By Ebere Nwoji
The National Insurance Commission’s (NAICOM) limit to management expenses of insurance firms may have started yielding fruits as operators, especially the big players are now taking steps towards ensuring reduction in their management expenses despite their huge premium.
But the commission is yet to achieve similar success among some troubled firms whom available data showed still have high management expenses.
Industry data released by the Nigeria Insurers Association(NIA) in the latest edition of its Insurance Digest, which x-rayed the 2019 financial positions of insurance firms revealed that some weak insurance firms placed under interim management and receivership have their management expenses exceeding premium income while market leaders with huge premium income recorded drastic reduction in their management expenses.
For instance, the report showed that the International Energy Insurance (IEI) Plc in its 2019 financial statement posted a gross premium written of N533.08 million, for non-life business while its management expenses was N682.40 million.
Also, it showed that Leadway Assurance Limited under the non-life business posted N35.05 billion and incurred N5.20 billion as management expenses.
In the same vein, while Custodian & Allied Insurance Limited, posted N25.65 billion premium and expended N3.16 billion on management expenses; Axa Mansard Insurance posted N20.08 billion, incurred N3.42 billion management expenses; and NEM Insurance posted N19.76 billion gross premium and incurred N3.51 billion management expenses.
Furthermore, while Sovereign Trust Insurance raked in N10.87 billion as gross premium and incurred N1.87 billion as management expenses; Royal Exchange General Insurance Company made N10.58 billion premium and spent N1.06 billion on management; Coronation Insurance raked in N10.71 billion and spent N3.48 billion as management expenses.
Also, the report showed that while NSIA Insurance, made N6.52 billion premium and spent N1.14 billion as management expenses; Unitrust Insurance raked N3.53 billion and spent N444 million on management cost.
According to insurance experts, management expenses are expenses incurred by insurance firms from underwriting activities, salaries, rents and others excluding commission to agents.
Few years back, insurance firms’ account books showed that majority of the firms weighed themselves down with heavy management expenses to the extent that some of their books showed that they were on deficit margin as expenses used to exceeded their generated premium.
This had prompted NAICOM to focus its attention on this form of cost in the industry.
The situation was more prevalent in insurance firms’ 2016 account prompting the then Commissioner for insurance, Alhaji Mohammed Kari, to mandate them to maintain certain management expenses limit.
The NIA 2016 digest had x-rayed insurance firms’ financial behaviors for five consecutive years – 2012 and 2016 – and had shown that within the period, insurers incurred N264.15billion management expenses.
However, latest edition of the digest (2019), revealed that from the N365 billion gross premium generated in 2017, 2018 witnessed significant growth to N413 billion premium.
But the industry in 2018 saw its management expenses came down to N88.9 billion, showing a very significant decrease from the previous years’ figures.
