The Nation Newspaper

Category: Insurance

  • Unhealthy competition worries insurers

    Stakeholders are worried that unhealthy competition in the industry may get worse this year, especially with the introduction of the ‘no premium no cover’ policy by the National Insurance Commission (NAICOM).

    Chairman, Independent Shareholders Association of Nigeria (ISAN), Sir Sunny Nwosu, said the policy would create a ‘rat race’ among firms.

    He said insurance companies would find a way to retain their customers, whether premiums are paid immediately.

    “What is most likely going to happen is that, if one insurance company does not take the client and finds a way to do business with them, another company will do it,” saying the major problem that confronted insurance firms in the past had been the issue of undercutting each other and this is going to continue.

    ”There is no way NAICOM will be able to catch all those destroying the sector because they will do it in such a way that there will be no evidence to show,” he said.

    The Managing Director, Riskguard-Africa Nigeria Limited Mr Yemi Soladoye, said unless insurance operators adopt cost effective and non-volatile distribution channels, unhealthy competition would get worse.

    He said most problems in the industry are caused by operators’ refusal to adopt retail strategy as a business policy, adding that one way to get out of the problem is for firms to adopt retail marketing.

    He said operators tackle the unhealthy competition because they have boxed themselves into a narrow distribution outlet – the brokering market – adding that in such a situation, price becomes the only strategy.

    He noted that clients are asking for reduced price because they are yet to see any strategy from the operators, saying insurance companies concentrate on premium growth instead of market expansion.

    “The future and the solidity of the operators can only come from market expansion and not competing for the few available channels.

    “Unhealthy competition will get worse, until they look for better, cost effective and non-volatile distribution channels,” he said.

    According to the Riskguard chief, retail marketing strategies means that insurance firms can identify organisations they can partner with to reach the target market.

    “Bankassurance, which is collaborating with banks, is a retail channel. It also means engaging in alliances with organisations, such as Shoprite, Megaplaza and others, which are working with cooperative societies.

    He said though the channels are there, the market will not expand except they are adopted.

    ”There’s no alternative; it is compulsory, for they are feeling the bite of the narrow distribution outlet that they are using at the moment.

    “Most of the problems they face, which include high cost of doing business, premium reduction, unhealthy competition, are manifestations of the fact that they are using narrow distribution method. If you have an alternative, you would be able to do business on your own terms, but when you do not have alternatives, you have to achieve what ever any body tells you. That is the problem with the operators for they are not creating alternative distribution outlets for themselves,” he added.

    He urged insurers to return to the drawing board to examine their operations, adding that each company needs to sit and draw strategy on how to develop its business and adopt retail marketing strategy and that when this is done, issues of unhealthy competition, premium reduction and others will stop.

     

  • ‘How compulsory insurance can be made attractive’

    EXPERTS have called for the enforcement of the compulsory insurance scheme to attract more people to it.

    Speaking with The Nation on the issue, the Managing Director of Royal Exchange Prudential Life, Wale Banmore, said one way to make Nigerians accept the policy is by strict enforcement.

    He said one of the biggest problems confronting the industry is lack of enforcement, adding that it is through it that people will know insurance and appreciate it when they see its benefits.

    “When you make a law that any employer with at least five workers must have a group life policy for the workers so that if something happens their family members are not stranded, you must enforce it to make it work. In Nigeria, most employers with more than five workers refuse to obey the law because they know nothing will happen to them since the government is not enforcing the law.”

    He said if an employer knows that if his staff member dies and there is no group policy coverage and the wife or a family member of the deceased cries to the Ministry of Labour or Nigeria labour Congress secretariat, or any such identified government agency to make a report, such employers will sit up, but unfortunately, enforcement is lacking.

    Banmore said if the employer or business owner knows that he will be punished if he disobeys the law, he will obey it.

    “What happens in most cases is that after the death of a staff member, the business owner, or employer will give to the widow, or the family of the deceased, pay may be N50,000 and everything ends there.

    ‘’But if he knows that the government will stand up for the bereaved and he may be asked to pay to the bereaved up to N5 million to N10 million, apart from other stringent punishments, which might include a prison sentence, the employer will pay the insurance cover to insure his workers instead of taking the punishment.

