Ebere Nwoji examines the roles various arms of the insurance industry can play in order to improve its fortunes in 2017 and beyond
Amidst mixed performance of insurance sector in 2016 due to economic recession which weakened activities in various sectors of the economy, leaving operators in struggle for premium generation, the insurance industry is obviously left with the choice of decisively taking two major steps in its effort to achieve growth. These include evolving strategies that will encourage Nigerians to see the need for the industry patronage. Also the industry must boldly face negative factors that have for several years limited developmental efforts.
To encourage the populace to increase its patronage of the industry, operators should consolidate on the improved awareness of insurance among Nigerians and push insurance products to their door steps using the new channels of distribution created by the regulator at the end of last year and identify other relevant distribution channels that will help in this regard.
The operators should also deal with the growth inhibition factors some of which include: over concentration on government and corporate accounts and total neglect of retail market; unprofessional practices like rate cutting , price wars, failure to pay genuine claims; unhealthy competition in pricing of government businesses, ignorance and nonchalant attitude towards loopholes through which the industry suffers leakages and other acts of misbehavior which the industry regulator has been kicking against.
This being the case, there is need for operators, the regulators and various arms of the industry to be proactive in guarding their fence against impending danger of impoverishment through the activities of some industry operators that seem to present the industry in bad light through the above factors so that the improving confidence will can be sustained. This will make operators to generate more premium that will position them to pay returns to investors.
The regulator, in particular, should stand firm and ensure full implementation of some of the reforms it has lined up especially those billed to take off this year.
Indeed, the regulator should ensure that reform like the risk base supervision( RBS), which will channel operating firms to consolidate only on the line of business they have financial capacity to underwrite and leave those they lack capacity to underwrite, takes off in order to save some operating firms whose names are in the danger list on account of declined shareholders’ funds.
This will enable individual firms remain focused and concentrate only on businesses they have enough financial muscle to underwrite and give returns to their share holders.
The investors have, in the past two years, been complaining about failure by their companies to pay dividend to them, pointing accusing fingers to the regulator whom they said milk the operating firms in the name of fines for offences committed.
Against this backdrop, there is urgent need for various arms of the industry to sit up and play their assigned roles in a way that will reposition the industry and enable it to weather the storm ahead.
Industry observers said by their constitution and personalities manning these arms, they are capable of saving the industry from any shock during the year if they perform their duties on their members and the market generally.
For instance, industry observers, noted that the commitment of the Chartered Insurance Institute of Nigeria (CIIN) to insurance education would further popularise insurance and deepen the market.
According to them, innovation through information technology, would remain a tool for driving the micro insurance product distribution during the year while NAICOM’s commitment to the policy of ‘No premium No Cover,’ is expected to boost the overall premium income of the industry during the year.
This has spelt the need for institution like CIIN to sit up and put on its thinking cap on how to push insurance education ahead to all secondary schools and institutions of higher learning in the country.
The institute, is already doing this but obviously there is need for it to set up monitoring team that will follow up on the previous efforts made. For instance, the institute needs feedback on the effectiveness of inclusion of insurance as subject of study in secondary schools .It needs record of number of students that write insurance in West African Examinations and even needs to extend it to other examination bodies like NECO and General Certificate in Examinations (GCE).
By its establishment, the institute is the educational arm of the industry. Therefore, it should in line with the promise of one of its past presidents, Mr. A A Lawal, play key role in insurance education of Nigerian masses. It should realise the fact that part of the problem of the industry is ignorance of what insurance is and what it can do. It should therefore spend quality time in educating the masses in addition to what it is already doing. It should extend this to both public and private schools in the country and encourage insurance departments of various institution of higher learning in addition to what it has already done.
Currently, insurance teaching in senior secondary schools in the country is still in principle and not in practice and is limited to public schools with exclusion of private schools. The institute should push further to see that insurance teaching is practically done in both public and private schools in Nigeria .
The various arms of the industry should give financial support to the institute in this regard bearing in mind that its mass education activities across the country is for the good of the entire industry because as more insurance policies are sold, brokers will collect more commission while adjusters will have more claims to adjust in time of loss. So in addition to NAICOM’s financial support to the institute for its mass education programme, other arms of the industry should contribute their own quota.
