The Tribune

• Bahamas First chief dismisses anti-competitive concern

• Deal complies with all laws and vetted by Commission

• Yet other brokers/agents brand it ‘big slap in the face’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas First’s top executive yesterday dismissed concerns over its wholly-owned agency’s tie-up with Scotiabank, saying: “The market doesn’t need to fear there’ll be unfair competition.”

Patrick Ward, the BISX-listed underwriter’s group president and chief executive, told Tribune Business the partnership involving its NUA Insurance Agents & Brokers subsidiary and the bank had been “thoroughly vetted” to ensure it complies with all the industry’s governing laws and regulations.

He added that the sector’s regulator, the Insurance Commission, had also reviewed the agreement prior to last week’s announcement and found nothing amiss with NUA staff being based in Scotiabank branches to offer homeowners and auto insurance policies underwritten by Bahamas First to the bank’s borrowers.

Mr Ward sought to further allay concerns that the arrangement is anti-competitive by pledging that “there’s not going to be any undue coercion” where Scotiabank customers are forced, or mandated, to insure with Bahamas First via NUA, implying that consumer choice remains alive over which underwriter and broker/agent they can use. 

But several insurance brokers and agents, speaking on condition of anonymity because they do business with Bahamas First, told this newspaper that the NUA-Scotiabank tie-up represents “a major slap in the face”. This, they explained, is because it runs contrary to long-standing Bahamas First pledges that it treats all its brokers and agents equally, and will not favour NUA simply because it owns 100 percent of the latter. 

They also questioned why Scotiabank has decided to partner with a so-called ‘tied’ agent such as NUA, which writes insurance business for only Bahamas First, rather than an independent broker able to offer premium prices and products from several carriers. The latter arrangement, they argued, would deliver more benefits for the bank’s mortgage and auto insurance borrowers since they would have access to greater choice and prices kept keen by competition.

The same brokers and agents also asserted that the Insurance Commission’s long-established position has been to keep insurance and banking activities separate, and that it has refused to issue any more agent/broker licences to bank affiliates as a result. They yesterday called on the regulator to take a fresh look at NUA and Scotiabank’s ‘strategic business referral partnership’.

Mr Ward, responding to the anti-competitive concerns raised, told Tribune Business: “We are confident that these issues do not exist. I can tell you that the issues around the way in which the programme is structured, in terms of whether or not it complies with existing regulations, have been thoroughly reviewed.

“The regulator was involved in that process and, in accordance with their views on the matter, we feel confident that the structure we have in place does not violate any existing regulations or laws.” While the presence of NUA staff in Scotiabank’s Nassau main, Cable Beach, Thompson Boulevard and Grand Bahama branches will undoubtedly give the agency first go at selling insurance to the latter’s loan clients, Mr Ward reiterated there is no obligation for them to buy.

“I can tell you specifically that the Commission ensured there was not going to be any undue coercion associated with any transaction in this agreement,” he told this newspaper, indicating he had anticipated the concerns. “The market doesn’t need to fear there’ll be unfair competition involved in this process.”

As for concerns that the separation of banking and insurance activities are becoming blurred, Mr Ward replied: “I think the thing to bear in mind is the employees of NUA will be physically present in the branches where the programme is rolled out, so all insurance activity and transactions will be carried out by employees of NUA.”

One insurance broker said the NUA agreement recalled previous controversy involving Scotiabank’s tie-up with a Caribbean regional underwriter, Island Heritage, which was facilitated via BISX-listed broker, J S Johnson. Island Heritage provided a group product, on to which Scotiabank placed mortgage clients who failed to prove their homeowners coverage had been renewed by the due date - a move that triggered concerns and complaints from industry rivals.

“The previous arrangement between Scotiabank and J S Johnson was heavily criticised by the rest of the insurance industry - including NUA and their parent Bahamas First - as being anti-competitive, contrary to public policy and a clumsy and convoluted way for a bank to circumvent the regulators’ firm stance that banking and insurance be kept completely apart, with no more insurance intermediary licences to be given to banks or their subsidiaries,” the broker added.

“It seems, therefore, to be extremely hypocritical of NUA and Bahamas First to now be apparently doing the same thing.” However, Mr Ward argued that comparisons between the separate NUA and Island Heritage deals were simply inappropriate and he denied that the former is paying Scotiabank a fee or commission as part of their agreement.

“The structure of that agreement was very different to the one we have in place now,” he said of the Island Heritage arrangement. “We’re strictly following the current guidelines and rules as to what we are allowed to do under the regulations.

“We took a very long time looking at this very closely, and worked very closely with the regulator to ensure whatever arrangement was put in place was consistent with the law and, as a consequence of that, we are very confident this complies with all current regulations. This has been in development for well over a year.”

Mr Ward also denied that Bahamas First was favouring NUA. Referring to an agreement that the underwriter has in place with another commercial bank, which he did not name, the Bahamas First chief said “the facts show we have always been true to treating our agents and brokers in a fair and transparent manner” - implying that the Scotiabank deal will be no different.

Other brokers, though, are not necessarily convinced. One told Tribune Business: “One has to ask, bearing in mind that NUA place all their motor and property business through their parent Bahamas First, what possible benefit this arrangement would have for Scotiabank’s customers. Surely if they had to do this sort of thing they should have chosen an independent insurance broker able to offer their clients the products and prices of several insurers.”

They added that the NUA-Scotiabank move was also “a major slap in the face by Bahamas First for all of the other insurance brokers and agents that sell their products. Bahamas First has always at least maintained... that they do not favour their in-house brokers”.

Mr Ward declined to reveal how much additional business NUA and Bahamas First expect to generate from the Scotiabank partnership. However, he indicated that there were wider benefits beyond just NUA expanding its distribution channels.

“The other benefit the client has is they can actually get premium financing through the bank for premiums that can be paid over a period of time, whatever is agreed between the bank and the client,” Mr Ward explained. “That helps in an environment where people are reliant on some kind of financing to pay their premium.”

Then there was the convenience of being able to conduct borrowing and insurance business in one place, saving both time and money. “It creates an environment where transactions can take place on a fairly seamless basis. They benefit with time, the ease of the transaction and provision of premium financing. A lot of people will find it attractive.”

Anton Saunders, managing director of RoyalStar Assurance, a direct Bahamas First competitor as a property and casualty underwriter, said of the NUA-Scotiabank tie-up: “Competition wise, I am not concerned. We just have to dig harder and get relationships for our agents with other people...

“If NUA has an initiative in place with Scotiabank, as long as everything is above board with the insurance regulations, they have the right to seek partnerships with whoever they want. I wouldn’t want someone to come to me if I had a legitimate partnership and say I cannot do it.”