Despite the repeal of the universal banking model by the Central Bank of Nigeria, banks have continued to force customers to patronise insurance companies and specific products, investigations have revealed.
Following the repeal of the model in 2010, the CBN had ordered the banks to divest from non-banking institutions and concentrate on their core business.
The repeal of the universal banking model led most of the banks to sell their stakes in the insurance sector, while a few with group holding licences held on to their insurance subsidiaries.
Even though the coming of the banks into the insurance sector provided the firms with the much needed capital, operators had complained that the universal banking regime introduced unhealthy practices and jeopardised corporate governance in the insurance sector.
The bank-owned insurance subsidiaries had more access to insure banks’ huge assets at the expense of firms without links to the banks.
The synergy between the banking and the insurance sectors became pronounced when the National Insurance Commission induced a compulsory recapitalisation exercise in the insurance industry between 2005 and 2007.
To meet the new capital requirement set by the regulator, many of the insurance companies approached the banks to invest in them so that they could scale the recapitalisation hurdle.
The investing banks changed the names of some of the insurance firms and structured them to fit into their own operations.
However, banks that had insurance subsidiaries have found ways of retaining some interest in the firms and have been forcing their customers to patronise the specific insurance firms.
The situation, however, is of concern to the operators in the financial sector, who feel it is not in the best interest of the customers for their banks to force insurance firms on them.
The President, Nigerian Council of Registered Insurance Brokers, Mr. Ayodapo Shoderu, said, “It is quite saddening that some of those companies have cleverly devised ways of circumventing the rule by re-enacting their collusion with banks and other financial institutions with whom they have relationships to compel clients to insure with them, especially when they source loans from them.”
According to him, this practice does not leave the client with the opportunity of choice of insurance companies or brokers, thereby subjecting them to exploitation.
The displeased NCRIB boss said that the council would arrange a meeting with the Chartered Institute of Bankers of Nigeria so as to make known its views on the matter.
Some displeased insurers, who spoke with our correspondent, said the bankers usually go back to the insurance companies concerned to collect commission for getting them customers.
A bank customer, who asked not to be named because of the controversial nature of the subject, said his bank subtly introduced him to an insurance company that he later discovered was connected to it and that when he could not agree to terms with the insurer, the bank denied him a loan facility that he requested for.
A former President, Chartered Insurance Institute of Nigeria, Mr. Wole Adetimehin, said he had unpleasant experiences with the banks on this issue.
He complained that despite the repeal of the universal banking model, the banks were forcing insurance companies on their clients before they could be given loans even though the customers were unhappy with the development.
According to him, the banks determine the rate at which the insurance is done and the scope of cover.
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