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Operators review insurance sector’s challenges, policy conundrum

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Commissioner for Insurance, Alhaji Mohammed Kari

As the insurance year 2018 came to an end few days ago, industry experts have taken deep retrospect of activities in the period and listed major challenges to the growth of the nation’s underwriting operations, as well as new strategies for improved performance in 2019..

Lamenting that 2018 started off lull due to the usual late appropriation bill’s processes, which means that public sector deals- the main driver of insurance sector, were then, placed on hold in the first quarter, they said the development followed a tough stance of the regulatory authorities on the policy of no premium, no cover.

But when the appropriation bill was eventually passed in June 2018, many Ministries, Departments and Agencies (MDAs) of government refused to renew their insurance policies, thus undermining the general performance of the sector.

The President of the Chartered Insurance Institute of Nigeria, Eddie Efekoha, noted that when the public sector is not working, nothing is working. “That was the challenge we had. Some of us who have huge budget in the public sector, 2018 was one that failed, because we really did not do much.”

Meanwhile, as part of efforts to curb rate cutting, the National Insurance Commission (NAICOM), in the course of the year, released premium rates for compulsory classes of insurance products. Contrary to operators’ expectations for an increase, the commission retained N5,000 as premium for Third Party motor insurance.

Rebranding project
Also in the course of the year, the insurance industry kicked off its re-branding project with focus on individuals rather than corporate entities.

The Insurers Committee, which championed the project, noted that the middle class, lower class and individual citizens of Nigeria needed insurance cover more than corporate entities that are currently major buyers of insurance products and services.

The Vice Chairman of the Publicity Sub-Committee, Mrs. Ebelechukwu Nwachukwu, said the project would be carried out in phases, with the first phase lasting for three years, while N300 million would be expended on the rebranding campaign.

“Through this project, the industry wants to capture individuals by first of all making them know the benefits of insurance. Insurance penetration is still low in Nigeria because most Nigerians don’t know the benefits.

“The industry has conducted extensive research into the project before embarking on it and the project is expected to transform insurance operation in the country,” she said.

However, observers are of the opinion that the effects of the rebranding project are yet to be felt by Nigerians. Importantly, majority of Nigerians are still outside the insurance coverage.
Regulations abolished

The other challenging development in the industry, according to the operators was the introduction of the controversial Tier Based Minimum Solvency Capital (TBMSC), which categorised insurers into three, according to their capital base.

NAICOM had, in August, announced October 1, 2018, as commencement date for the TBMSC against January 1, 2019, it earlier announced. NAICOM had maintained that only companies that meet the respective tier requirements shall lead on new businesses in those categories with effect from October 1, 2018.

However, some shareholders, led by Sir Sunny Nwosu and seven others, filed a suit against NAICOM in the Federal High Court, and the policy was subsequently withdrawn. NAICOM also introduced the State Insurance Producers (SIP) within the year.

SIP is a state government agency licensed by NAICOM to provide intermediary insurance services in a particular state. Sadly, insurance brokers, under the aegis of the Nigerian Council of Registered Insurance Brokers (NCRIB), took NAICOM to court over the matter, claiming that NAICOM has no right to register state intermediaries and that the brokers are the only legal intermediaries. Again, NAICOM cancelled the SIP, as in the case of TBMSC.

Explaining the rationale for the introduction of SIP, the Deputy Commissioner for Insurance, Technical, NAICOM, Sunday Thomas, stated: “We tried to engage the Nigerian Governors’ Forum at a point, to deepen insurance penetration. While we were yet to reach out to them as a group, we reached out to some individuals within the forum and the question they asked us when we solicited their enforcement of the compulsory insurance was: ‘what exactly will be the benefits to the state?’

“Some told us that in their state, ‘there is no insurance company, so you want me to enforce and bring somebody from another state to come and reap what I am using my resources to create? We asked for what we can do. We offered to create some level of revenue for them and possible employment. And that was the idea behind the issuance of the SIP guideline.

“In the SIP guideline, we had hoped to establish an agency that will enforce and follow up with compulsory covers.  Of course, people will be engaged to do this and the underwriters that will take the businesses will be made to compensate them for getting those businesses. I believe that the compensation will be enough to underwrite whatever expenses that the state will undertake in the enforcement process.

“And in situations where the commission may subsidise or issue grants to states in the process of enforcements, the commission would not stop at doing that if it became necessary, because we have one agenda and the agenda is that the industry must assume its rightful place as provided by the available resources that we have in this country.”


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