Rethinking the bancassurance model for Nigeria’s financial sector

Globally, one of the most significant changes in the financial services sector over the past few years has been the appearance and development of bancassurance.

Banking institutions and insurance companies have found bancassurance to be an attractive – and often profitable – complement to their existing activities. The successes demonstrated by various bancassurance operations, although not all of them have been successful, have attracted the attention of the financial services sector, and new operations continue to be set up regularly.

Most developments in bancassurance up to the mid-1990s took place in Europe. However, banks and insurers in other parts of the world, e.g. the USA, Canada, Asia and many countries in Africa have developed bancassurance operations. In doing so, they seek to learn from the experiences of European bancassurers.

In Nigeria, especially during the post universal banking era, banks were constantly looking for ways to supplement their core earnings. Bancassurance, the provision of insurance services excluding risk underwriting by banks, is one way.

Banks also see this as a sure step in the financial markets where one institution serves all the financial needs of its customers. This naturally was a positive development for insurers as they see Bancassurance as a strategic distribution channel that will increase both their premium volume as well as insurance penetration in Nigeria.

As the government seeks to create vibrancy in insurance sector in post universal banking era, the move by Central Bank of Nigeria (CBN) to reconsider bancassurance is a welcome development.

Honestly speaking, it’s unthinkable that Nigeria as huge as she is can do without Bancassurance given that global financial impact on insurance penetration and financial inclusion, which it will make with rapid progress in the country with Bancassurance.

The initial challenge with recent renewed directive from CBN, is that the word ‘bancassurance’ was mistakenly introduced therein which was not mentioned anywhere in the 2010 regulation titled: CBN Scope, Conditions & Minimum Standards for Commercial Banks Regulations No. 01, 2010.

Bancassurance was also not mentioned as non- permissible activities under the CBN Guidelines for Licensing and Regulation of Financial Holding Companies in Nigeria. This renewed policy had left the banks, insurers, financial holding companies and bancassurance consumers confused.

There is urgent need for the key stakeholders to move forward to find a sustainable solution for the future of Bancassurance. This is the reason why West Africa Business School is inviting all stakeholders to the Nigeria Bancassurance Forum taking place in Lagos on February 24 2015. This seminar is coming at this auspicious time and will enable the insurance and banking industry especially the regulators (CBN/NAICOM) to discuss bancassurance in Nigeria with a view to agreeing on the best way forward.

Bancassurance is considered a good development for the financial services sector in Nigeria. Indeed, West Africa Business School has always been in the crusade since 2011 for CBN to consider Bancassurance model as a key financial market development strategy in Nigeria.