On its part, NAICOM should face the challenge thrown up by the economy experts last year in their prediction especially that of ensuring full implementation of ‘No Premium No cover’ rule across the country including government.
The experts in their prediction hinged the success of the industry for the year on the willingness on the part of government to pay the outstanding N 10 billion premium owed to the industry by government. Till date, this huge amount has not been paid even as government is yet to pay premium for group life insurance of its workforce for last year.
NAICOM, as government adviser on insurance, should call the attention of government to the ‘No Premium No Cover,’ law implemented by the industry in January 2013 and ensure that government leads by example by paying premiums for its assets and workforce.
In 2013, during the tenure of Mr. Fola Daniel as the commissioner for insurance, NAICOM, took a bold step that reshaped the face of the industry through the implementation of the “No Premium No Cover policy.”
He compelled the operators to adhere to it and even made government to pay premium for group life insurance cover of its workforce. A situation, which has to a reasonable extent solved the lingering problem of huge outstanding premium in the industry and positioned the industry as a pacesetter for other regional markets.
For instance, the success of the ‘No Premium No Cover’ policy implementation in Nigeria spurred the National Insurance Commission of Ghana into action. The commission in January 2014, commenced the implementation of its own ‘No Premium No Cover’.
NAICOM in 2014, collaborated with the industry operators and stake holders, consolidated on this and vigorously pursued the propagation of micro insurance in Nigeria. Licences were issued while operators went into franchising for marketing of micro insurance.
NAICOM should also take note of the prediction of the experts that scramble for customers in the industry during the year may further force prices of insurance products down and may also increase cases of unprofessional practices like rate cutting except there is intervention from the industry regulator.
The commission should provide this needed intervention effort to ensure that unprofessional practices like price wars, rate cutting among others which have been existing in the industry over the years is controlled to the barest minimum.
Also reports last year on the threat by overseas reinsurers to delist Nigerian airlines on accounts of their failure to pay premium, a situation which was attributed to difficulty in accessing forex is not a good one.
The commission, should advise government on the need to make discriminating policies that will give sensitive sector like aviation sector preferential treatment in obtaining foreign exchange to settle important bills like reinsurance premium.
By its establishment, the commission has the mandate to ensure effective administration, supervision, regulation and control of insurance business in Nigeria. The commission has the duty to establish standards for the conduct of insurance business this year in order to improve on the existing standard and ensure that operators conduct their business better than they did last year.
NAICOM is to determine whether there is need to increase insurance rates this year and should as such approve rates of insurance premiums to be paid in respect of all classes of insurance business.
It has to approve rates of commissions to be paid in respect of all classes of insurance business and ensures adequate protection of strategic government assets and other properties, regulates transactions between insurers and reinsurers in Nigeria and those outside Nigeria. It acts as adviser to the federal government on all insurance related matters; especially in the face of prevailing poor attitude of government towards insurance of its assets as well as the revelation year n year out, less than 30 percent of government’s budget on insurance is released and spent.
Given its numerous tasks, the commission has to work hard in this regard considering the fact that the Nigeria Insurers Association (NIA), the previous year had said that failure by government to insure its assets was the main reason compulsory insurances could not be successfully enforced.
Also considering the fact that NIA recently expressed concern that insurance industry is suffering abuses from government, NAICOM should through its advisory role to government address this problem.
What NIA should do
The NIA, which is the umbrella body of insurance underwriters
in the country was established in 1971 to promote and uphold the universally accepted standards of business ethics and professional integrity among its members, using modern technology in maintaining and disseminating information globally. There has been crusade over the years by public speakers against unethical practices among insurance underwriters. The NIA as the umbrella body should tighten its belt in disowning or delisting operators who indulge in any form of unethical practices. It should also caution its members who still drag the image of the industry in the mud through repudiation of genuine claims.
The association also has the duty to protect and advance the common interests of insurers in Nigeria by creating and sustaining a positive image for the insurance industry and contributing to legislation, and decisions made by the government and other public authorities in the best interest of the industry in particular and the national economy in general. NIA, whose members constitute core industry operators, should contribute its quota towards education of Nigerians on claims filing, claims settlements and policy interpretations and understanding to avoid unnecessary allegations on claims and fraudulent claims, which will portray industry in bad light. It should also spur its members to action in making in house polices and efforts that promotes micro insurance.
