The Commissioner for Insurance, Alhaji Mohammed Kari, who visited the Corporate Head office of THISDAY Newspapers in Lagos recently, spoke on the measures put in place to sanitise and rebrand the Nigerian Insurance Industry. Ebere Nwoji presents the excerpts:
Commissioner Sir, you are welcome to the corporate head office of THISDAY Newspapers. Can you throw some light on the purpose of this visit and what you hope to achieve?
It is Part of our current strategy to visit reputable media houses like yours, to share our vision and opinion on our industry and the economy and to use the opportunity to re -emphasise what we are trying to do with insurance industry because the Nigeria economy today, like other economies,is going through trying times. We however believe that in every challenging situation, there is always an opportunity.
For the Nigerian insurance industry, we feel it has now gotten another opportunity to re -awaken itself to play its rightful role in developing the economy. Nigeria’s economic development definitely needs everybody’s hands to be on the deck. As far as the financial sector is concerned in this country, other sectors of the financial world seem to have moved ahead of insurance sector, not for any lack of effort but principally, I think the industry has not woken up to the challenges it met along the way.
You know the biggest impediment to insurance in a developing economy is the issue of inability to buy insurance and in most cases, the perception of the consumers of insurance. But in a clime like ours, the perception is held more by non-consumers than consumers. When you find ten people complaining about insurance, you find out that only one of them has insurance policy. In Nigeria we like to amplify complex situation.
But together with the insurance operators, the regulator is building calculated plans to improve awareness on insurance and to rebrand the whole profession and the industry so that potential consumers can now appreciate what insurance can do for them and their business.
You will be surprise to find out that even the public sector which is government, whose responsibility it is to protect public asset,is found wanting in most cases. They don’t comply with the requirements of the law even to their own employees and the aspect, which requires them to protect public assets.
Secondly,to ensure that they do not infringe the law of the country like the law, which made certain classes of insurance compulsory and we are trying to highlight those deficiencies with the public sector to government in particular and to individual consumers.
We found that with enforcement,every policy can succeed. The pension industry was removed from insurance sector. But with the enforcement, see what happened to it in less than 13 years. It has overshadowed insurance sector, the kind and amount of investible funds it has been able to create, the kind of security it has been able to provide for workers and ultimately,its employment contribution to the public. So, we believe that insurance can be as big or bigger because that was a subset of insurance. I mean if it can be given the proper opportunity and supported by the law to enforce the compulsory area of insurance which in all cases were made compulsory because they protect public interest.
Take for instance, simple motor insurance. A friend of mine challenged me by asking why Third party Motor Insurance should be made compulsory arguing after all is it not my property.
And my reply is this, it is not the asset that is compulsory, it is your liability to the road users and other members of the public because it is meant to protect public interest, likewise buildings and public places.
This is because the liability you incur by the use of that property is so huge. Look at now the rate of fire out brakes in our markets. There is fire everywhere, we have these markets full of valuable goods but they are not insured and in the mist of these wastes, ability of government and other property owners to replace those assets is being challenged every day by difficult times. So insurance is one of the best mechanisms to transfer those risks.
What in specific terms do you wish to do to make Nigerians begin to buy insurance?
There is a regulatory authority now.We have refocused our emphasis into creating value for the stake holders of the industry not only the consumers of the services but the investors. Insurance is the biggest sector quoted on the Nigerian stock exchange but the Stocks are not doing well, but of recent, we have noticed that there are positive changes in the price movement and it is going to do the reawakening of the investors and the opportunity they are not seeing existing in that sector because with the saturation you find in other financial services sector, insurance is the only area of opportunity.
What it needs, is proper nurturing and we do that nurturing especially to the consumers and investors by ensuring that insurance companies play according to rules, pay claims on time, pay their taxes, meet all other corporate social responsibilities, employ people, provide the spread so that their services can be reached by everybody who want their services especially the compulsory classes.
We also identified from the exercise undertaken by the World Bank few years ago that there is a huge unserviced population of Nigeria not serviced by insurance, which is the micro level. The bank also during the exercise discovered that there are some parts of the country where the citizens have reservation for conventional insurance services based on their religious and cultural beliefs and the bank has been addressing this with the financial inclusion policy, which it established worldwide to encourage developing economies to create products in those areas.
We have responded positively to this by issuing guidelines on areas of micro insurance and Takaful insurance which is based on Islamic Sharia principles, to be able to include in our services provision for people who were not included before. Now we have micro insurance that cater for insurance of assets or liabilities as little as N5000. Which before were not available. We have provided lower capital requirement for such companies and conventional companies.
