The utilization of bancassurance has proven to be effective in expanding insurance coverage as part of the measures outlined in the National Financial Inclusion Strategy (NFIS), UDOKA OGARAKU reports. This is due to the issuance of revised bancassurance guidelines by the National Insurance Commission (NAICOM), which encourage insurance companies in Nigeria to form partnerships with multiple banks

In 2016, there was a significant disagreement between the National Insurance Commission (NAICOM) and the Central Bank of Nigeria (CBN) regarding the best approach to implementing bancassurance in Nigeria. As a result, the NAICOM suspended all bancassurance partnership deals between insurance firms and banks indefinitely until a satisfactory model could be agreed upon. Furthermore, the NAICOM also suspended other channels for distributing insurance products, such as airlines, online aggregators, telecom platforms, and any others that had not been approved by the NAICOM. This decision had a detrimental impact on the expansion of financial services and inclusion because it was caused by the CBN’s refusal to grant licenses to banks that wanted to establish bancassurance partnerships with insurance companies. However, it appears that this situation has come to an end with the CBN’s launch of the third National Financial Inclusion Strategy (NFIS) in November 2022, which successfully incorporates insurance into all three versions of the strategy.

Jide Orimolade, the chairman of the sub-publicity committee of the Insurers Committee, made a public announcement recently stating that the updated guidelines will allow insurance companies to collaborate with more than one bank at a time instead of being restricted to just one. Orimolade, who’s also the managing director of Stanbic IBTC Life Insurance, expressed appreciation for the new guidelines and emphasized that they will promote fairness among participants in the insurance market.

The NFIS, whichh was introduced in 2012, has with it 70 strategic recommendations, overall financial inclusion targets, as well as targets for products, channels, and enablers. The third strategy also aims to achieve objectives such as fostering growth and innovation in microinsurance through new players, models, and partnerships. Additionally, it aims to enhance the affordability and relevance of credit and insurance products for MSMEs and smallholder farmers. Analysts have observed that one of the objectives is to raise the percentage of adults with regulated insurance policies from 2% in 2020 to 8% by 2024.

In Nigeria, the utilization of bancassurance has proven to be effective in expanding insurance coverage as part of the measures outlined in the NFIS. This is due to the issuance of revised bancassurance guidelines by the National Insurance Commission (NAICOM), which encourage insurance companies in Nigeria to form partnerships with multiple banks. These guidelines aim to facilitate insurers in reaching a wider customer base through various banks, thereby enhancing the sales and penetration of retail insurance in Nigeria.

Essentially, the guidelines establish a framework for licensing, registering, and regulating web aggregators, as well as governing their interactions with insurance companies. Specialists say that web aggregators must acquire an operating license from NAICOM, while insurance companies require a “No Objection” from NAICOM to engage in web-based insurance activities. The Guidelines were implemented on February 1, 2022, and existing web aggregators and insurance companies have a 60-day period to fully comply with the provisions.

Rasaq Salami, who’s the deputy director of corporate communications and market development at NAICOM, explained that the revised guidelines aim to create equal opportunities for all operators and eliminate captive arrangements. He further clarified that this would remove exclusivity, aligning with the Central Bank of Nigeria’s regulation that prohibits commercial banks from exclusively offering the products of one insurance company to consumers.

The referral model of the bancassurance model, which was approved by NAICOM and the CBN in 2017, has been reasonably implemented by the insurance industry in the country. Pius Agboola, who’s the director of authorization and policy at NAICOM, announced during the first bancassurance certification workshop for insurance employees in Ogun State that NAICOM would approve the referral bancassurance agreement between the bank and insurance company, with the condition of obtaining references from the Central Bank of Nigeria. However, due to the Federal Government’s tenure policy, Pius Agboola, Director of the Inspectorate Directorate at NAICOM, and Habila Amos, Director of Administration and Human Resources, have been compelled to retire. On Friday, August 04, 2023, Pius Agboola, Habila Amos, and Barineka Thompson, who served as Director of Finance and Accounts, received compulsory retirement letters from NAICOM. This action was in line with a recently released Public Service Circular that mandates eight-year tenure for all Directors of the Federal Government of Nigeria (FGN).

Nonetheless, the National Financial Inclusion Strategy (NFIS) consists of a set of agreed-upon measures that stakeholders at the national or subnational levels implement to achieve financial inclusion goals. Research findings suggest that the referral model of bancassurance has a noticeable impact on customers’ preference for insurance products. Moreover, the loyalty of customers and the perceived quality of service provided by banks play a crucial role in influencing the effect of the bancassurance referral model on customers’ preference for insurance products.

Despite initial concerns when NAICOM issued guidelines for bancassurance operations in 2010, the popularity of bancassurance as a distribution channel for insurance products has grown. The growth of bancassurance in Nigeria can be attributed to the regulatory environment, market potential, and strategic partnerships. The significant opportunities for bancassurance in Nigeria arise from its large population and expanding middle class. Banks are making use of their extensive branch networks to reach a wider customer base with insurance products, capitalizing on the increasing awareness of insurance and financial inclusion initiatives. As a result, there is now a wider range of bancassurance offerings available across various banks in Nigeria.

Insurance companies have collaborated with banks to access their customer base and distribution channels, enabling them to provide a wide range of insurance products. By utilizing the trust and existing relationships established by banks with their customers, insurance companies can expand their reach and enhance their market penetration. Experts recommend that insurance companies in Nigeria carefully select banks with a significant customer base and excellent service quality when establishing a bancassurance relationship. As an example, the United Bank for Africa (UBA) Nigeria, Heirs Insurance, and Heirs Life Assurance have joined forces, allowing UBA customers to purchase insurance products through UBA’s digital platforms, branches, and other authorized channels, as mentioned on their website. It is well-known that the Nigerian insurance industry falls under the regulation of NAICOM, while the banking sector is overseen by CBN.

While there are challenges related to regulatory compliance, operational integration, and customer education, these challenges also present opportunities for innovation and collaboration within the financial services industry. Overall, bancassurance in Nigeria is a growing trend that is supported by regulations, market potential, and strategic partnerships between banks and insurance companies. It is expected to play a significant role in expanding access to insurance products and improving financial inclusion for Nigerian consumers as the industry continues to evolve.

According to Agboola, bancassurance is defined as a method of distributing insurance products through professionals who work for or represent an insurance company. Additionally, he explains that the bank collaborates with an insurance company and utilizes its employees to identify potential customers, who are then approached by an insurance expert.

•Ogaraku writes from Imo State.

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