    ‘’In most instances the world over, those who insure do so because they do not want to offend the law and face the punishment. This is the situation worldwide, but where there is no enforcement, the situation gets worse as it is in Nigeria.

    “Nobody pays insurance for the fun of it, they pay because they don’t want to go against the law and, subsequently, face the penalty which is usually very heavy,’’ he said.

    Banmore decried lack of enforcement and that is why insurance penetration is still shallow, he observed. He said the world over, people pay for insurance because in those places, the law is strict.

    Publicity is another problem the Prudential chief identified. He said NAICOM has been trying to let people know the benefits of insurance.

    He claimed the government is the greatest problem in the industry because it cannot enforce the policy.

    The Managing Director /Chief Executive Officer , Union Assurance Plc, Mr Godwin Ejembi Odah, said NAICOM was working hard to ensure the development of the policy.

    He noted that NAICOM was collaborating with the government and other agencies because implementation requires joint effort.

    According to him, for people to embrace the subject, they need to see the benefits of the policies. He said NAICOM and the insurance firms were working to ensure that they enlighten the people, adding that the policies were not meant for the benefits of the industry alone, but also for the public.

    President of Risks Surveyors’ Association of Nigeria (RISAN) Mr Jacob Adeosun said insurance must work because people are performing one activity or another to achieve certain goals.

    “People are confronted with risks, which prevent them from achieving their goals. Some of the risks could result in financial loss directly or indirectly”.

    Insurance, he added, is a mechanism to provide financial compensation in the event that an insured risk occurs and results in financially quantifiable loss.

    He said: “Insurance helps insured individuals and firms to recover from impacts of insured losses e.g. fire, flood, robbery, business interruption etc. It gives peace of mind.”

    Adeosun said many individuals and businesses could not survive the huge losses inflicted by fire or flood due to lack of insurance and funds.

    “Children can conclude their education with insurance fund in the event of sudden death of their breadwinner. People and businesses in developed nations do not joke with insurance. It is because of the innumerable benefits they derive from it,” he stated.

    Adeosun said compulsory insurances are okayed by law are in the interest of the public. How does an ordinary member of the public killed or injured by a vehicle on the public road get compensated? How will the people injured or killed in collapsed hotel, church, mosque, cinema theatre (public places) be compensated without compulsory insurance in place? he asked.

    The Managing Director and Chief Executive Officer of Mutual Benefits Life Assurance Limited, Mr Femi Asenuga said the public should be enlightened on the benefits of insurance, noting that there are penalties for non-compliance which should be enforced.

    He advocatd a monitoring team that would ensure compliance. He observed that compliance was usually good because corporate bodies were more aware of the need to take up these policies.

  • Royal Exchange pays N1.58b claims

    Royal Exchange General Insurance Company (REGIC) has paid about N1.58billion as claims as at the end of the third quarter of last year.

    The figure represents 54.75 per cent increase over the amount paid in the corresponding period in 2011, which stood at N1.02billion.

    In a statement, the Managing Director, Olutayo R. Borokini, said the company’s focus is the settlement of genuine claims, adding that this would continue to be the philosophy of the company in future.

    He said customer satisfaction is the fulcrum of insurance and this, inevitably, builds customer loyalty.

    “Once Royal Exchange is able to pay claims as they arise, the genreal public will have faith to take out insurance policies on their lives and properties because they are convinced that should a claim/loss arise, the company will be able to meet its financial obligations to its clients.”

    Giving the breakdown, he said N631 million was paid on Fire insurance policies, accounting for 39.9 per cent of the N1.58billion paid out as claims, while N398.7million was paid out on motor insurance policies, representing 25.2 percent of total claims paid, and Industrial All Risks insurance policies accounted for 11 per cent, amounting to N174.6million as claims.

    Other classes of insurance on which claims were paid, include non-motor insurance policies N164million, representing 10.3 per cent; marine insurance N131.3million, 8.3 per cent; while N68.1 million was paid on oil and gas insurnace policies during the period.

    A total of N12 million was paid on engineering insurance policies, he added.

    “These payments have shown that Royal Exchange General Insurance is more than capable of meeting its various claims demands.

