The insurance risk premium rates currently applicable in the country have been described as too low and unsustainable for the development of the insurance industry.
Decrying the underpricing of insurance premiums, group managing director of Cornerstone Insurance Plc, Mr. Ganiyu Musa, said underwriters have deviated from the basics of the profession in the sense that all have collectively driven insurance rates to levels that are not sustainable.
This is as the top-line of the underwriting firm rose to about N24 billion in its 2022 financial year, growing by about N4 billion, compared to the N20 billion it posted in the 2021 financial year.
Speaking at the Cornerstone Insurance Plc 2023 Brokers Events held separately in Abuja and Lagos, Mr Musa, said as a result of premium underpricing, profitability across the insurance industry is below par and not comparable to what is seen in other arms of the financial services sector
He urged underwriters to work together to ensure that premium rates in the industry are improved.
According to him, though the banking sector is faced with same regulatory constraints on pricing,
“For instance if the CBN says you cannot lend for more than 21 per cent, or that you cannot pay less than two per cent interest on current account, for the banks, that maximum lending rate is what applies to the majority of their customers. If anything, in addition to the specified lending rate they also charge documentation fees, legal fees, such that at the end the customer is borrowing above the specified rate.”
For us as insurance operators, faced with a similar regulation that says, for instance, motor premium should not be more than 10 per cent, while the banks will take that rate as the minimum that they charge, insurance takes that as the maximum and then drives it down it.
Until December when NAICOM came out with the new guide on rating, motor premium had gone down to as low as one per cent in some cases.
Mr Musa said it is the collective responsibility of all underwriters to develop the discipline needed to change that narrative.
“It is the underwriters that are squarely to blame because we are not forced to accept those rates, we determine the pricing, we put our balance sheet on the risk. If all the underwriters band together and agree on the rate of premium to accept and the brokers go from underwriter A to Z and get a similar response, they will pay a price that is fair,” he said.
Meanwhile, the group managing director of the underwriting firm, while thanking brokers and other stakeholders, who were instrumental to the outstanding financial performance the company had last year, noted that the feat was achieved despite several uncertainties in the operating business environment.
Saying that brokers are an essential part of his company’s business because they control the large scale of the insurance market, he appreciated their belief in Cornerstone brand, promising that the insurer will not let them down.
Going down the memory lane, he said, 10 years ago, the company made N4 billion premium Income but has grown significantly in the last 10 years to N24 billion, a feat he attributed to brokers, its policyholders and shareholders and other relevant stakeholders.
He said the event is an annual gathering where the management of the insurance firm meets the critical stakeholders, such as brokers, policyholders and shareholders, and assess performance of the outgone year with the hope of correcting the previous mistake in the new year.
“It’s a gathering of stakeholders whereby the management of Cornerstone meets our partnering insurance brokers to offer solutions to us on how we can serve them better. We want to learn from them, what we have not been doing, but can do, to enhance our products and service deliveries. So, having the opportunity to interact with them is an invaluable experience.
“This is very critical, very positive and some of them are bringing ideas, suggestions on how we can move forward. We value that because it enables us to improve. So, we are always looking out for opportunities like this to improve our operations,” he said.
While assuring its policyholders and shareholders that Cornerstone Insurance will always be there for them, he added that the company has a strong balance sheet, saying, “we have a strong balance sheet, which means, whatever that happens, we are going to deliver on our promises. We have never ever had to reject or not pay claims because of finance. We have arranged our balance sheet in such a way that we have more than enough financial resources in immediately available form to meet all our matured obligations. That is the company’s policy that, irrespective of what happens, we must meet our obligations.”
The executive director, Business Development, Mr. Chidiebere Nwokeocha, disclosed that the company has 12 offices and branches nationwide with FCMB and Union Bank being its Bancassurance partner while it has surpassed N20 billion in its Shareholders’ Fund which improves the firm’s capacity to take leadership position in more key accounts.
The insurer’s services are and will always be top notch, urging brokers to engage Cornerstone more for their risk businesses.
Earlier, some of the brokers at the event eulogised the company for promptness in its service delivery and claims settlement, stating that Cornerstone brand is already a house-hold name in the industry and must grow higher.
