Saturday, April 13, 2024

NBE directive sparks debate on marketing’s role in insurance sector leadership

By Muluken Yewondwossen


By Muluken Yewondwossen

Although there is a contention that the marketing function should be a crucial aspect of the insurance sector, the National Bank of Ethiopia (NBE) has put up a directive that does not designate the business as work experience for prospective CEOs. As per the proposed directive, unlike past experience, the top position would be held by acting for a specified period of time.

Article 2.4 of the SIB/32/2012 directive, which outlines the “requirements for persons with significant influence in an insurer’s directive,” defines a core area as an insurance operation, life and/or general, related to underwriting, claims, reinsurance, finance, internal control, audit, and risk management.

The same directive, in article 5 sub-article 1.2 (II), states that a CEO should work on core areas that are specified above.

While ‘operations’ took the role of the ‘core areas’ in the newly released draft directive for public comment.

On the definition, the draft directive states that ‘operations’ means underwriting, claims, and reinsurance.

Experts have indicated that a candidate for CEO should have prior expertise with at least one of the operations included in the definition.

Though experts acknowledge that the business is seeing significant advances from the regulatory body, they state that the most recent directive does not address the issues that previously surfaced.

They say that there should be a shift in the way people view and comprehend the insurance industry and its daily operations.

They assert that the basic functions or sectors of the insurance industry should include marketing.

People who urge that the draft contain the important departments to be included as operations or core areas say, “It is similar in other countries not only for marketing but for other core areas, while when it comes to Ethiopia the concept of the marketing role is misunderstood.”

Assegid Gebremedhin, CEO of At Insurance Broker and Consultant, remembers, “At Ethiopian Insurance Corporation, we identified marketing and customer service as core areas when we designed Business Process Reengineering (BPR), while NBE is coming with a similar perception in this new draft directive.” More than any other department, the marketing department is the foundation for product sales and plays a critical role in both product design and customer service. “Marketing services are fully integrated with claims and underwritings,” he added.

There are opposing viewpoints to the aforementioned concept, which claim that marketing’s function is promotion.

“The underwriting operation is actively working for sales, and products on life or nonlife insurance are designed by operational experts,” a board director at one of the top insurers states.

“The major role of marketing is promotional activity and branding like producing advertisements and following up on the publication of agenda books.”Assegid disagreed with the claim that industry misconceptions are the root of the issue.

“If the company would not allow the marketing head to exercise her responsibility, how does she do the business?” he questioned.

“This is among the obstacles observed in the industry concerning client satisfaction,” he continued.

He conveyed his expectation that NBE will take marketing into account in order to enhance the insurance industry and alter its current course.

In addition, the draft directive mandates that the CEO post be filled in nine months. According to the current SIB/32/2012 NBE law, an acting head will fill the role of president in the absence of a permanent CEO, and an acting CEO will only hold the job for six months.

Experts in the insurance industry claim that the six-month timeframe is consistent with the commercial code, which stated that the acting head was expected to assume full responsibility after that time.

They clarified, “But in the NBE case, the regulatory body should approve the senior post.”

It was specified in both the 12-year-old directive and the draft directive that an individual may not hold an acting CEO or senior executive officer post for longer than six months.

However, the proposed directive stipulated that the CEO role cannot be filled on an acting basis for longer than nine months.

The year of experience required of candidates seeking senior positions in insurance companies has also been modified under the proposed law.

According to the draft directive, the CEO must have 12 years of experience to be considered for the position, and the deputy CEO must have 10 years.

It is 10 and eight years respectively on the existing directive.

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