Following the recent civil unrest in some states in the country that resulted to the destruction of businesses, the National Insurance Commission (NAICOM) has directed insurance underwriters to commence rating and charging of adequate premium for insurance coverage on strike, riots and civil commotion.
But NAICOM disclosed that it would soon release guidelines to this effect.
The Commissioner for Insurance, Sunday Thomas, disclosed this recently at the insurance professionals’ forum in Abeokuta, Ogun State, saying insurers would start charging standard rates on the riots, strikes and civil commotion risks.
He said this was to ensure that insurers have enough money to adequately compensate victims when such risks occur.
“However, these incidents are likely to increase insurance claims, thereby exacerbating the already weakened liquidity and capability of insurance companies. This has reinforced the need for proper underwriting to ensure insurers are able to settle corresponding claims obligations to cushion the effect of losses on Nigerian households and businesses,” he said.
Speaking further, he said: “It is pertinent to note that insurance coverage for Strike, Riot and Civil Commotion (SRCC) clauses, which were redundant in the past and which by competition are mostly offered free of charge must now be adequately rated as an important product for the survival of Nigerian businesses.
“The Commission will be issuing directives to ensure that underwriting is strengthened to appropriately rate and charge requisite premiums so that profitability can be guaranteed and claims are settled promptly without financial strain on the companies.”
He maintained that the recent outbreak of protests and civil unrest across the country and the resultant losses exposed the vulnerabilities in government, businesses and individuals to unforeseen events, adding that the incidents further reinforced the value and necessity of the insurance industry.
The insurance commissioner, noted that the widespread protests, civil unrest and destruction of properties, among others have created further socio-economic hardship and barriers for business profitability and growth.
“As Nigeria reels in the pain of the destruction and losses suffered this year, the Nigerian insurance industry must utilise the opportunity to lead in the quick recovery and restoration of the affected businesses and also showcase its role in reinforcing the economic resilience of individuals, businesses and the economy at large. Therefore, the theme of this year’s Professional’s Forum, “Defining the Future of the Insurance Industry,” is apt and timely”, he said.
He noted that the COVID-19 pandemic imposed immense pressure on all businesses including insurance business, pointing out that pressure faced by consumers in the form of reduced finance and business activities, lack of access to credit, expiration and wastage of perishable goods, temporary or permanent business closures and employee contract terminations, life threatening illnesses and deaths all combined to increase the propensity for claims.
Thomas, noted that one of the major challenges for insurers in the period of abrupt stop on businesses was the inability to market/sell insurance products to consumers which, in turn, reduced the premium income.
According to him, this necessitated the need for a robust online automated marketing and feedback system in order to reduce the dependence on in-person sales and marketing.
He also said considering that most losses arising from the pandemic were not adequately covered by existing insurance policies, it became obvious that current insurance product offerings are not adequate to respond to emergent risks and needs of our society.
“There is, therefore, the need for a review of conventional insurance products in order to upscale the value proposition of the Nigerian insurance industry. We cannot continue to ignore the impact of unforeseen events on individuals, businesses, and the insurance industry as a whole,” Thomas said.
He further noted that the work-from-home trend which is gradually becoming the norm has heightened the need for digitalisation in the Nigerian insurance industry, observing that insurance companies are now deploying technology for remote working to enable companies to expand their mode of delivery of products and services to customers.
“In this vein, the Commission is working on an insurance industry IT framework including cyber risk and security requirements to safeguard the confidentiality and personal data of the insuring public.
“In response to the changing environment, Phase 1 of the NAICOM portal which is intended to capture all insurance policies issued across the country and also provide a link with the Commission’s licensing and other authorisation processes has been concluded and is ready for deployment. The Commission is also currently working assiduously to conclude the digitization of the operations of the Commission’s support departments,” he added.