‘We need to boost public confidence in insurance industry’
Dr. Ahmed Salawudeen is the President/Chief Executive Officer, Standard Insurance Consultants Ltd., one of the top five insurance brokerage firms in Nigeria. With over 40 years in insurance practice, the chartered insurer told select journalists about the challenges impeding insurance industry growth and what needs to be done to boost growth and confidence in the sector. Business Editor, Clara Nwachukwu was there. Excerpts:
How has the journey been so far and what is your prospect for the future?
The journey so far, has been excellent. We have to give that glory to God. The journey started far back since 1980, as a small organisation with about seven staff. But over the years, particularly as at the time the economy of Nigeria was very buoyant and when we started then professionalism was very good because whoever wanted an insurance broker will visit your office, they want to see how qualified you are because they don’t want to employ non-professionals. You must be a professional and be a member of all necessary organisations. Unlike today, the profession is not like what we used to know. Corruption has played a part in everything. We started as a small organisation but we have developed over the years.
The most important thing is that we are in insurance broking, an intermediary – we have the insurance intermediary in the middle, the insured on one hand and the underwriter on the other. The issue of an intermediary is to interface with the insured and this is very important. For instance, in Britain, you cannot do your insurance unless you go through a broker. The broker is the operational person who understands the language of insurance ‘terminology’. So, since that time we have been providing provisional services to our clients and because of that I think a lot of people appreciate the services my company is giving to them and that is why we are in the forefront today; we are one of the five top insurance brokers in Nigeria.
Our journey so far has been very nice, we provide our clients with excellent services in many areas of insurance discipline. When I say discipline we have what is called insurance special risks like oil and gas, Marine services, health, Aviation and Agriculture insurance. Not only that we provide real insurance programmes for insurance companies, which accept risks, but they need to spread the risks because nobody can carry the risks alone.
We also are financial institution because we are a financial institution, we are licenced and authorised to do general insurance, life insurance, Special risk, Real insurance and all other things by the regulatory body, NAICOM – National Insurance Commission.
You’ve narrated how the profession was in the past and how corruption is now affecting professionalism. How much would you say this has impacted on the profession?
When you look at insurance very well, it’s a shame in Nigeria, insurance is one of the most important economic base of any country all over the world. It is the insurance companies that finance banks; at the early stage that is what we were doing, but unfortunately in Nigeria this is not so. Companies accept life insurance cover from the general public and use it for investment purposes to develop the economy of the country. That is where insurance invest their money through the bank to make sure the economy is developed, but unfortunately, in Nigeria, it is not the same. You go and check, Nigeria’s insurance industry needs to be contributing more to the GDP – gross domestic product of Nigeria but what do we have? Nigerian insurance industry contributed only 0.02 per cent in 2014.
In 2015, we are about 0.06 per cent. Is a shame. Insurance industry needed to have contributed much more to the GDP. But the industry is not doing so well and I think with the present government maybe things will change.It needs to change if we are to move forward, because of corruption things have not been working very well.
The regulatory authorities too need to do more. The insurance companies need to be given the leeway to do their professional business. The underwriters also need to be assisted to become developed. The regulator needs to assist the insurance industry to develop.
Confidence is dropping on daily bases and the market is not expanding. How can this be addressed?
Anywhere in the world if you are a professional broker it is an important part of insurance. Business is conducted through the brokers. What we have in Nigeria is that the underwriters takes over the job of the brokers and they do that because of corruption; they go direct to the client, which is wrong. If you have a broker, the underwriters don’t have any business to go to my clients. But this was not so in the 60s, 70s even up to the 80s; it wasn’t like that, they practiced professionally, it was after 1980s that the industry derailed. It’s not about casting blame, the underwriters have their responsibilities, regulators have their responsibilities and the reason they are casting blames is because things are not being done in right way. Let us follow the foot print of those who started the insurance as far back has the 11th Century, but the way we practice it here in Nigeria is different.
Insurance should be on display, there should be competition but the competition must be fair, but the competition in Nigeria is not fair because the small companies want to enter the market at all cost.
Recently, the National Assembly accused insurance brokers of corruption and unethical practices. What do you have to say to this?
The National Assembly spoke out of ignorance on the operations of insurance. What the lawmakers should have done, was first to investigate. I was in London, when I heard them accusing the insurance companies of involving themselves in multibillion Naira fraud, till now we don’t have such billions in the Insurance industry. They also said some companies were unlicenced, does that make sense if you’re doing government business? The multibillion naira fraud they talked about I don’t know where it is coming from. They said somebody was paid certain amount, how much? The commission that was claimed to have. Even paid will take about 30 years before the companies will get that. Not only that the business involves a consortium of brokers, the brokers involved have about 10 per cent of the entire business. How much is 10 per cent?