We are now scaling it down further to provide licence to operate at micro level like one unit Licence, like micro finance banks where you can have licence for an insurance company to operate in one area if you like or to operate in state alone like the banking licence , which we believe will expose insurance to the common man who need small covers that the big people take for granted.
We have brought the market together into an insurance committee structure,a kind of the bankers’ committee structure we had before where all the Managing Directors of all the providers meet regularly with the regulators to consider challenges and opportunities and discuss how to go about it and how to manage them rather than the operators issuing guidelines and directives.
We meet every two months. That committee has constituted six other subcommittees with specific responsibilities. The two most important of all the subcommittees are:one is to deal with customer services that are managing the consumer properly and the investors and ensure that their complaints are attended to. The second is the publicity committee, which has to do with changing the conception of insurance and rebranding the industry so that a common man can understand the benefit to him and in effect.
The minimum capital base for operators of micro insurance has received a lot of criticism from the public,with some saying the minimum capital base of N150 million,N200 million andN300 million is out of reach of people who supposed to make the micro insurance market grow like the agents. Now you said a new capital base will be spelt out by your office how much is the minimum?
We received report of the review committee set up during the National micro insurance forum held in Abuja.The committee recommended that the minimum figure recommended is too small to capitalise on national operation and too big to have a one unit operation so we are planning to stagger it into a unit licence, a state licence and regional and national licence. And each of them with different capital base and the unit licence will be cheapest. once you are licenced, you can decide to have an office without chairs and air condition because if you have a unit licence set up at Ajegunle, you don’t need to have a poach office as long as you will be there for the consumer to walk in to you every day and deal with you. If you have a licence to operate near a market, all you need is to stay close to the market where consumer will deal with you on daily basis and if they have issues, you will be there to attend to them. So you don’t need the kind of capital a conventional company will need to operate in Victoria Island.
But we will come out with exact minimum capital by the second quarter. Definitely the unit licence will be cheapest, the state licence will be the next, the regional and the national will be bigger.
Similarly, the level of structure you need to set up will differ and will be such that the unit licence will have only one operational branch, the state will have minimum number of local governments, the regional minimum number of states in that region and national, minimum number of states around the country.
What about minimum capital for Takaful Insurance operators?
Takaful is similar,we have also issued guidelines on that.
Now because the two lines are new, we did something there, we allowed registered insurance companies now with conventional license to sell the same products through windows. So with the licence they have, they are qualified to sell micro and Takaful insurance subject to product approved for them. But with the experience we have had in this four years, we encouraged them to take up standalone licence as specialised operators so instead of companies operating through windows, they combine specialist license and sell it through the same branch network .
Takaful too is still Under the same consideration but we have received application for specific specialist companies We have interviewed one and advertised one for public comments, which will be concluded any time from now. In the last two weeks,we have interviewed second applicant which we will soon publish, because our law provides that before we licence any operator, intermediary or company, we must publish the name of the company, and the directors for public comments. Interestingly,we have been getting good comments from the ones we have published so far. And the last publication we did on insurance licensing was more productive to make people be aware that we are issuing Takaful licencing. When they saw the publication, they said oh! You have started licencing on Takaful and we said since and we issued guidelines but they said they missed it. So that is what convinced us that actually, publicity should not be one off thing but should be done constantly. So we are going to be disturbing you with a lot of publications so get ready for us.
We have listened to you carefully and I’m personally thrilled by what is happening in the industry today but don’t you think it has taken too long for insurance to wake up from its slumber in terms of sanitising the industry and educating the people on the relevance of insurance especially in the grass root?
We believe it has taken this long not because of lack of effort of the regulator but because of the cultural and religious perception and the wealth and ability level to finance insurance. As I explained earlier, a lot of people see insurance services in the light of essentials. It is always in the lowest part of their preference list. They don’t see or understand the benefits but this effort we are making now together with the industry, is to really bring it to the fore front for the consumers to understand the benefits and how it can help their businesses.
We are not working alone, we are working with government and other commercial sectors. We invited the Dangote industries during the last insurers’ forum and Dangote came and told us the size of his business and all eyes were bulging. And we realised that we have been providing only 50 percent of the company’s insurance requirements.
