Awakening Government’s Consciousness on Insurance

Winning government’s recognition and patronage has remained the earnest desire of insurance sector operators, but this seems not to be happening, as expected. Ebere Nwoji reports that NAICOM’s engagement with the Secretary to the Government of the Federation may change the narratives.

Recent visit by the board of the National Insurance Commission (NAICOM) to the office of Secretary to the Government of the Federation (SGF), Boss Mustapha, with a request for government to ensure that ministries, departments and agencies (MDAs ) patronise  insurance industry through proper insurances of all government assets around the country, is an indication to the fact that the industry is no longer at ease with  poor  treatment meted to it by government in form of low level of recognition, support  and patronage .

Insurance operators look forward to higher recognition and support from government but said they get much lower than they expected.

Often times, the operators just like members of Manufacturers Association of Nigeria (MAN) accuse government of paying lip service to their sectors.

Indeed, these two sectors, as vital as their positions are have been lamenting that they enjoy little or no support from federal government in both patronage and policies that will fast track their sustainable growth.

At one time, MAN members challenged government to stop importing fleet of cars from abroad for members of the upper and lower houses and to patronise their members if actually government wants their survival.

One of the MAN’s sectorial groups, the Nigeria Society of Engineers picked holes with the Lagos State government under the regime of Brigadier Buba Marwa for importing the tricycle called Keke marwa instead of giving the contract to its members.

The textile group of MAN never spared government as it has also accused all government functionaries of denying them patronage in their dressing.

The group, challenged government functionaries to desist from wearing imported fabrics if their crusade on usage of made-in-Nigeria goods is from their hearts.

They challenged government office holders to lead by example by using only products made in Nigeria to help the growth of the manufacturing sector.

After this challenge, federal government for a short while enforced use of Nigerian products around the Aso Rock Villa such as made in Nigeria rice for festive gifts while female office holders tried to copy the then Minister of Finance and Coordinating Minister for the Economy, Ngozi Okonjo Iweala by wearing Ankara made in Nigeria.

But while Iweala maintained her Nigerian Ankara dressing culture, others allowed the spirit to wane by diverting to imported English wears up till today.

Fate of insurance Sector

Among the insurers, the same is the case as though government keeps challenging the operators on the need to ensure that the sector makes meaningful contributions to the growth of the economy, according to the operators, the same government prefers to either not insure its assets or where they insure, they prefer to use foreign insurers.

For instance, before the local content law, virtually all accounts of the Nigeria National Petroleum Corporation (NNPC) were insured abroad.

When the insurers enquirer, the answer they got was that they lacked the capacity in terms of capital and technical know how.

THISDAY recalls that officers in charge of NNPC account once told the insurers that the capital of all the insurance firms put together cannot insure even one oilrig of the corporation.

But the insurers were quick to tell them that even among the overseas insurers they give the business, no one single insurer handles their business alone, arguing that if they could give their business to foreign insurers to share among themselves, why not allow indigenous insurers to participate and share the risks like their foreign counterparts.

NAICOM’s Intervention

It was from this point that NAICOM as the regulator and government adviser on insurance matters confronted government on the need to allow indigenous insurers to handle NNPCC account.

The commission anchored on the local content law and came up with guidelines on oil and gas insurance as well as on aviation and with that it was signed under the local content law that no business organisation or individual in Nigeria will take any business abroad without first feeding the indigenous firms with such business before taking the excess abroad.

The indigenous firms were advised to form consortium on such high tech and capital-intensive   businesses to build capacity.

With this, the insurers were at least allowed to literally pick the crumbs under government’s table in the insurances of its businesses.

Underpricing, Non-payment of Premium

But paying the premium became another issue and another way government rip off the insurers in the sense that instead of fully supporting the insurers’ business through paying the right premium rate at the right time, government’s insurance agents were taking advantage of the insurers’ voraciousness in underwriting government business to beat the premium rate to the skin.

In some cases, corrupt government insurance agents will insist on paying whatever amount they want to pay and assure the insurers that they will not worry them when claims occur.

This continued for many years but the overall effect was on low premium generation by the industry, low contribution to the National GDP and abandonment of government’s damaged properties.

A case in point was the Mamman Kotangora house gutted by fire and was abandoned for several years.

But again NAICOM waded into the situation and put a stop to it by insisting that the unhealthy competition going on in the insurance of government assets must stop and the right premium charged.

This to a reasonable extent controlled the excesses of government’s insurance agents in cheating the insurers on premium pricing.

Then came the issue of Group Life Insurance of government employees in which government will buy cover from insurers but will not pay premium but when it losses any of such staff, it will begin to negotiate to subtract claims from premium and if at the end of any year it losses no employee, it will refuse to pay the premium and will sweep the year’s premium under the bed.

No premium no cover policy

This continued until in January 2013 when NAICOM implemented “no premium no cover” policy of the industry meaning that if any one buys any insurance contract and fails to back the contract up with premium payment, in the event of any mishap, the person or organisation will be entitled to no claim.

It was from that same year that government started releasing budget meant for the group life insurance of its employees.

The latest negative attitude of government towards the insurers was that of insuring its assets. Indeed investigations by THISDAY reveal that even in some cases, some government official vehicles don’t have common third party motor insurance coverage let alone comprehensive


Similarly, despite what the law says about compulsory builders insurance, some buildings belonging to government do not have insurance cover.

The result of this is that premium from these assets that supposed to go into the coffers of insurers are diverted to other sectors of the economy where government agents choose to spend them.

Operators’ views

One of the managing directors of insurance firms in Lagos who pleaded anonymous said looking at the above scenario; federal government was number one killer of the industry.

He said through its policies, government has not shown that it has regard for the insurance sector.