    “The company paid close to N4billion to the Nigerian Bottling Company for the fire in its Benin plant in 2010 and was the lead insurer in a consortium that paid out over over N3.63billion to Friesland Foods West African Milk Company (WAMCO) over the major flood disaster that occured in its lagos factory, in 2011,” he stated.

  • Commission, operators to meet on ‘no premium, no cover policy’

    The National Insurance Commission (NAICOM) will soon meet some key players in the sector to find solutions to some challenges in the ‘no premium no cover policy’of the commisssion that started on January 1, The Nation has learnt.

    It was learnt that brokers are worried that underwriters may by-pass them to provide cover for businesses rejected by them due to non- payment of premium.

    President Nigerian Council of Registered Insurance Brokers (NCRIB) Mrs Laide Osijo said the operators have agreed with NAICOM to call the stakeholders in the industry – representatives of the brokers and underwriters – to chart the way forward for the implementation of the policy.

    She said: “These issues are fundamental to the operations of brokers, for 80 per cent of insurance business in the country is done through brokers. If we follow the law and underwriters refuse to follow, the whole thing would be a mess. We would try to ensure we get the modalities as to how to go about the policy.”

    She lauded NAICOM for its decision to bring sanity into the industry through the policy, adding that the idea of underwriters accusing brokers of non-remittance of premium will now be a thing of the past with the introduction of the policy.

    According to the Commissioner for Insurance Fola Daniel, when they were doing verification of accounts of brokers and underwriters, they observed that most of the outstanding premiums that brokers were accused of were not actually true. Some of the underwriters raised their books to cover their expenses.

    “NAICOM observed the mis-representations and sanctioned the errant underwriters. Some brokers who erred by keeping premium beyond the stipulated date were also sanctioned. I am not saying that brokers are perfect, but most of the accusation by underwriters is not really true. NAICOM observed that most of the withheld premiums are receivables,” she said.

    She said brokers have been enjoined to report underwriters who by-pass them to take a business they rejected, stressing that the operators have agreed to abide by the policy.

  • Expert seeks fund for disaster victims

    Expert seeks fund for disaster victims

    he President, Risk Surveyors Association of Nigeria (RISAN) Mr Jacob Adeosun has advocated the establishment of a National Catastrophic Fund.

    He said the fund should be used to assist victims of disasters to overcome the effects of catastrophies, such as the floods that ravaged over half of the nation last year.

    He said such disaster may reoccur, urging the government to establish the fund. He noted that it exists in other countries.

    Adeosun, who is also Executive Director, Industrial Risk Protection Consultants (IRPC), told The Nation that though it is good for the government to compensate victims of diasater, the right thing would have been to establish the fund from where such disasters could be managed.

    He said: “If it is a natural disaster, the government has a duty to empathise and sympathise and take action aimed at helping, but the real help comes from insurance.”

    Adeosun, a professional risk engineer and surveyor, explained that the fund is managed by insurance professionals, like the commercial insurance fund, saying the difference is that this one is reserved only for catastrophies.

    He said because there is no such fund in place, most of the losses caused by the disaster last year would not be paid for.

    “If such a fund was in place and managed by insurance experts, they would have taken the appropriate steps to identify who owned what asset, and who suffered what losses with to determine what each should get to indemnify them.

    ‘’As it stands, several months after the flood, most of the victims have not and may never get any benefit from the huge amount set aside by the government because it is not handled by insurance experts who would have known what to do to determine who gets what.

    “We have just moved into a new year and in the next few months, the rains may start coming and no one knows what may follow this time, thus the urgent need for the government to set up such a fund to mitigate losses arising from catastrophic occurrences,” he said.

    The insurance expert said the function of the fund he is advocating is different from what the National EmergencyManagement Authority (NEMA) and the Red Cross are doing. These bodies give first aid. The remedy for victims can only be handled by insurance.

    Adeosun urged Nigerians to embrace insurance, saying: “Insurance accepts little premium in return for a huge compensation in the event that the insured event occurs as per the contract terms. If the insured loss event does not occur, you don’t get a refund. You have had the peace of the mind, while someone else in the large pool of insured has made a claim. It may be your turn tomorrow or several years to come”.

