The Nation Newspaper

Category: Insurance

  • Insurers: Sandy’s damage hits $10b

    Some insurance companies say they were prepared for Hurricane Sandy, but the same may not be true for flood insurers who are feeling increased pressure as the storm caused more water damage than normally expected in such storms.

    Hurricane Sandy’s overall toll on the economy could be as high as $20 billion, according to estimates released before the storm, with traditional insurers on the hook for about $5 billion to $10 billion of damage. That would make the storm more devastating than last year’s Hurricane Irene in dollar terms, but not nearly as bad as Hurricane Katrina in 2005.

    The National Flood Insurance Program, however, which is administered by the federal government, may be facing some large bills. While most hurricanes produce heavy winds and rain, Sandy brought with it the highest water levels in New York Harbor since the 1960s, causing massive flooding on the city’s streets, subways and buildings. Depending on the extent of the damage, which has yet to be determined, that could be very expensive.

    “I would say the estimates I saw come out before the storm looked low to me,” said Ryan Ogaard, senior vice president of product management at Risk Management Solutions, a California-based company that specialises in catastrophic risk modeling used by insurers. “I don’t think anyone realized what was going to happen with the level of flooding. It really was a worst-case scenario in some places.”

    Insurers have yet to release their damage estimates, and it may take days or weeks to compile the information. But Risk Management and Eqecat, another firm that calculates the industry’s disaster exposure, expect it to be worse than Irene, which cost insurers about $4.5 billion in losses.

    Those figures would have little impact on overall health of the industry, which could potentially withstand damage up to $100 billion, which is twice the tab from Hurricane Katrina, according to Eqecat President Bill Keogh.

    “That’s certainly something the insurance industry can absorb,” Mr. Keogh said. “It would be really hard to do a lot of damage to the industry. It really isn’t getting to the point of stressing the capital structure of the industry.”

    Insurers prepared for the storm over the weekend, sending emergency crews to central locations that were expected to be hit the worst.

    Agents are setting up mobile units where policyholders can come to file claims for the next few weeks. Insurers also will send adjusters out to affected homes to assess the damage.

    Bob Hartwig, president and economist at the Insurance Information Institute, said insurance companies are deploying “armies of adjusters” to affected neighborhoods.

  • RISAN to train risk surveyors

    The Risk Surveyors Association of Nigeria (RISAN) is set to introduce a training for risk surveyors in 2013.

    The new President of the association, Jacob Adeosun, announced this during the association’s conference in Lagos.

    Adeosun took over from the immediate past President, Chief Lebi Omoboyowa, whose tenure expired.

    Adeosun said: ”The essence for the structured training was because risk assessment is a knowledge driven profession, changes occur rapidly by the hour.

    ‘’The risk survey profession is anchored on knowledge and the knowledge should be as deep and broad as possible and relevant to the needs of the society. We must produce risk surveyors of local and international repute”.

    He also announced the introduction of the “Mandatory Continuing Professional Development (MPCD) program for all her members. He said: “While MPCD programme will ensure that the we rejuvenate the knowledge base of all existing members, we have recognised a missing gap to fulfill the aspirations of would-be professional risks surveyors.”

    He said risk surveyors are trained to add value in risk assessment, loss prevention and risk reduction in the interest of stakeholders, insurers, the insured and the public.

    He also announced that there is in-place now, a structured membership grading system that will be administered in strict compliance with approved guidelines.

    “To bring the Nigerian risk surveyors in line with international standards, there is urgent need to train and retrain the practitioners, Adeosun stated.

    He said the Federal Government registered and empowered RISAN to among other things, provide continuous education for members of the Association in the fields of risk surveying, risk management, loss prevention, risk control in relation to fire technology, safety devices, engineering, business information and other risks of industrial, commercial and personal lines.

    Some Honorary Fellows were inducted on the occassion. They include: Mr Oye Hassan-Odukale, Chief Prosper Okpute, Dr Remi Olowude, Prof Joe Irukwu, Chief Theophilus Idowu and Chief P.O.N. Egbuniwe.

  • Consolidated Hallmark pays over N600m claims in Q3

    Consolidated Hallmark pays over N600m claims in Q3

    Consolidated Hallmark Insurance PLC (CHI) paid over N600 million claims at the end of the third quarter, its Managing Director, Eddie Efekoha, has said.

