High FX Rate: Insurers Groan under Huge Claims Figure


Ebere Nwoji

The twin problems of high exchange rate, which has seen the Nigerian commodity price index moving at geometric increase rate and adverse effects of climatic change with its attendant risk of damages to lives and properties in 2016 have exposed Nigerian insurers into high claims ratio experience in 2016 more than ever.

The insurers, said their claims experience in the current year, more than doubled what it was in 2015, adding that by the nature of insurance business, which is periodic and is renewable on annual basis, the high exchange rate of Naira to dollar has more than doubled their claims figure as what they spend in paying claims to their clients whose properties were damaged during the course of the year compared to what it was before now has more than doubled.

Both the Chairman Nigeria Insurers Association (NIA), Eddie Efekoha and Group Managing Director Royal Exchange Plc Auwalu Muktari, said the above twin problems gave insurers tough time during the year.

Specifically, the NIA Chairman, narrating the operators’ claims experience during the year 2016, at a press briefing organised by the association in Lagos, said during renewals in 2015,when premiums were paid, it was paid based on old Naira exchange rate to dollar which was N196.00 to a dollar but now claims are paid based on current exchange rate which is over N400.00 to a dollar.

He gave instance of third party motor insurance, saying the cost of repairing even the least damage on a vehicle has more than doubled because of high prices of motor spare parts adding that the same goes to other classes of business and claims emanating from them.

Muktari of Royal Exchange, said the year 2016, came with challenges of huge claims coming the way of the industry operators particularly as a result of negative impact of climatic change.
He said against the backdrop of the economic recession , premium generation has not really been a serious problem to insurers but huge claims experience coming their way particularly this year as a result of negative effects of climatic change.

The Royal Exchange boss, said: “In the year 2016, we envisaged a lot of claims coming our way due to climatic change.”
There has been heavy rain in the northern part of the country, before now, it has not been like that. With the climate change, there is heavy rain in the north this year .We have not seen that before in the north we have only seen it in the south so they are not prepared for it.

So many houses have been affected, also, the terrorists activities have caused a lot of pipeline vandalism, the terrorists activities in the north, in form of Boko Haram, many police, soldiers were killed, and these have group life cover. Houses were damaged, all these brought a lot of claims to the industry in the current year. There are a lot of factors that have affected claims rate in this 2016″, he stated.

On the way forward for the industry, Muktari, said the most important thing is how to increase operators’ capacity of doing businesses so that the industry will have larger capacity to accommodate more risks instead of ceding huge risks outside the local market.

He said with improved capacity, operators can focus and reposition the industry so that they can retain more risk in the local market and with retention of more businesses locally, there will be creation of more jobs for the teeming population of Nigerian youths.

He said with improved capacity, there will also be rapid growth of the insurance industry, and there will be a lot of funds for share holders to enjoy and the industry will become one of the greatest industry in Africa and part of the world in general.

The NIA Chairman, said the operators are battling to survive the situation adding that they have been proffering solutions both at individual and at group level.

The NIA chairman speaking on other issues affecting the industry debunked claim recently made by the Chairman Ad-hoc Committee on Insurance, House of Representatives, Adekunle Akinlade in which he said that mass fraud of over N200billion was discover in insurance of federal government assets.

Efekoha, said: The Association would have waited for the Committee to conclude its investigation before making its comments but to date,so much damage has and is still being done to the image of our industry by some of the statements credited to the Chairman of the committee, which in their material facts are inconsistent with known insurance market practice.

He frowned on the allegation against the industry, stating that there is no N200billion fraud anywhere as claimed by the chairman.

Speaking at the inauguration of the ad-hoc committee in Abuja, the chairman of the committee, a member of House of Representatives, Adekunle Akinlade (APC, Ogun), said the panel has in its possession documents that showed how payments were made to non-licensed and non-existent brokerage firms by MDAs.
He said the committee also uncovered unpaid claims running into billions of naira, paper trails of monies paid to individuals and third party companies as well as over-valued premium payments for the years under review.