The Group Managing Director, Industrial and General Insurance Plc (IGI), Rotimi Fashola, has called for a review of some of the regulations by the National Insurance Commission (NAICOM), saying such a measure would lead to a greater contribution of insurance products to the nation’s Gross Domestic Product (GDP).
Fashola, who has just been appointed CEO of IGI, said a re-examination of some of these policies would determine their effectiveness and ensure they are not counter-productive to the industry.
He listed the ‘No Premium No Cover’, Inadmissible foreign investment; Restriction on insurance investments and recognition of offshore investments; Insurance of oil and gas imports; Cabotage Act 2003; Amendment of Companies Income Tax (Amendment) Act 2007 and Multiple taxation of insurance companies by different tiers of government as some of the issues begging for review.
He urged the Commission to also look into government’s patronage of insurance services and the need for prompt payment of premium, Brokers’ yearly renewal of license and Investment in properties and the encroachment on insurance business by government agencies which try to provide insurance protection to aviation passengers and public liability for nuclear risks.
Fashola also argued for the need by the government to support the quest for accelerated insurance penetration in Nigeria through micro insurance and takaful insurance, saying that NAICOM under the leadership of the current Commissioner, Fola Daniel and his deputies, has done well in stabilising the industry.
He said: “The Commission deserves applause for introducing the Market Development and Restructuring Initiative (MDRI) designed to promote compulsory insurances, the rejuvenated policy of No Premium No Cover; the regulation on micro-insurance and the exposure of the draft on market conduct guideline, that focuses regulation on ethics and best practice principles. NAICOM must be commended for always making it a point of duty to put the industry on notice early enough before full implementation and application.
“However, for an industry that still needs to grow and contribute to the nation’s GDP, it is imperative that some of the current regulatory interventions are re-examined thoroughly to determine their effectiveness and to ensure that they are not counter-productive,” he stated.
On ‘No Premium No Cover’, Fashola explained that it is true that many government Ministries, Agencies and Departments (MDA) were no longer insuring their assets because of the delay experienced in the approval of their budget, adding that based on this, operators are advocating for these agencies to be exempted from No Premium No Cover, as this would encourage them to embrace Insurance.
He said allowance should be made for this category since their receivables are always collected even when there’s delay.
On investment in properties, he said the Insurance Act 2003, pegs investment in landed properties at 25 per cent and 35 per cent for General Business and Life Business respectively, arguing that this needs to be reviewed in the face of the crash in the stock market which led to some insurance companies losing much of their investment in the past.
“The encroachment on insurance business by government agencies which try to provide insurance protection to aviation passengers and public liability for nuclear risks, is also an issue. 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,” Fashola said.
“In similar vein, the Federal Government transferred pension business from the insurance industry to the Pension Fund Administrators; while it also moved health insurance from the insurance industry to the Nigeria Health Insurance Scheme (NHIS). It is my hope that the income from both sides are credited to the Insurance industry in determining its true contribution to GDP, as the income should have been earned by insurance companies if not for government intervention and operation of the law.
He said feelers from official quarters indicate that the Nigerian Civil Aviation Authority (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.
He continued: “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.
“Many of the parastatals are no longer contracting insurance, certainly in breach of some of the compulsory insurances, because of the government budget system. It is my considered opinion that exemption be granted to Government in the strict application of Section 50, ‘No Premium No Cover’. The reason is that government debt is a statutory, sovereign debt which will be paid by succeeding administration.”
