How insurance firms’ low liquidity hampers operations

The National Insurance Commission (NAICOM) has said the liquidity position of some underwriting companies in the country has hindered the industry’s progress, with heavy investments on fixed assets.

The Director, Policy and Regulations Directorate, NAICOM, Pius Agboola, told The Guardian in an interview that poor liquidity position is impacting on underwriters’ ability to meet current obligations, stressing that the new capital increase will thus make companies liquid to meet their obligations.

Investigations revealed that the cash and cash equivalents held by life underwriters have been falling since 2015.

Data obtained from the Nigerian Insurers Association (NIA) showed that cash in the hands of life operators fell from N59.97 billion in 2015, N41.08 billion in 2016, to N29.49 billion in 2017.

It was also learned that nine out of 27 life operators had less than N1 billion cash to run their operations.

On non-life business, cash equivalent at N107.34 billion in 2015, fell to N99.41 billion in 2016 and a marginal rebound to N102.23 billion in 2017, while 13 out of 41 companies, had less than N1 billion cash.
Industry watchers believed the poor liquidity position is responsible for the inability of some companies to settle claims promptly.

An insurance stakeholder told The Guardian over the weekend that presently, one of the most affected companies, which has huge unsettled claims had opened the register for claimants to write their names, thereby paying claims on first-come-first-serve bases.

The observer also noted that the company had employed a bouncer to intimidate claimants, who go there often to protest.

Another observer who also spoke about how claimants went to another company to protest and barricaded the entrance of the firm to prevent staff from going and leaving the company.

Some insurance product marketers explained that the inability of some insurance companies to honour claims is seriously affecting their businesses as most prospect clients who are already victims do not want to see anything about insurance near them.