The guideline went further to state the various other activities like market activities, such as underwriting/issuing house activities and insurance services. With particular respect to insurance activities, the guideline specified the insurance services as, agency services, brokerage services underwriting services, loss adjusting services, underwriting services and re-insurance services.
Banks may provide insurance marketing services while they may provide underwriting services and re-insurance services indirectly through a subsidiary or an associated company. Banks can therefore undertake insurance services as specified under the insurance guidelines.
According to Adejumo, the regulations issued for banks that may wish to engage in insurance business under universal banking varied.
The guideline stated that an insurance subsidiary of a bank shall comply with the capitalization requirements under the Insurance Decree 2 of 1997 and any subsequent amendments all insurance activities wherever they occur shall be licensed and regulated by the National Insurance Commission {NAICOM} and subject to the provisions of the Insurance Decree of 1997 or such other insurance laws as may be enacted.
An insurance policy should not be rejected solely because the policy has been issued or underwritten by a person not associated with the bank when such insurance is required in connection with a loan or extension of credit. A debtor, insurer, or insurance agent or broker must not pay a separate charge for the handling of insurance that is required in connection with a loan unless such is required when the bank’s affiliate is the licensed insurance agent or broker providing the insurance.
There should be no payment or receipt of any commission or brokerage fee for services rendered as a broker or agent unless such a person is properly licensed by NAICOM.
A bank shall not release any insurance information about a customer to any person other than an employee, agent, subsidiary, or affiliate of a bank for the purpose of soliciting or selling insurance without the consent of the customer. A bank shall not use health information obtained from the insurance records of customers for any purpose, without the customer’s consent except for activities as licensed insurance agent or brokers. A bank shall not insist, for extension of credit, on the condition that the customer obtains insurance from the bank’s affiliate/associate or a particular insurer, agent, or a broker, but must inform the customer or prospective customer that insurance is required in order to obtain a loan, and that approval of a loan is contingent upon the customer obtaining insurance, or that insurance is available from the institution.
The guideline added that banks shall not require that, when a customer’s application for a loan is pending and insurance is offered to the customer or it is required in connection with the loan that a written disclosure is provided to the customer. Such as indicating that his choice of an insurance provider will not affect the credit decision or credit terms except that the bank may impose reasonable requirements concerning the credit worthiness of the insurance provider and scope of coverage.
It stated further that the bank shall clearly and conspicuously disclose to the customer, prior to the sale of any insurance policy, that such policy is not a deposit, insured by the NDIC, guaranteed by the bank and an investment, credit and insurance transactions should be completed through separate documents when a customer obtains insurance and credit from a bank. An insurance company shall not transfer its funds to a bank which is either its holding or associated company without clearance from NAICOM except for the purpose of investment.
A bank shall not issue instructions to its insurance subsidiary or associate that will affect the insurance funds adversely or commit insurance funds to a purpose outside insurance, except dividends declared. A bank shall not include the expenses of insurance premiums in the primary credit transaction without the customer’s consent, where the customer obtains insurance and credit from a bank.
It added that banks shall be required to maintain separate and distinct records relating to insurance transactions and such records should be made available to the appropriate regulators. Also, banks should also disclose specifically among other things earnings from insurance activities in their published accounts. However the on- going reforms in the industry may further modify the current trend as banking specializations, as being proposed may lead to a narrower business horizon. But by and large banks and insurance are closely related and if insurance must deliver on set agenda, it should align with global economic trends.