    Adeosun denied allegations that insurance firms don’t pay claims. “If they don’t, several blue chip companies that are hooked to their services would have abandoned them.Individuals also make claims. But those who receive claims will not make any noise about it. It is their entitlement. As it is in every other aspects of life, cases of failure and challenges attract more attention,” he said.

    He explained that there are several reasons an insurance claim may not be paid.

    When such a case arises, the National Insurance Commission, the regulatory authority on insurance, the Nigerian Insurers Association (NIA) and the Nigerian Council of Registered Insurance Brokers (NCRIB) will attend to cases of aggrieved customers on claims disputes, he said.

    Whoever is buying insurance cover should ensure that it is properly done and claims will be paid on insured losses, Adeosun added.

  • ‘Why transfer window is delayed’

    The hope of retirees to transfer their retirement savings account from one Pension Fund Administrator (PFA) to another may still take sometime, The Nation has learnt.

    The delay is as a result of the inability of the National Pension Commission (PenCom) to conclude work on Information and Technology (IT) applications.

    A source said PenCom is battling to settle some problems surrounding the initiative.

    Head, Research and Corporate Strategy PenCom, Dr Farouk Aminu, confirmed this, saying the Commission is working on the transfer window problems.

    He told The Nation that the framework has been issued to operators for implementation, adding , however, that work was still ongoing on the supporting IT application that would drive the initiative.

    To ensure seamless operation of the initiative, PenCom mandated PFAs and Pension Fund Custodians (PFCs) to deploy IT infrastructure for the job, saying such this must have adequate storage and retrieval capability for about 10 years.

    He explained that Section 11 (2) of the Pension Reform Act (PRA) 2004 specifies that an employee may not, more than once in a year, transfer the RSA from one PFA to another without any reason.

    He added that a review of the regulation would address multiple transfers of RSAs in a year.

    PenCom said the inability of any PFA to provide service to RSA holders will attract a fine of N100,000 and N10,000 for every month of violation.

    Similarly, a monthly sanction of N100,000 per RSA shall be imposed on any PFA who violates the law.

  • US insurer pays $6m in penalties

    Insurance Commissioner, California Department of Insurance Dave Jones said the National Union Fire Insurance Co. (NUFIC) of Pittsburgh, a member of AIG’s Chartis Group, had agreed to pay the California Department of Insurance (CDI) a penalty of nearly $6 million for violating fair business practices.

    “This is a win for California consumers and sends an important message to insurers about the cost of not complying with laws and regulations designed to protect consumers,” said Jones.

    The products covered under the settlement include group and blanket limited benefit plans, supplemental accident and disability policies, and accident and disability coverage provided with travel insurance policies.

    Many improper practices and violations were cited by insurance regulators, including delays and errors in processing claims, product limitations not explained clearly, failure to use licensed people to sell insurance products, and failure to fulfill and administer policies after sale, among others. As a result of these violations, CDI participated in a multi-state insurance regulators investigation and enforcement action against NUFIC.

    The settlement includes a required two-year monitoring period with an implementation audit performed by insurance regulators and a series of other audits and reports by the insurance company to ensure compliance.

    The agreement includes provisions for an additional $21 million in penalties should the company fail to comply with any of the stipulated conditions.

    Under California law, the $5,991,132.37 penalty payment collected by the California Department of Insurance was deposited in the General Fund of the State of California.

     

  • Investment & Allied Insurance shops for N4b

    Investment and Allied Assurance Plc is shopping for N4billion to meet the minimum capital requirement for its operations, the Managing Director, Abayomi Rufai, has said.

    “A minimum capital injection of N4billion is required to meet the statutory capital level set for Non life insurance business in view of the present negative shareholders funds,” he added.

    He said the firm is seeking new investors.

    For these investors to come in with their funds, one of the things the firm must do is to reconstruct its shareholdings to create a window for new funds.

    He explained that it became imperative to put in place a new board, which includes members of the interim management.

    Rufai said the intervention by the National Insurance Commission (NAICOM) has helped the firm to restructure for better performance.

    “NAICOM’s intervention has impacted positively on the company, and the Commission has given assurance to potential investors that their investments are in safe hands,” he said.

