Some insurance operators are regretting last year’s cancellation of the recapitalisation exercise for the industry.
According to the operators, the development may lead to the channelling of big ticket businesses to foreign insurers.
They said the policy, which had increased operating capital of the industry by 300 per cent, if implemented would have strengthened indigenous insurers to retain most huge insurance businesses often flown abroad and would have also increased the contribution of the sector to the nation’s Gross Domestic Product (GDP).
The insurers said in the light of the cancellation, most insurance companies would still lose businesses they used to underwrite as policyholders seemed poised to transfer their risks to underwriting firms with strong capital base.
Commenting on the cancellation, the President, Chartered Insurance Institute of Nigeria(CIIN) and Managing Director Consolidated Hallmark Insurance Plc, Eddie Efekoha stated: “Currently, insurance buyers especially big corporate buyers determine companies that will underwrite their business using capital as parameter of measurement of fitness of firms that will handle their business.
“Recently, a broker said his client had informed him not to place risks with any underwriting firm with less than N9 billion capital as proposed in the cancelled policy.
“With such developments, it is now immaterial whether the industry regulator withdraws the policy because it has opened the eyes of insurance consumers.
“What I heard from our office recently was that there is a broker that said that my client has already seen that N9 billion is what is required, so please go and shore up.
“It is immaterial whether the commission has withdrawn from the TBMSC or not. Of course, we are all here in this market, there is a particular transaction in Exxon Mobil for several years that never respected the N3 billion capitalisation and to that extent, some of us whose capital were not up to that minimum were excluded,” he stated.
With the cancellation of the recapitalisation exercise the National Insurance Commission (NAICOM) last year, the capital base for the industry remains the same, meaning that non-life insurance firms are to continue to operate with a minimum of N3 billion capitalisation ; life insurance operators to maintain N2 billion and composite insurers are to maintain N5 billion minimum capital base.
This is what they would use to conduct their respective businesses in 2019.
Efekoha, who spoke at a recent workshop organised by the National Association of Insurance and Pension Correspondents (NAIPCO), called on insurance underwriters, to shore up their capital base in the new year, irrespective of the cancellation of the recapitalisation exercise.
Commenting on behaviour of some insurance underwriters, especially towards insurance rating, Efekoha, said rate-cutting was expected to continue in the industry in 2019, as insurers scramble for businesses, especially, in the formal sector base, a development which he and other underwriters said was hurting insurance industry in terms of premium income.
He said rate -cutting was a regrettable act that must be addressed to increase insurance contribution to the nation’s GDP.
On his part, the Deputy Commissioner for Insurance Technical, Mr. Sunday Thomas, said: “There was a point in this market when 10 per cent for comprehensive insurance was sacrosanct, but later, it came down to five per cent and that became the standard.
“But you and I also know that there was a point that some operators were charging as low as one per cent
“Also, there was a point that third party was N5, 000. You and I know that it came to a point where people were charging N1,000 and the market was producing N200 million premium income from this business. If they decide to charge N5000, what is the market likely to produce?”
This challenge, he said, must be addressed by insurers to increase the ability of the industry to pay genuine claims as and when due, noting that, when a risk is under-priced, it affects the ability to promptly pay claims.
The Managing Director, NSIA Insurance Limited, Mrs. Ebelechukwu Nwachukwu, said, insurance in 2018, grew significantly in terms of the quality of products insurers rolled out, the quality of channels of distribution, the quality of people they engaged and the commitment of insurers to grow the people, thereby, increasing insurance penetration in the country.
According to her, “If we can push all of these over and over in 2019, I have no doubt at all that penetration will increase and premium will rise also. “Today, the industry is paying better salary and so people are better; operators study more than any other industry I have engaged with, they are dedicated to writing examinations, attending seminars, conferences and workshops, they want to be heard and an insurance person wants to be heard intelligently.”
The Chairman, Nigerian Insurers Association(NIA), Mr. Tope Smart, said, the nation’s economy had been projected to expand by about 2.5 per cent in 2019, promising that insurance industry will take advantage of this expected growth.
“We have figures of the growth of about 20 per cent when you compare the figure for 2017 and 2018 and I hope 2019 will be better. By the time we have the end of the year result, we will be having what I call a very positive result.
“The industry will continue to prioritise claims settlement and both regulator and operators are working together to put insurance companies on their toes to pay genuine claims through NIA and NAICOM complaint bureaus.
Smart, is also the Managing Director/CEO, NEM Insurance PLC,