By Ebere Nwoji
The umbrella body of insurance underwriters, the Nigeria insurers Association (NIA), has condemned the rising trend of banks compelling their customers seeking credit to insure the loan collateral with their (banks’) captive firms instead of allowing them to choose insurance firms of their choice.
A captive company is one wholly owned by banks.
Although the CBN, had through its latest directive on bank ownership of insurance firms, compelled most banks to divest from their insurance subsidiaries, some banks who retained ownership of their insurance firms through their holding company initiative, contravene the Insurance Act, by compelling customers seeking for loans to insure with their captive insurance firms at an additional charge.
NIA Chairman, Mr. Eddie Efekoha, in a statement to journalists, said he has received complaints about the new development in which banks and their captive companies force known customers of other underwriters to loan collateral with their own insurance companies
“It has come to our notice concerning customers that often times are compelled by the banks and their subsidiaries to insure with their captive insurance firm.”
“That is, the banks compel their customers who took loans to insure the collateral with their own insurance subsidiaries or companies, and that is against the spirit of the Central Bank of Nigeria (CBN) because a universal banking license is no more and no client must be forced or compelled to insure with any insurance company,” he stated.
The NIA Chairman, said rather than imposing their insurance companies on customers, banks should require that the customer brings a policy from any registered insurance company.
He said such banks should agree with the customer that should there be damage to this collateral, the proceeds from the insurance would be made to the bank; and nothing more than that.
Efekoha urged such customers to bring evidence of compulsion to indemnify collateral with captive companies by banks.
“Therefore, we are educating our insuring public that where banks so insist, they should compel the banks to put it in writing and such letter should be brought to the NIA because we will make such reports to the CBN that their members are not respecting the guidelines for their operation.”
The NIA boss said the association had overlooked such complains in the past, adding that it has gotten out of hand in recent times to the extent that the body can no longer sweep it under the carpet.