He said people were often fast to say that insurance sector in western countries were more serious than their Nigerian counterparts, pointing that over there, insurance own banks but that they forgot that over there, their governments support the industry through patronage and positive policies.

Here in Nigeria, the insurance technocrat said the reverse was the case.

He cited example with government policies saying most of government policies were against insurance sector.

He cited example of pension sector, which was reformed and removed from insurance, arguing that in advanced countries, pension was under insurance and that was why insurance could afford to own banks.

He argued that if government had reformed the pension sector and left it under insurance, the N14.27 trillion pension assets would have been under insurance.

He said today whereas after 18 years of pension reform, the sector is currently controlling N14 trillion investable funds insurance is still struggling with N600billion annual premium.

He said another policy of government that affected the industry was the removal of workmen compensation from insurance and its transfer to Nigeria Social Insurance Trust Fund (NSITF).

The insurer lamented that aside these, some government agencies like the Road Safety Commission, licensing offices were eyeing third party motor insurance and are currently selling the certificates to the detriment of the insurers.

This, he said, was in addition to carefree attitude of government towards deploying its law enforcement agents to implement the compulsory insurances even among state governments, which up till today have not complied with the law on group life insurance of their workforce.

He said these did not start today and had been responsible for low turn over of the industry as well as its minimal contributions to the National GDP.

 NIA’s View 

THISDAY recalls that the industry’s struggle to earn government’s recognition and support dated way back to the days of late Remi Olowude, the former Chairman Nigeria Insurers Association (NIA) and founder Industrial and General Insurance (IGI).

Olowude, who was the Executive Vce Chairman of IGI, and Chairman NIA in what stands as his last outing before his untimely death, at an interactive meeting between the Board of NAICOM and Insurance Industry Operators, bared his mind on unpalatable treatment received by the industry operators from government by saying: “I will not bother you with details. The one thing to do in a dinner of this nature is to discuss the most sensitive issues. We shall draw the commission’s attention to issues that affect the stability and long term growth of the insurance industry.

“The encroachment on insurance business by government agencies, which try to provide insurance protection to aviation passengers and public liability for nuclear risks. The federal government in 2007 divested its interest in Insurance business when it sold NICON and Nigeria Re, on the understanding that such concerns are better managed by the private sector. But ironically, the same government extracted workmen’s compensation insurance business and transferred it to NSITF as Employee Compensation Scheme.”

Continuing he said, “In similar vein, the federal government split pension business between insurance industry and PFA’s, assigning the chunk of the business to PenCom and PFAs; while it also moved health insurance from the insurance industry to NHIS. It is an open secret that the NCAA, under the Ministry of Aviation, is planning to establish insurance fund for aviation passengers’ liability. All over the world, aviation passengers’ liability is subject to international conventions and the risks are covered by conventional insurance policies; Nigeria cannot be an exception. Similarly, the Nuclear Agency wants to establish fund for nuclear damage insurance, instead of seeking conventional Insurance cover for the risks which are covered in international insurance market.”

On the issue of poor patronage of the industry despite its position as the highest spender in the economy, Olowude said: “Government and its agencies have been paying lip service to the importance and benefits of insurance, without serious patronage and support. There is hardly sufficient budget provision for payment of insurance premium by government and its agencies. Therefore, when insurance services are patronised, payment of the premium becomes an issue, a clear negation of the provisions of the law on “No premium, No cover”. Some government parastatals or enterprises are funded without allocation for insurance. Many insurance policies contracted by the MDAs in the past were not renewed, thus leaving the assets exposed to risk, damage and losses without insurance protection.”

On marine insurance he said: ”There is need to activate the various laws relating to Marine Insurance of refined petroleum products imported into the country. The Insurance Act 2003, for instance, provides that all imports into the country must be insured with an insurance company registered in Nigeria. This law is only observed in the breach. Consequently, we are seeking enforcement of the Cabotage Act 2003, review of the Insurance Act 2003 and the Nigerian Oil Industry Content Development Act 2010.”

Olowude made these observations in March 2014 and died the same month but eight years after, just last week, having seen no much change in government’s treatment to the industry, NAICOM board visited the same issue with a compassionate plea to the government of the federation to consider mandating insurance desk officers of the MDAs and their bosses ensure that the industry enjoys government’s patronage through insurances of assets under their purview.

“The commission is interested in seeing all government assets being insured, we want the SGF to issue a circular or letter to all MDAs on the necessity of compulsory insurance” said Chairman, NAICOM board Dr. Abubarkar Sani during the visit.

In his response, the SGF, represented by the Permanent Secretary, General Services Office (GSO), Dr. Maurice Mbaeri, requested the commission to come up with a draft document of what the Commission wanted the Circular to contain to guide the Office of the SGF to be properly articulated in the Circular.

“Send a draft copy of the circular to the SGF, after the review a circular will be released to the MDAs, ”he said.

But an insurance chieftain who spoke on the above response said this was not the first time the industry got such positive response from government but after a while everything goes down the drain.

He said despite similar promises by government in the past, “majority of the government officials do not take risk mechanism seriously, hence insurance is an erroneous issue in the government circles. 

According to him, it is a fact that some of the ministries that insert insurance premium in their yearly budget head, end up diverting these funds meant for payment of insurance premium to other sectors they think were more relevant to the government.

As a result, he said, “You find these abandoned properties scattered all over the country because of this promise and fail attitude of government.”

The current NIA chairman, Ganiyu Musa said going by the prompt response of the insurers to claims from the #eddSARS protest damages, the sector should be recognised and patronised by government and all Nigerians as a very responsive industry.

NIA immediate past chairman, Mr. Tope Smart, said the industry was appreciative of the recognition accorded to it by Federal government during the Covid-19 pandemic and pleaded that such recognition should translate to patronage of the industry by government.

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