Discussions between insurance brokers and agents and the Moroccan Federation of Insurance and Reinsurance Companies should lead to a roadmap on the issues that concern both sides, according to Mr Khalid Aouzal, president of the National Federation of Insurance Agents and Brokers (FNACAM).
He pointed out that commission rates granted to agents and brokers have been fully liberalised since July 2006, in an interview with The New Tribune.
“By company, by customer or by product, it is today totally deregulated,” he said, referring to the commission rate, “so that it constitutes the subject of negotiation”.
He said commissions are borne by insurance companies. The insured person, whether buying a policy through an intermediary or directly from an insurer, pays the same premium for his insurance.
In the aftermath of the liberalisation of the commission rate in 2006, insurers decided to maintain the then prevailing rates. These vary according to the classes of insurance, for example, for a home multi-risk cover, the rate is 25%; 12% for car insurance, and 3% for a pension product.
“In terms of percentage, these commissions may look attractive, but in absolute terms they have become derisory and some percentages must be reviewed,” said Mr Aouzal.
This is because the absolute amount of commission, for say, a motor insurance policy has remained unchanged at MAD300 ($32.75) on average since 1977 whereas the responsibilities and management costs borne by intermediaries has grown considerably over the same period.
He said that previously, the management of insurance policies (preparing and printing) was the responsibility of insurers. Today, these functions are carried out by intermediaries without any increases in remuneration for these new services. There are now about 2,400 insurance intermediaries in Morocco, who contribute 75% of the premiums generated in the insurance market and 85% of the direct jobs in the insurance sector.
Insurance intermediaries are therefore in talks with the FMSAR to review these aspects in healthy and balanced negotiations. To press their point, agents and brokers held a one-day strike in late February over issues of remuneration and working conditions.
Mr Azoual also said, “Beyond remuneration, we want to set up a code of ethics, because we have market practices that start to border on the unreasonable.”
Insurance intermediaries, comprising agents of insurance companies and brokers, belong to two professional associations, FNACAM and the Union of Moroccan Agents and Brokers (UMAC). FNACAM accounts for around 80% of premiums paid to the insurance market through the traditional network and employs more than 80% of the workforce.
Collection of premiums
Mr Azoual also argued that the collection of premiums must be treated as an additional service by insurance intermediaries. He said that the obligations set out in insurance policies do not fall on intermediaries as they are a matter between the insurer and the insured.
He said that agents and brokers provide advice, propose the relevant insurance coverage and get customers to sign up for an insurance policy. “For all these services rendered and accomplished, the company must pay them each time a contract is signed.
“Companies must therefore pay intermediaries for their intermediation services, regardless of the collection of premiums, and collect their premiums directly from the insured. Otherwise, the premium collection service must be paid for separately,” he explained.
For renewed contracts, he said insurers should pay commissions in advance, which several have refused to do, forcing intermediaries to postpone transferring to insurers the premiums they collect. “This is how dysfunctions are created between insurance companies and intermediaries that are unresolved for years.” M