the fact that they engage brokers they still dictate to the brokers where they should take their risk to regardless of whatever professional advise the brokers have to give. 

According to him, this is because first of all they see those companies as companies that have value. And they also have acceptable brand.

On the other hand, he noted that some insurance brokers have zero tolerance to bribery or gratification.

He accused some underwriters of including inducement as part of their marketing strategy saying it was unfair for them to turn back and accuse brokers of asking for payment of gratification.