    In February 2011, NAICOM took over the firm because of some irregularities, and put in place an interim management to take charge of the company’s operations.

  • NCRIB to check fake operators

    NCRIB to check fake operators

    The Nigerian Council of Registered Insurance Brokers (NCRIB) is taking steps to sanitise the sector, The Nation has learnt.

    Its National President, Mrs Laide Osijo, said the Council would send the list of genuine brokerage firms to clients to check fake operators.

    She said the council would also close registration for members on March 31, adding that by the first week of April, the list of members would be published.

    She said: “Our rule states that we should publish the list of members every year. I must not forget to commend the effort of the Commissioner for Insurance for his efforts in promoting the affairs of the council.

    “Our law says that registration with NCRIB is a requirement for licensing by NAICOM. Before this year, so many brokers have been going to NAICOM for registration, but since the beginning of this year, NAICOM has refused to give anybody licence if they did not have the NCRIB registration certificate. The Commissioner and his team have been doing a good job to ensure people comply with the rules.”

    The Council chief also said: “If a firm has a new chief executive, the person has to come to the council for us to check if he is fit to run the organisation. This is because the new executive would be held liable for anything that happened in the firm.

    “If an organisation changes its executive, it has to write to us and we would give it six months to present the executive for examination. If an operator failed to meet up with his financial obligations, his membership will lapse, that is also what NAICOM is doing.”

    She said members have been told to renew their membership before March 31, to avoid being sanctioned.

    On the proliferation of brokerage firms, the president said some of them were established to secure a particular business..

    She said the council has observed that some people just register a brokerage firm because they wanted to secure a business through their relatives, who can assist them.

    She noted that these individuals abandon the firms once they get the business. She added that some of the brokerage firms were also established because people wanted to be known as managing director.

    She said: “Instead of 10 people joining hands to form a strong firm, they want to be managing directors. We have always encouraged mergers and acquisition. If you have a formidable team, it is better than being alone.”

    She noted that the council is collaborating with the National Insurance Commission (NAICOM) to ensure that only genuine operators and professionals operate in the sector, adding that at the monent the council has to give approval before a firm is licensed by NAICOM.

    “The NCRIB law says that registration with NCRIB is requirement for licensing by NAICOM. Prior to last year, so many brokers do go to NAICOM, for registration but from last year, NAICOM has refused to give anybody licence if they did not have the NCRIB registration certificate. The Commissioner and his team have been doing a good job to ensure people comply with the rules,” she said.

    Stakeholders said any step taken by the council to sanitise the sector is welcome, adding that it would help curb unethical practices and enhance the industry’s performance.

  • 40 broking firms, others get PenCom certificates

    Six insurance companies and 40 broking firms were among the 74 companies that received the National Pension Commission (PenCom) compliance certificates last year.

    In a statement, the commission said only 74 companies, which include, Creed Insurance Brokers Limited, Leadway Assurance Plc, and Lasaco Life Company met the requirement for the certificates by January 4, this year.

    The Pension Reform Act (PRA) 2004, made it compulsory for companies seeking government business to present certificates of compliance, which indicate that they are meeting the regulation on staff pension contributions.

    The PRA 2004 also mandates employers with minimum of five staff to subscribe to the new pension scheme.

    To ensure enforcement of the law, the commission said employers who fail to remit their pension contributions would pay two per cent surcharge, two weeks after deductions have been made by them.

    PenCom noted that employers are to remit employees contributions not later than seven working days from the day salary is paid, adding that if the default persists after three months, one per cent of the outstanding would be paid to the commission.

    The commission said it would sue defaulters if violation persists, adding that employers who refused to give access to information about their staff would pay a fine not more that N200,000 and that every false or misleading information would attract N100,000 fine daily for the duration of the the offence.

    It said any employer, who coerces employees to open RSA with Pension Fund Administrator (PFA) that is not their choice, would pay N1,000 after three months per employee for every month of violation.

    The commission is seeking leave of the attorney-general of the Federation to institute criminal proceedings against employers who refused to remit pension contributions

    PenCom called for the amendment of Section 11(7) of the PRA 2004, stressing that the provision ihas some limitations.