So you see the opportunity, even in one company, not to talk about others. I don’t want to ask if THISDAY is properly insured, but you will be surprised that even if the organisation is properly insured, half of the staff do not enjoy the benefit of insurance. May be on their personal insurance, on their product insurances not because they don’t want but may be because they are not even aware of the policies they will buy to protect their properties. As little as you have is worth protecting. So it is only this kind of effort we are making that can bring insurance to the fore front and we agreed that we could have done more that is why we are emphasising on doing more now. In our corporate strategy, we have just concluded that in the next five years, from now to another five years, we have put publicity and customer awareness at the top of our agenda. And it is what actually guided this visit in addition to other media we will visit for you to hear first time from us.
Like you mentioned in your opening remarks, also keep us on our toes. Not only government even NAICOM, if you think there is more we need to do tell us by writing editorial, by writing articles. But occasionally, the same media are used wrongly. Recently we had an article written in THISDAY by somebody who claimed to be a practitioner from Ibadan, A very critical article, which reading in between the lines, you will see that he was misinformed by some players in the market. One way of bringing discipline into the market is through deterrent factor. We do not see penalties we serve to companies for failure to comply as penalty. We hope it will be a deterrent to companies that have not failed as such, a lot of companies now are paying penalties and the penalty is working in the sense that level of compliance has improved drastically so a few aggrieved operators that have been penalised will go to the press and structure rubbish that looks intelligent and publish. But what we have always appreciated is that people like you will always give us right to reply and this one too we are writing a reply, which we hope will be given exposure.
What is your reaction to ailing operators’ complaints about monetary penalties and sanctions as well as government’s indifference to insurance of public assets?
We have the understanding that a regulated entity, who is being properly regulated, will always scream. But for the benefit of the consumer, the investor and the general public, it is important that discipline be instilled in all license operators because that is the principal role of the regulator to protect the consumers, policy holders and the public. We are the official adviser of government by our law but government has not been taking our advice when it comes to insurance of their assets. So we are trying to awaken them. We have just issued some circulars to all ministries and departments of government (MDAs) so that the public will know that we are asking government to also comply and a lot of government MDAS may not see the circular before they see your publication in your papers.
When we talk about regulation and sanitisation of the industry, you seem to focus more attention on the insurers with little attention to intermediaries like insurance brokers and other intermediaries whose activities tarnish the image of the industry more.what are you doing to brokers or other intermediaries who go about selling policies to buyers only to abscond when the buyer must have paid premium to them without any record of any business transaction with the buyer in the underwriting company they are marketing ? What are you doing to separate the wheat from the shaft among these intermediaries?
Recently, precisely towards the end of last year, we did a review of licenced operators especially intermediaries and your paper was among those that published the list. 108 insurance brokers with lapsed licenses. And that caused an uproar, not from consumers but from those class of intermediaries, who feel that we have deprieved them of their means of livelihood. They argued that we have caused unemployment; they argued that we are unjust, but the interest of the public we protect is more important than their complaints. Because we found out that all those companies that we published, we did not cancel any licence. They are operating without genuine licence from us so we only alerted the public not to do business with them because they don’t have genuine licence. And that caused a panic but since then, if you see the level of attempt to comply with appropriate licensing procedure, you will be surprsed.
But that is not the issue, we are checking our records to identify more that will go out of practice because it is those rotten ones that cause problem and create the bad publicity and bad name for the industry and there will be more to be published no matter their level of complaints. All of those complaining when they do in their own name and they have specific cases we look at them , if they have merit, we listen to them but most of them don’t operate with their names. They operate with silly names because they know they have no legal licence.
They will rather stop defrauding people. But we have taken it a level further. New we are going to prosecute the individuals behind such frauds thank God people are more weary of law enforcement now. So we believe that time is right to do things right in the industry. We are doing it with the Chartered Insurance Institute of Nigeria which is the body that registers every professional operator and the institute has agreed with us that when we find a professional wanting, he will be suspended from using his licence for sometime and depending on the level of infringement, he will be suspended from using the Licence for life. These are the measures we have adopted to sanitise the industry. The insurance companies also agreed with us that companies that don’t pay claims should be published, so that people will avoid them. The name and shame policy has now been agreed between the operators and us, so that nobody will say we are spoiling their market. They have agreed with us because they also accept that there are bad eggs in the market. For that reason, we have also taken up another project to enforce the risk-based supervision approach.
This really looks at the individual liability of companies via- a-vis their capital and asset provision. We don’t want to line them up and say because you have paid N 3 billion minimum capital, you can do all businesses. No N3 billion capital will not give you the ability to insure a refinery or an aircraft. So if you want to do that class, you have to push up your capital and asset base. If you have small capital and small asset base, may be you convert to micro insurance; if you don’t have big capital to insure an aircraft, may be you specialise in Keke Napep.