The Nigerian Insurers Association (NIA) has expressed displeasure over the rising trend of banks compelling customers to insure their collaterals with their subsidiaries.
The NIA Chairman, Eddie Efekoha while addressing the press recently in Lagos advised banks to desist from this act, explaining that a subsidiary is a captive company owned by a bank where, in contravention of the Insurance Act, it forces customers who obtain loans from it to patronise it, adding that it is against the Central Bank of Nigeria (CBN) law, which bans universal banking licence in the country, and allows clients to insure with any insurance firm of their choice.
He said: “It has come to our notice that the banks and their subsidiaries often compel customers to insure with themselves specific insurance companies. This means that the banks compel their customers who take loans to insure the collateral with their own insurance subsidiaries or companies.
“Rather imposing their insurance companies on customers, the NIA chairman advised bank customer to bring a policy from any registered insurance company which notes the interest of the bank that should there be damage to this collateral, the proceeds from the insurance would be made to the bank; and, that is all that is required.”
Efekoha, therefore, urged such customers to bring evidence of compulsion to indemnify collateral with captive companies to NIA.
He said they had begun educating the public that where banks so insist, they should compel the banks to put it in writing and that a such letter should be brought to the NIA, because we will make such report to the CBN, adding that the association would act on it.
The NIA chief said the association had overlooked such complaints in the past, adding that it had got out of hand in recent times and that the association could no longer sweep it under the carpet.