Insurers’ management expenses hit N264.15bn in five years
Some insurance companies are struggling to remain afloat amid the harsh economic, which had pushed them into incurring huge management expenses above their premium income generated.
Such expenses are the costs of running operations within a particular period, and are charged against its income. Ordinarily, such costs should not exceed 0.5 per cent of the assets under management, and cover directors’ remuneration, administration, and audit fees, and share registration expenses.
The Nigeria Insurance Digest, published by the Nigeria Insurers Association (NIA), put the industry’s total management cost at N264.15billion in five years.
Broken down, the Association put the expenses at N48.22billion in 2012; N48.59billion in 2013; N52.12billion in 2014; N53.83billion in 2015; and N61.39billion in 2016. It listed the expenses to include underwriting expenses, salaries, rent, and others excluding commissions paid to agents.NIA further revealed that six underwriting firms experienced higher management expenses than the gross premium generated in the last two years.
The firms include: Universal Insurance Plc, which generated N536.526million but incurred N739.449million in management expenses, or 1.38 per cent higher; NICON Insurance Plc, N92.040million gross premium, spent N453.790million (4.93 per cent); Old Mutual Life Assurance Company Limited, N1.30billion gross premium, incurred N1.83billion (1.41 per cent).
Others are: SpringLife Assurance Plc, had N32.000million, spent N105.282 million (3.29 per cent); UNIC Insurance Plc, N38.769million, spent N244.929million (6.32 per cent), while Investment & Allied Insurance Plc, generated N4.399million and incurred N169.499million (38.53 per cent).
Commenting on the development, the Customer Experience Manager, Old Mutual Nigeria, Rachel Millard-Jaja, said the firm’s expenses were high due to efforts to position it for the future and for expansion purposes.
“We invested significantly in retail mass offering, and technology to cope with business growth. Higher expenses are synonymous with young organisations operating in a high inflationary environment,” she said.
The National insurance Commission (NAICOM), in line with its regulatory priorities, which is to regulate the management expenses of companies, put a cap on the expenditures of some firms.
The Commissioner for Insurance, Mohammed Kari, said following observations from the financial accounts submitted by some companies, those with huge expenditure profiles were mandated not to spend beyond certain limits.He said this was taken to ensure companies do not spend unnecessarily to the extent that they would not be able to attend to claims settlement and some other relevant matters in the industry.