Rate Cutting Hinders Claims Payment, Insurance Operator Alerts Practitioners

By LOVETH AZODO, Lagos

The Executive Director (General Business) of Leadway Assurance Company Limited, Adetola Adegbayi, has advised Insurance operators to desist from lowering rates because of its negative consequence of hindering claims payments to the  insured.

Explaining that claims are paid with premium, she said if any insurance company fails to collect enough premium and thereby become insolvent, it would be very difficult for it to pay the claims from the insured.

Further, she said other negative consequences of rate cutting is erosion of public trust and confidence for failure to pay claims.

Adegbayi gave these explanations at a training workshop for Journalists recently organized by Leadway for the purpose of equipping Journalist with the requisite knowledge for their day to day reporting.

The training focused on key areas of financial reporting in insurance, understanding life annuity, micro insurance business, among others.

She said “We talk about pricing on our market, the lower you drop your price, the riskier your business becomes and the riskier it is to disappoint your policy holders because you are not collecting enough to pay the claims the person is making. Some practitioners can afford to drop their price, you can only do that if you have volume, the more volume you have the lower the price.

“The public have power that they don’t even know that they have, when an insurance company refuse to pay your claim you can wine them down. If an insurance company is insolvent, they can be insolvent when their capital is eroded and you will struggle to pay claims.

“Get a lawyer, in fact I encourage a charge and bail lawyer, get them to write to the insurance company, we will wine up for not payment of claims, the public don’t just know that they are so powerful they can help us shape this industry”

Speaking on the solution to lowering rates of Insurance products, Adegbayi told Journalists that as custodians of the public opinion they should encourage the public to make claims as the value of insurance or the policies they give is only realized when it is called.

“We are hurting ourself and hurting the public, most people have accident because the person feels we are paying just 1500, we can’t go to the insurance company to make claims. The more claim they make the more the insurer will know we don’t have enough money to pay, I better make an increase, you don’t need the intervention of regulators sometimes.”

“We have no right to breach the public trust, take money from people without paying them when they need it the most”, she said.

Speaking on Insurance Accounting, Adegbayi said that the more of insurance accounting  journalists are familiar with the more robust their reporting can be. She encouraged the press to be interested in Insurance accounting as it gives them a deeper edge to insurance and makes them question insurers better.

She said “Look at the money going into Leadway and look at what Leadway is going to pay out and then ask yourself if too many people make a claim is Leadway going to survive you have to look at that as well”

“You are custodians of the public opinion, you have the burden of presenting from your own perspective the view of the industry to encourage people to trust insurance not to distrust the industry, and how do you get them to trust the industry is by also helping them navigate through those areas that will make the industry look suspicious”.

She further explained the objective of the Leadway Hospital cash payment product that it is targeted at putting cash back in the pocket of a patient, rather than becoming bankrupt or taking money from your trade for hospital bills, the insurer doesn’t decide how you spend the money.

“Unlike the HMO product, where they pay the hospital a certain amount of money every month on your behalf whether you go or you don’t go the hospital, you get that money because you are registered under an HMO program.