The need for insurance industry to find its bearing in Nigerian in the economy has made National Insurance Commission to introduce policies capable of transforming the sector, writes Ebere Nwoji
For more than a decade now, the National Insurance Commission (NAICOM) has been making the efforts to transform the insurance sector and make it generally acceptable with the aim of making the industry contribute meaningfully to the country’s Gross Domestic Product (GDP). The commission in this regard tries to ensure that the operating firms have adequate capital with industry operators playing according to market rules in the area of official premium charges and claims payment among others .
These efforts dated back to the days of Chief Oladipo Bailey as the Commissioner for insurance to Fola Daniel and to the present regime of Alhaji Mohammed Kari.
But a critical examination of these efforts vis-a-vis the outcomes shows that despite some improvement in the area of patronage and awareness of the industry by the populace in recent years, NAICOM and the operators are yet to fully reap the benefits of their efforts in popularising insurance.
One of the reasons for this remains the fact that both the regulator and the operators are not working and walking at the same pace in their efforts in this regard.
For instance, in the past, the operators often relied on the legislative powers of the court to successfully shorten the arms of the regulator. This situation often keeps the industry at a stagnant position for a whole business year and even more, before both parties would reach an agreement.
This happened in the days of Bailey, Emmanuel Chukwulozies as commissioners of insurance. Only Daniel was successful and today, Kari is facing similar situation.
The Chairman, Progressive Shareholders Association Nigeria, Boniface Okezie, however, blamed the regulator.
According to him, NAICOM’s recent directive for operators to shore up their capital was the worst mistake any regulator will make, considering that the country has an upcoming general election.
Indeed, most Nigerians especially those in rural areas, going by the result of a NAICOM survey, have no idea of what insurance is all about and what benefits are there for them because of lack of education on insurance.
To addressed this, the commission, had designed a programme tagged: “Reaching the Unreached.” This was targeted at bringing more Nigerians under insurance coverage.
Speaking on the programme, NAICOM Director of Authorisation, Pius Agboola, noted that one of the greatest challenge in serving Nigerian population with insurance services is distance, adding that whereas banks have successfully spread their branches to the remotest parts of the country, insurers were yet to do so.
According to him, branches of insurance firms are only located in capital cities and at best in state capitals. He said in north-east, for instance, out of 112 local governments, it is not certain that there is a branch of insurance company there.
According to him, in north west, out of 126 local governments, 106 branches of different banks are there but insurance firms have no representative branch, adding that the story is the same with some parts of north central .
The result is that due to overconcentration of insurance firms and their marketing staff and agents in the cities and too much focus on corporate business and government accounts with little or no efforts towards development of retail market which is available in these neglected rural areas, operators resort to cutting corners in order to grab the available businesses and grow their premium income.
This has resulted in unhealthy competition that gave rise to the prevailing rate slashes which is now killing the industry.
The Deputy Commissioner for Insurance, Technical, Mr. Sunday Thomas, said the commission would look at how to penetrate every nook and cranny of Nigeria with insurance services.
He said the commission has some strategic policies on how to sustain all the achievements it made in the previous years in its effort to deepen insurance penetration in the country. But Thomas, said one of the things NAICOM was targeting is fighting against unhealthy competition especially as it concerns pricing of insurance products.
Also NAICOM Director, Research, Statistics and Corporate Strategy, Habila Amos, said the fundamental issues in the Nigerian insurance market presently is that the industry contributes only 0.48 per cent to the GDP and is dominated by brokers and general business of which motor insurance and oil and gas insurances are the largest products sold in the market.
complaint bureau unit and facilitation of index based agricultural insurance for farmers protection and enhanced food production in the country.
Meanwhile, Kari stressed the need for recapitalising the sector based on risk bearing capacity of each firm.
He had insisted that low capital base of the operators remained the bane of the industry’s growth. He said while the operators were busy dragging NAICOM to court over capital increase, the banking sector has upgraded its capital several times.
He insisted that the industry must match up with the trend outside the shores of Nigeria if it must remain a competitive industry.
However, the commission’s determination in this regard has been punctured by a recent court action instituted by shareholders in the industry who were instigated by some operators that felt threatened by the exercise.
Observers have said that if NAICOM’s efforts to restructure the industry through the aforementioned initiatives and programmes were backed by positive actions by operators, the industry would have achieved its primary target of winning mass patronage and growing the premium income of the industry as well as the overall target of contributing meaningfully to the GDP.
Their thinking was the use of alternative distribution channels approved by NAICOM. But again, the disagreement between the Central Bank of Nigeria, (CBN), the Nigerian Communication Commision(NCC) and NAICOM posed a stumbling block.
Operators also complained that in the face of the micro insurance business, the initial experience may not be palatable if there is no practical steps to implement compulsory insurances and intensify efforts in insurance awareness.
On tier base capital increase, their complaints was the time limit for final implementation and the categorising of their operations into tier one, tier two and tier three operators.
Some of the operators complained that the tier based capitalisation did not build protection for the small firms that would operate at tier three level, arguing that the commission had exposed them to free competition with the big players in tier one.
According to them, the insuring public would prefer to deal with tier one firms even with the least assets they want to insure since they are in the same market with the tier one operators.
The complaints came despite the length of time and several consultations between the regulator and the operators especially at the insurers’ committee meetings before the official announcement of the tier based capital increase.
This spells the need for government through NAICOM to find a way of arriving at a point of agreement with the operators before coming out with initiatives as well as the need for operators to boldly lend their voices to the initiatives before implementation commences.
It also points to the need for government to beef up its insurance attitude to lead the public by example.
In any business, especially the services sector, government has remained the highest spender and biggest customer. If government at all levels change their attitude towards insurance, premium generated from state and local government insurances alone would be enough to sustain insurance firms.
This being the case, government should be at the fore front of implementing the compulsory insurances in order to encourage the citizens to comply.
If government does not want the insurance sector to go the way of textile firms in Nigeria which continued to lament over government’s lip service until the demise of the last textile firm in the country, government should listen to the advice of NAICOM which is federal government adviser on insurance matters regarding the insurances of its assets.
For instance, till date, some government ministries, departments and agencies(MDAs) are yet to heed to NAICOM’s advice on establishment of insurance desks in their offices. What this means is that assets of such agencies including their motor vehicles are without insurance cover and government employees work without group life insurance cover.
The implication is that in the event of anything happening to such worker, his family would be left without any compensation and in the event of any uninsured government vehicle including presidential jet having accident, the third party involved has made the list of victim of hit and run vehicle because the driver of such vehicle would as usual assume that because it carries federal or state government number, he is free to hit anybody and go free.