New insurance intermediaries emerge for state Governments’ businesses

- As NAICOM pegs licensing fee at N2m
The Nigerian insurance industry will from January 1st 2019 witness the emergence of a new set of players called State Insurance Producer (SIP), licensed to act as intermediaries for state government insurances.

This follows the release of the operational guidelines for State Insurance Producer (SIP) by the National Insurance Commission (NAICOM) yesterday, which stipulated N2 million as license fee for the new players.
A SIP, according to NAICOM, is a government agency licensed by it to provide intermediary insurance services and remunerated in accordance with the provisions of the guideline.

The guideline stated: “A license issued under this Guidelines shall entitle the holder to act as a State Insurance Producer for the appropriate state government and shall be renewable once every two years by the Commission.
“There will be a signed undertaking signed by an officer of the State Government not below the rank of a Permanent Secretary that the state undertakes and agree that the sum of N2 million shall be deducted from accrued commission to be earned by the licensed State Insurance Producer before payment of commission is made to the coffers of the Government.
“The levy chargeable on SIP business shall be 1.00 percent of gross commission and the commission to be paid by the insurers to a SIP shall not exceed 75 percent of the Commission payable to insurance broker.
“If the Commission is satisfied that the applicant has satisfied the requirements as contained herein or such other requirements as may be prescribed, it shall licence the applicant as a State Insurance Producer.

“The State Insurance Producer shall enter into a memorandum of understanding; as may be approved by the Commission; with approved insurance companies established in its jurisdiction for the purpose of the placement and management of insurance business.
“The State Insurance Producer shall only transact insurance business with these approved insurers, which list shall be approved from time to time by the Commission.”
Commissioner for Insurance, Alhaji Mohammed Kari said that the SIP business model will bring about 200 to 300 percent insurance penetrations in two years. He said the initiative will increase the revenue base of state governments and insurance profits.

Application
According to the guideline, “Application for license to transact business as a State Insurance Producer shall be made to the Commission in the prescribed application form as contained in schedule 1 accompanied by: The name(s), designation(s) and qualification(s) of Insurance officer that shall be engaged on full time basis to manage the Insurance affairs of the State Insurance Producer. Evidence that the Insurance Officer has a diploma certificate of Chartered Insurance Institute of Nigeria or its equivalent. Copy of Curriculum Vitae and credentials of the proposed Insurance Officer and evidence that he is employed on such structure/level as will report directly to the head of the designated agency applying to be appointed as a State Insurance Producer.

A signed undertaking signed by an officer of the State Government not below the rank of a Permanent Secretary that the state undertakes and agree that the sum N2,000,000.00 (Two Million Naira) shall be
deducted from accrued commission to be earned by the Licensed State Insurance Producer before payment of commission is made to the coffers of the Government.”

Licensing
“If the Commission is satisfied that the applicant has satisfied the requirements as contained herein or such other requirements as may be prescribed, it shall licence the applicant as a State Insurance Producer. A license issued under this Guidelines shall entitle the holder to act as a State Insurance Producer for the appropriate state government and shall be renewable once every two (2) years by the Commission.”

Terms of Agency
“The State Insurance Producer is licensed to operate under the following terms and conditions:- A State Insurance Producer shall maintain a separate insurance unit or department for proper monitoring of the activities of the agency with the Insurance Officer reporting directly to the Chief Executive Officer of the licensed agency. The State Insurance Producer shall enter into a memorandum of understanding; as may be approved by the Commission; with approved insurance companies established in its jurisdiction for the purpose of the placement and management of insurance business. The State Insurance Producer shall only transact insurance business with these approved Insurers, which list shall be approved from time to time by the Commission.
The key responsibilities of the agent include: Facilitating the enforcement of compulsory classes of insurance within the state jurisdiction by ensuring compliance; exercising on defaulters the power to penalise them according to the states laws; maintaining proper records of individuals and organisations bound by the requirements of the compulsory classes of insurance and monitoring the compliance.”

Restrictions and Conduct
“A State Insurance Producer or its employees shall not:- a) Sell insurance products apart from the products contained in the approved Memorandum of Understanding. The State Insurance Producer may, however, on behalf of its principal; the State government; process and place other classes of insurance that are beyond the compulsory classes, but with the approved insurers and in compliance with the memorandum of understanding.

1. b) Undertake or engage in the underwriting of risks, settlement of claims, unauthorised insurance functions by the Commission or engage in any other insurance business outside insurance intermediation.
2. c) Give the impression to its customers or imply in any way as to being the actual insurance underwriter of the insurance products. The State Insurance Producer terms shall state that the respective insurer will wholly be liable for underwriting of the risks, assessment, adjustment and payment of claims that may arise from the risks covered.
3. d) Receive any other commission, fee or gratification in whatever name, from insurers or any party to the transaction.
4. e) Fail to keep distinct and separate, the records relating to insurance transactions and that, such records are to be made available to the Commission as and when required.
5. f) Fail to ensure the confidentiality of consumers’ data and information.”

Fees
“Licensing and registration fee ¦ 2,000,000.00. Renewal ¦ 1,000,000.00. Levy chargeable on State Insurance Producer business shall be 1.00% of gross commission. The commission to be paid by the insurers to a State Insurance Producer shall not exceed 75 percent of the Commission payable to insurance brokers.

Payment of Premium
“Payment of premium for insurance businesses conducted under this guidelines will be subject to the provisions of section 50 (1) of Insurance Act 2003 (No-premium, no-cover) and the various guidelines issued by the Commission where appropriate. Such premium payment shall be made directly to the insurer or lead insurer as the case may be.”
Approved classes of insurance products
“A licensed State Insurance Producer shall have the authority to facilitate sale of the compulsory classes of insurance and for its principal (the State
Government).
Additional insurance products may only be distributed by the State Insurance
Producer upon approval of the Commission.”