Nigeria Council of Registered Insurance Brokers (NCRIB)
The NCRIB is by law expected to register all brokers before they can be licensed to operate in the Nigerian Insurance market by the NAICOM.
The council has as its objectives the duty to establish and maintain a central organisation for insurance brokers and generally do all such things as may, from time to time elevate their status and safeguard and advance their interest and procure their general efficiency and proper professional conduct, with a view to ensuring for the community, the existence of a class of Insurance Brokers who can be relied upon as being trustworthy and duly qualified to perform their responsible duties. The president of the association should be awake in doing this. He should keenly watch over legislation affecting insurance brokers, and to promote, or support and assist in any legitimate manner, the carrying into effect of any legislation having for its object the common interest of members, of the council and the general public.
He should collaborate appropriately with government and with various institutions and professional bodies in achieving the objectives of the council.
The council as professional arm of the industry has the duty of marketing insurance to the public through its members interpreting insurance policy documents to the public and ensuring that the client gets his or her claims on time.
Before now, the council, had through its former president, Mr Ayodapo Shoderu, said that it has targeted the distribution and extension of insurance services to the remotest part of the country.
The council through its current president Emmanuel Kayode Okunoren and its members are expected to champion the cause of retail and grassroots insurance in Nigeria this year riding on the numerical strength of its members.
The council under its present leadership has not done much in propagating the gospel of retail insurance. Rather than doing this, it has spent all its time defending its members on delisting or not being delisted by NAICOM. NCRIB leadership and NAICOM should settle whatever rift they have and concentrate effort on development of the industry.
Institute of Loss Adjusters of Nigeria (ILAN)
The objectives of setting up the institute was to establish and sustain a professional body of practising loss adjusters of Nigeria.
It has the responsibility of engaging in activities that will ensure the general welfare and public well-being of insurance loss adjusters and to take necessary actions for the advancement of education in the field of loss adjusting in Nigeria. The objectives should be pursued by the institute by establishing and maintaining institutions, libraries, schools, and recreation centres for the succour, assistance or education of its members, and the public in Nigeria in loss adjusting.
By applying the funds of the institute in the purchase of proprietary or other interests and the establishment of projects, the proceeds of which shall be appropriated wholly and entirely for charitable purposes and public well-being of loss adjusters in Nigeria.
The institute should this year establish a more cordial relationship with the insurers and the regulator especially in respect of the controversy in their commissions and scale.
Association of Registered Insurance Agents (ARIEN)
Members of ARIEN have the responsibility of promoting and selling grassroots insurance resting on their shoulders. They have numerous members scattered all over the country and are closer to the masses more than the brokers and the underwriters, they should therefore use this opportunity to market insurance to Nigerian masses and in doing that protect the image of the industry by not presenting themselves in bad light. They should liaise with the newly approved distribution channels by NAICOM and spread insurance to all Nigerians. They should establish branches in rural areas to pursue the federal government 10 million farmers insurance scheme by marketing micro insurance scheme to farmers in rural areas.
ARIEN should also rise up to the challenge of keying to the model marketing tool like these of information technology in selling insurance to the grass root through the education of its members and enlisting of young graduates who are more versatile in the use of modern technology in the sale of insurance.
The association should ensure that its members do not dent the industry’s image through misbehaviours like absconding with premium they supposed to remit to insurance firms and non documentation of policy contracts of their clients.
Risk Surveyors Association of Nigeria (RISAN)
The RISAN is an association of corporate bodies and individuals performing the duties of risk surveyors in the fields of risk management, risk surveying, loss prevention, risk controls, etc in relation to fire technology, safety devices, engineering, business information and other risk of both industrial, commercial and personal lines.
RISAN provides continuous education for its members and inculcate in them the virtues of maintaining good business relationship with clients when giving professional advice on risks.
One of the areas insurers are not getting things right in Nigeria is in the education of Nigerians on how to stay safe and avoid risks. The result of this is that insurance industry is prone to claims emanating from avoidable risks.
The risk surveyors should this year make their position and services more prominent and accessible than the previous years. Many don’t understand their position and place in the insurance industry they should therefore tell people where they are and what they can do to help in reducing the burden of claims from avoidable risks coming the way of insurers.