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Insurance firms oppose payment
THERE is disquiet in the banking industry as insurance companies may have started kicking against paying the debts incurred by sacked employees of banks.

The Guardian's investigation showed that  hitherto, this set of staff had their indebtedness to the banks picked up by insurance companies under a policy known as key-man insurance.

Key-man insurance or key employee insurance is a coverage that protects a  company in the case of an untimely death or disability of a top salesperson, executive or business owner. Key-man insurance provides peace of mind to business owners and shareholders alike knowing that the business can continue operations without major disruption in the event of the loss of a key employee. If death or disability strikes a company, key person insurance may be the difference between the company's demise and its ultimate success.

Many people and especially insurance agents themselves wrongly assume that key-man insurance is simply life insurance. Life insurance is one of necessary elements of a good key-man insurance plan, but in most cases key-man disability insurance is equally important. While the risk of death is always present, with most ages the risk of disability is much higher.

Therefore, to achieve adequate protection, most companies are expected to secure both key-man life and key-man disability for their key employees and executives.

However, owing to pressure from insurance companies over the rising cost of this policy, banks have opted for another solution.

To this end, it was learnt that up to five banks at the weekend sent letters to all their staff asking them to provide guarantors if they (staff) would like to retain their employment.

This new policy, which is expected to commence from tomorrow, stipulates that such a guarantor must have twice the yearly income of the employee being guaranteed.

The implication is that if an employee's yearly income is N7 million, the guarantor must be a person with a yearly income of N14 million.

The letters also stipulated that such a guarantor must provide a notarized statement of account with a specimen signature, which the current employer bank must verify.

In the alternative, such a guarantor must also provide a certified evidence of owning landed property in choice areas, which must also be verified by the employer bank.

This development, it was learnt, is currently causing disquiet in most banks as even the top management staff are not spared.

To this effect, it was learnt that the trade union associations of both junior and senior staff may be warming up for a showdown with the banks' management.

In the wake of the banks' sanitisation programme in 2009 by the Central Bank of Nigeria (CBN), most banks reduced their staff strength in order to save cost.

Their argument was that the bloated staff strength was responsible for their high overhead cost. Over 21,000 bank workers were laid off in this exercise.