‘All you need to know about Insurance in Nigeria’ – Series 8

Insurance Broking As A Profession

Preamble

The Insurance Broking business has a long history which dates back to the 19 Century in Britain when many people held themselves out as insurance practitioners even without having any knowledge of insurance. Indeed, it was easy to confuse agents with professional insurance brokers because of the similarities in the tasks they carried out. The situation was further compounded by the proliferation of entities which sought to carry out this vital insurance service. These early organisations included the Lloyd’s Insurance Brokers’ Association, the Corporation of Insurance Brokers (CIB) and the Association of Insurance Brokers (AIB). They operated with different standards of practice. These bodies were subsequently merged and called the British Insurance Brokers Council (BIBC) in an effort to harmonise their operations and practices. This body later transformed into the British Insurance Brokers Association (BIBA) in 1978. This Association became the flagship of insurance brokers in UK.

Historical Background of Nigerian Insurance Broking Business

The Nigerian nation was politically formed in 1914 with the amalgamation of the Colony of Lagos, the Northern and Southern Protectorates of Nigeria by the British government. The philosophy of the colonial masters was to reinforce political exploits with economic activities. So, wherever the flag went, economic entities also followed. In other words, wherever the British government colonised, British companies were encouraged to go in there to do business. Indeed, these businesses flourished. Thus, for the economic benefits of UK, shipping, banking and insurance were introduced to the newly formed Nigerian nation by British companies. There were a lot of risks associated with the booming trade and marine activities between Nigeria and UK. Accordingly, it was considered expedient that insurance services be provided. The following insurance outfits were very active: PZ Liverpool, London Globe, Bewacs Legal and Assurance General Company, Norwich Union, Law Union and Rock, Miller Bros, etc. In 1919, the British consolidated all these insurance broking firms to form the Royal Exchange Insurance Agency which subsequently became Royal Insurance Exchange Assurance Company PLC in 1921. Many of the pioneer practitioners including Late Chief T.A. Braithwaite were trained by the Royal Exchange Assurance Company.

The period 1950 to 1965 can conveniently be regarded as the pioneering years for the growth of insurance broking firms in Nigeria especially by Nigerians who had passed the Chartered Insurance Institute, London, United Kingdom. It was during this period, for instance, that T.A. Braithwaite & Co (1958), Thomas Insurance Brokers (1959), J. Akin-George & Co Ltd (1960) and African Underwriters Ltd (1962) were established by Mr. T.A., Braithwaite, Mr. J. A. Thomas, Chief John Akinwunmi George and Chief Sonny Odogwu, respectively.

The above pioneering and successful efforts motivated other young professionals to set up their broking firms as follows: (a) Premier Brokers 1963; (b) Intercontra Lloyds Agency 1963; (c) H. Clarkson Edu & Partners 1963; (d) Intra-Niger Insurance Brokers 1964; (e) Graham Miller 1964

(f) Nigerian Life & Pensions 1964; (g) B.C. Madiebo & Co 1965; and (h) SCIB Nigeria Ltd 1977. In order to standardise and share practice information as well as promote the interest of members, these brokers came together to form a central body which was called the Nigerian Corporation of Insurance Brokers in 1962.

Insurance Broking as a Profession

The Nigerian Corporation of Insurance Brokers (NCIB), the precursor of NCRIB, was established in 1962 to provide a central organisation for the regulation of all practicing insurance brokers in Nigeria. The body also sought to set and enforce standard of professional conduct for its members, scan the environment as well as present a common front on issues and legislations that were likely to impact the practice of insurance broking business in the country.

With the enactment of the National Council of Registered Insurance Brokers (NCRIB) Act of July 3, 2003, the name of NCIB was statutorily changed to the National Council of Registered Insurance Brokers thereby making insurance brokerage business a recognized professional endeavour. The body was then charged with the responsibility of regulating this critical arm of the Insurance Industry in Nigeria, the Insurance Broking profession. Pursuant to this, the law empowered the body to maintain a register of insurance brokers, containing names, addresses and qualifications of professionals.

Membership of the Chartered Insurance Institute of Nigeria is a precondition for registration as a member of the Council. This membership is required to be renewed annually. Also, in line with the provision of Section 7(4), membership of the Council is a precondition for registration by the National Insurance Commission of Nigeria (NAICOM). The power of the Council to register and de-register insurance brokers was affirmed on June 13, 2005 by a Federal High Court in a suit filed by NAICOM challenging the powers of the Council to do so. The Court of Appeal has also affirmed the judgement of the lower court.