For example, If NPA purchases 100 vehicles, in the first place they will charge them premium of 100 vehicles. If by tomorrow they purchase 25 vehicles and they have already paid for 100 vehicles, automatically they will get refund premium on 75 vehicles. But if by tomorrow the company bought additional 100 vehicles they will be charged additional premium for them. This is where we expected the regulator to have come in and clarified issues of so as to retain confidence in the industry; this is what the CBN – Central Bank of Nigeria does in the banking industry.
Recently, a press conference was organised to clear the issue, but this should have been done immediately the accusations were made. The moment anybody mentions anything about banks, in two to three hours, you will see the CBN come out to clarify the situation because public confidence is very important in any business you are doing. I travel around the globe and as soon as I tell anybody that I am an insurance person, they recognise me, but in Nigeria that is not the case because of lack of confidence.
Would you say the issue of confidence is what is affecting insurance for federal government’s insurance of their assets and public servants?
It is still corruption. Pension scheme is best managed by insurance companies. But for them to have taken that huge business from the insurance sector to another sector, does not make any sense. Government is promising that they will manage it well, are they better managers? It would have been much better if pension was managed by insurance companies. I have been in the industry for years, and I can tell you that although there are some bad eggs there are lots of good insurance companies in Nigeria that pay their claims as at when due. We don’t give insurance business to companies that are not trusted.
Nicon Insurance is the best for Nigerians because they have offices all over Nigeria. They have office in London. They train people all over Nigeria. But they gave the company to people, who know nothing about insurance. Where is that done? Go and check, Nicon Insurance and Nigerian Re are they not dead?
NAICOM is saying it will review industry capital based on risk-based insurance, if you are to suggest how much will you will prescribe?
Professionalism is very important; those people talking about capital base that wouldn’t solve the problem because risks are spread. For instance, oil and gas business is an international business, you cannot localise it, and localising international business could lead to disaster. We are lucky that the local insurance company have not been tested, if they are there will be problem. I’m talking of oil and gas and you will agree we also haven’t got that capacity. Individually, we need to change our mindset, Insurance companies have to work together as a team. We have to spread the risks.
Capitalisation is fine, but insurance companies have to work together as a team. That is why you have the rat race. When they work together they get experience from each other. These days, they are on their own because of what they want. In the early stage the insurance companies worked together. But now everything has scattered.
Does it mean the operators were not carried along?
The operator is the one that will carry people along with them, the insurance industry and the regulator are far apart and how do you regulate successfully?
Talking about Supervision, the industry is thinking about risk-based supervision, will that bring about the desired result?
What I am advocating is that Insurance industry is a good industry, but people need to come together change their mindset and do it well because I am ashamed when people are crying that they don’t settle their claims. If you don’t settle your claims you don’t have any reason to do insurance business.
The image problem of the insurance industry is still a problem. How can this be solved?
Like I told you now, if you are to be my insured, let’s say Guardian, I am a broker handling Guardian, an Insurance company is not entitled to go and visit Guardian because there is a broker handling them. But what you see the insurance companies do is that they would go to Guardian. It is very unethical everywhere in the world. That is the reason why the public say they want the broker and the underwriter. The only person you need is the broker not the underwriter because the practice is that the insured wants to be in a position that you can get your claim. If you go directly to an insurance company you need little incentive, if you have a claim who will fight for you?
The problem the Nigeria insurance industry is having today is this image. Why do they have bad image? They have bad image because they are not settling claims, so the public don’t have confidence in them, and if they don’t have confidence how would they grow? Everywhere in the world claims are settled as at when due, if you don’t settle claims, there will be no confidence.
How is the issue with Nigeria Aviation insurance and the forex challenge. What do you think is the way forward?
It appears the Central Bank perhaps has inconsistent policy on foreign exchange, which makes things very hard. Nigeria has economic problems, but I think we should solve our problems gradually. If insurance premium is not paid because of Forex, who will grant you insurance cover? We have to understand that Aviation is not in a domesticated industry, it is International, there are rules that bind everybody globally, so Nigeria cannot be an exception. Whether you like it or not, insurance premium must be paid, if premium it is not paid how do we grant cover.? What I am trying to say is that government has to look into to the issue of forex. It is not possible to say everything has to be done in naira. In the old days when our currency was very strong you could go to Britain and change naira, you can go to Saudi Arabia to change naira, if anybody has to do anything it has to be in that currency but right now the naira is very weak.