Nigeria’s apex bank, the Central Bank of Nigeria (CBN) has released new guidelines on bancassurance, which allow insurance companies to distribute their products through the bank’s customer base, giving a lift to the nation’s quest for financial inclusion.
The guidelines , signed on March 16 this year, by Tokunbo Martins, director of Banking Supervision of the CBN, and seen by BusinessDay last night, state that “In the light of the developments and the need to ensure synergy in the financial system, the CBN in exercise of its powers under section 33(1) (b) of the CBN Act 2007 and the provisions of p2 section 3, item (1) of the CBN scope, conditions and minimum standards for commercial banks regulation, number 01,2010, considered it necessary to issue the guidelines on bancassurance products.
“The guidelines, which set out the regulatory framework for the offering of bancassurance products through the non-integrated referral model, take immediate effect”, the document stated.
According to Martins, the choice of this model is premised on the fact that it does not preclude banks from focusing on their core banking business and does not undermine the essence of the CBN’s new banking model.
The CBN had directed banks that were engaged with insurance companies in any bancassurance transactions, to stop, citing section 4 of the 2010 CBN regulations titled: CBN Scope, Conditions & Minimum Standards for Commercial Banks Regulations No. 01, 2010.
Section 4 of the above mentioned guidelines, states that , “No Commercial Bank shall be permitted to carry out the following business activities: Insurance underwriting; Loss adjusting services and Re-insurance services, among others.
But following interventions from key stakeholders, including the minister of finance and coordinating minister for economy, Ngozi Okonjo-Iwela , a committee was set up involving the CBN and the National Insurance Commission (NAICOM) to come up with appropriate guidelines for banassurance.
This follows stakeholders often stated position that banks were not involved in underwriting, but only provided reliable distribution channels through which insurance companies could reach the uninsured public and deepen insurance penetration in Nigeria.
The guidelines which define bancassurance as an arrangement in which insurance companies leverage on the customer base of banks to sell insurance to bank’s customers, states that: “Banks shall not engage in any other model of bancassurance other than that permitted under these guidelines and for which approval has been obtained from the CBN; banks also shall not offer banking products that incorporate insurance features; shall not offer free premium payments as a feature of any of their products.
“And banks shall not provide bank assurance products in a manner that contravenes these guidelines or any other statutory provision or law, that applies to insurance products and services.
On the referral model, the guidelines further state that the referral model of bancassurance arrangement between banks and insurance companies shall not be valid without an executed bancassurance agreement;” banks shall not undertake any insurance marketing, underwriting, claims settlement and this must be clearly stated in the banc assurance agreement.
“Banks shall ensure that no risks are transferred to them and they shall not assume any fiduciary responsibility or liability for any consequences, financial or otherwise, arising from subscription to insurance policies by customers.”
Modestus Anaesoronye