The point must also be made that the NCRIB was formed to promote the welfare of its members as well as sanitise the insurance agency business such that the value-driven activity receives the respect it deserves. It is to reinforce this responsibility that the Insurance Act of same year expressly provided that the leadership of insurance broking firms must be persons who are professionally qualified and certified by the CIIN. Thus, the NCRIB sets standards of practice for compliance by its members within the regulatory space provided by its Act, the Insurance Act and NAICOM Act. For instance, it requires all its members to maintain a professional indemnity insurance to be registered in any year as a member of the Council.

As one of the most active trade groups in the insurance market, NCRIB is a platform for all registered insurance brokers in Nigeria which number over 500. Registration as a broker with NCRIB is a condition precedent to a person carrying out insurance brokerage business. As intermediaries, they help to create awareness about the Insurance Industry and its diverse products as well as market them to would-be buyers. They strive to explain the grey areas of various policies to would-be buyers of insurance policies and are statutorily allowed to collect premium on behalf of insurers. In the handling of policyholders’ premium, the broker must comply with the ethics of the profession to enhance the image and reputation of the insurance industry.

As required by the law, they must remit all premium collections within 30days. Indeed, Section 41(1) of the Insurance Act 2003 also states expressly that “where an insurance business is transacted through an insurance broker, the insurance broker shall, not later than 30 days of collecting the premium, remit to the insurers premium collected by him.” Indeed, Section 50 (2) of the Insurance Act 2003, provides that “the insurance premium collected by an insurance broker in respect of an insurance business transacted through the insurance broker shall be deemed to be premium paid to the insurer involved in the transaction”. This practice facilitates business growth by smoothening the process of insurance policy procurement by the insured. In the same vein, if a claim occurs, the broker also ensures that the policyholder is fairly treated and indemnified.

To facilitate reconciliation of accounts and promote transparency through compliance to statutory provisions, Section 40(1) further demands that “an insurance broker shall establish and maintain at all times a client’s accounts into which all monies, premiums, claims and recoveries from and on behalf of clients, insurers and reinsurers shall be paid.” This is the standard set for professionals to preclude them from using their clients’ money to satisfy personal needs, a situation that can compromise their independence and objectivity.

Importance of Insurance Broking Business

Over the years, there has been a great misunderstanding about the role and importance of insurance broking business and its practitioners. Some uninformed persons see it as mere sale of insurance products for a commission while some even likened it to touting and therefore, concluded that it adds no value! Nothing can be farther from the truth. Insurance broking business is a distinguished professional calling that adds great value to business. As intermediaries between the underwriter and the insured, they play supportive and value adding roles that are beneficial to both parties. For instance, Insurance Brokers provide informed and professional advice to potential policyholders that enable them to make optimal business decisions on insurance policies or combination of policies to secure their assets. Through their professional advises, policyholders can save a lot of resources. They are also empowered by law, for instance, to collect premium from the insured on behalf of the insurer. This role is very important to insurers as they are saved the burden of chasing after premiums from policyholders. In the event of any disaster, insurance broking professionals provide not only prompt information to the underwriter, but also assist their clients (the insured) to process claims and obtain maximum possible benefits. Therefore, insurance broking business drives the growth of insurance as they help significantly to create awareness about insurance. Indeed, based on their close interaction with policyholders, they can suggest innovative products to insurers that will cater to the needs of policyholders. Put simply, insurance brokers are worthy ambassadors of the Insurance Profession. It is therefore not surprising that the National Council of Registered Insurance Brokers, the regulatory body for all insurance brokers, is one of the most active trade groups in the industry in addition to the fact that it is recognised by law.

Summary

The insurance broking business started in a business-like, competitive manner but with diverse standards of practice. Because of the involvement of non-professionals in insurance broking business as agents, the premium placed on the service was low. Indeed, it was started in an era of “everybody to himself and God for us all”; that is, an era of practice with regulations and control. The consolidation of the competing firms from Britain into Royal Exchange Assurance Agency brought harmony and dignity into the business. Through the pioneering efforts of great minds like Late Mr. T.A. Braithwaite, Olola Bode Ogunlana, Mr. J. A. Thomas, Chief John Akinwunmi George, Chief Sonny Odogwu, Mr. H.C .Edu, Mr. B. C. Madiebo, etc, the practice of insurance brokers in Nigeria was standardised. Over time, a body, the NCRIB, was established by law to regulate the practice of insurance broking profession thereby raising its profile and ability to create value. The body, which recently celebrated its golden jubilee, has transformed the insurance broking profession to one of the leading professions in the country.

Funmi Babington-Ashaye