e-Insurance: Threat to insurance brokers’ business

By Ayeleso Oladele, Lagos - Updated: Tuesday 14-04-2009

•Mr. Okey Nwosu, Group Managing Director,
FinBank (left) and Alhaji Muktari Shagari,
Deputy Governor of Sokoto State, at a
courtesy call on the deputy governor in
Sokoto recently.Obviously, every business in the developing countries of the world is fast embracing electronic means of transaction, insurance not excluded. The advent of electronic means of business transaction, most especially in Nigerian insurance business, is a reflection of the determination of operators to be compliant with what is invoking around the world.

Although, the issue of e-insurance has become a major concern in some quarters within the industry and there has been much talk over the ineffective usage of the internet to transact insurance business which prompted most of the companies that successfully recapitalised during the last recapitalisation exercise to give more priority to the development of Information and Communication Technology (ICT) on papers.

Several months after the conclusion of the exercise, only few insurance companies have come out to inform their clients of this development. Some have argued that not all types of insurance business could be done on the internet, while others are only paying lip service to it. A study by New York–based Mercer Management Consulting discovered that insurance companies had failed to make effective use of digital technology to connect with customers online.

It further revealed that insurance companies attained lowest ratings on online customer interaction, internal use of information technology and overall digital technology when compared with banking and investment brokerages. It added that digital business design in insurance are in their infancy, but stated that there are tremendous opportunities to create value from internet enabled offerings.

The key for insurance companies, the researcher revealed, was to craft an offering that creates value for specific customer segments and channel partners.

An insurance expert has also said that since insurance was a business of risk, in some cases, there is need for risk evaluation and assessment which could not be done through the internet. This is a consolation for slow pace at which the industry is moving towards becoming ICT compliant, but the social relevance of it in today’s world with particular reverence to the internet technology cannot be undermined.

The insurers, however, are making incremental progress in their efforts to incorporate internet technology such as online customer service, online quotes and sales capabilities are now visible on the internet while companies are making progress in using webs to support and extend their reach to their agents. In all these, insurers must be mindful of the shortfall that comes with the usage of ICT.

Recently, the oldest insurance company in the country, Royal Exchange Group, launched its digital (scratch card-based) mode of paying premium which could be used to activate new accounts and make payment of insurance premiums through phones, using easily obtainable scratch card. With this latest development, Royal Exchange customers are just to purchase a scratch card which will reveal a set of PIN number that can be sent to a prescribed number on the card.

Sometime ago also, Consolidated Hallmark Insurance Plc launched an internet-based vehicle insurance registration for the convenience of the insured public who may not have all the time to locate any of the companies offices to do the vehicle insurance policy.

With this also, customers can sit conveniently at the comfort of their homes or offices and purchase vehicle insurance policy without necessarily visiting any office.

This is fast becoming the trend in the Nigerian insurance companies as an expert has revealed that in some few years to come, companies would move towards this trend and any company that fails would find it difficult to meet up with others in term of development.

Nevertheless, the question is what becomes of insurance brokers if all companies embrace the internet means of doing insurance business? The implication is that customers will be relating directly with the underwriters without necessarily going through insurance brokers, thereby relegating the usage of insurance brokers.

It is worthy to note that the purchase of insurance policy is made in anticipation of the insurance company to pay compensation to the insured in the event of a loss, but times without numbers, the industry has been accused of non-payment of claims when the need arises.

Insurance brokers have argued that this was as a result of bypassing insurance brokers, claiming that if brokers are involved, it will be difficult for any company to deny their clients of its legitimate rights (claims).