The Moroccan Union of Insurance Agents and Brokers (UMAC) is seeking an exemption from VAT on insurance intermediation operations, as the government continues with preparations for the 2019 Finance Bill, which sets out a package of fiscal measures and which is expected to be passed soon.
Apart from VAT, UMAC is working on several other issues, notably the remuneration of insurance intermediaries and protocols of arrears signed by intermediaries with insurers.
"Increasing the commission rate and improving pay are the main solutions to the problems faced by insurance intermediaries," said UMAC, adding that a meeting of the committee responsible for remuneration will be scheduled very soon. The commission rate payable to intermediaries has remained unchanged for more than 40 years.
UMAC has also decided to ask the regulatory authority, the Insurance and Social Security Supervisory Authority (ACAPS), to stay the application of a 2015 circular governing the receipt of premiums.
According to UMAC, many intermediaries have been forced to sign protocols in which they recognise past debts. It argues that intermediaries are unable to honour these protocols, since commission levels are barely enough to cover costs.
UMAC says that given the economic situation of the country, the Moroccan consumer does not have the financial capacity to pay the insurance premium without being granted payment facilities. It calls on insurance companies to review the terms of arrears protocols, taking into account the repayment capacity of their partners, agents and brokers, and to put in place favourable conditions to guarantee their performance, profitability and their durability. UMAC says that it requires the intervention of ACAPS on the issue.
However, Mr Othman El Alamy, ACAPS Secretary General, in an interview with Les Eco in March, said, “The circular in question is not intended to introduce new provisions that could have a negative impact on the cashflow of insurance intermediaries. In fact, the insurance code and its implementing texts already provide for the rules for the repayment of premiums collected. Therefore, this circular was only intended to clarify and operationalise the regulatory system, reducing disagreement in interpretation. Thus, this circular aims to formalise relations between companies and insurance intermediaries in a conventional framework dealing in particular with the receipt of premiums and the payment of claims. For this purpose, the said conventional framework must specify whether the insurance intermediary is authorised or not by the insurance company to collect premiums and introduces, in particular for the automobile branch, other means of payment which were not usually used. These include, in particular, cheques or bills denominated in the name of the insurance company, bank transfers and automatic debits made on the subscribers' bank accounts.”
He said, ”The insurer can grant payment facilities to its customers. In this case, this possibility must be formalised by an express agreement of the insurance company which assumes all the consequences. On the other hand, it is clear that the intermediary which grants payment facilities of its own accord, without the insurer's prior agreement, must assume responsibility for this, without transferring to the insurer the risk that it has voluntarily and unilaterally taken.”
As for commissions, Mr El Alamy said that the regulator has not set the commission rates for insurance intermediaries since the liberalisation of tariffs in July 2006. He added that although this is a matter between insurance intermediaries and insurance companies, ACAPS is willing to support any initiative to engage in a constructive dialogue.
The Moroccan Federation of Insurance and Reinsurance Companies (FMSAR) has said that it has no position on the subject of commissions, adding that an insurer is free to negotiate rates with each intermediary. It said that the fact that the commission rate has stagnated at 12% (this is the rate applied to motor insurance) should not obscure the volume effect in view in particular of the growth of the vehicle fleet in Morocco.
As for premium arrears, an FMSAR source also said that the fact of not paying back to the companies premiums collected places intermediaries out of step with regulations.
The protocol, he said, serves to help them regularise the situation. "Some companies agree to reschedule these debts but this is not a general rule."
UMAC has held two meetings with the FMSAR this year, on 20 June and 31 July, to discuss the issues. Further talks are expected to be held.