    He disclosed this at the presentation of Group Accident Insurance Cover to members of the National Association of Insurance Correspondents (NAICO) in Lagos. He added that the company is committed to meeting policy holders’ expectations.

    Efekoha said the company takes payment of claims as a priority because the value it places on its clients, adding that the company will always ensure that its underwriting is healthy and professionally handled.

    He stated that insurance is driven by referrals and customers’ recommendation.

    He said: “For us as a company, we recognise that we are in business to pay claims. Therefore, we must operate and ensure we do not fail. When we do that, satisfied clients will recommend themselves and other people to us. So it’s a business that is built on referrals such that existing clients will refer you when you have done well and we will continue to do that in the mist of changing environment.”

    He noted that despite the harsh business environment and challenging regulatory regime, the company has continued to witness upward movement in growth fundamentals.

    He said the firm is happy with where it is, having achieved a very modest growth, stressing that the key driver of its business from the start is its people including the staff and the board.

    He noted that the weight of premium receivables in the industry has been a challenge to operators under a changing regulatory regime.

  • A&G pays N1.2b claims for crashed plane

    Alliance & General Insurance (A&G) Plc paid over N1.2 billion claims to the Nigeria College of Aviation Technology (NCAT), Zaria for its training aircraft that crashed in 2010, its Chief Operating Officer, Dotun Onipede, has said.

    He explained that on May 23, 2010, the plane crashed while being landed by a trainee pilot, saying though there was no causality, the plane a model of TAMPICO TB9, was wrecked with many of its vital parts destroyed, including the propeller, the engine, the sliding gear, the wings.

    Also, Onipede said the firm also spent over N250 million on one of the College’s most prestigious aircraft, 5N-CAG, that crashed some months ago.

    He said the crash was pathetic, but “we should give glory to God that no life was lost in the process, adding that “our company is ready to tackle this issue with the high level of urgency required, being the only training institute for pilots in Nigeria.”

    He said: “Our consistency in the payment of claims has strategically placed us as a well-established and reputable insurance company with high level of integrity, whose word remains her bond.”

    He reaffirmed the company’s commitment to settling claims, adding that the mishap that happened in NCAT would be a thing of the past as the company was on ground to fulfill its commitment.

    “It is in our character to face challenges of this nature as it can be seen in our records in the insurance industry,” he said.

    Onipede stressed that the firm was trying to restructure its business in line with the standards expected of them in the industry in accordance with regulatory provisions.

  • ‘Premiums record growth, profits dwindle’

    The Chairman, Union Assurance Company Limited, Mrs Olufunke Osibodu, has said performance of the insurance premiums globally has been impressive.

    She, however, added that underwriting profitability has been adversely affected by increased claims.

    She adduced reasons for the development, saying the global economic situation, the low interest rates environment, particularly in the more advanced insurance markets, poor investment yields and increase in claims, among others, were partly responsible for it.

    Olufunke told The Nation that insurance premiums were growing, as insurers gradually restore underwriting capacity to pre-crisis level, while building lager capital buffers after two years of sluggish growth following the global economic crisis.

    She said the robust economic recovery and reforms, especially in the developing economies continued to fuel strong rebound in premiums across a broad spectrum of the insurance value chain.

    She listed one key challenge for the industry globally as the low interest rate environment, particularly in the more advanced insurance markets, adding that underwriting profitability has been adversely affected by increased claims. ‘’This has necessitated increase in premium rates across most developed economies, she said

    “In Nigeria, what is prevalent is a strong buyer market and this she said has brought about insurers’ declining renewal of some businesses owing to dwindling underwriting profits.

    “The greatest downside risk to premium growth in Nigeria remains the insufficient awareness of the operations of and structure of insurance policies as well as their significance,’’ she said, adding that political risks have waned in the aftermath of the general elections in April 2011, but the increase in sectarian and ethnic violence in the country continues to heighten security fears and could slow down Foreign Direct Investment (FDI) in Nigeria.

    ” The regulatory landscape for insurers globally is shifting towards more robust risk-based supervision. The Solvency 11 policy is a renewed focus on Insurance and capital adequacy, adding that the purpose of the new supervisory regime is to ensure a clearer picture of an insurer’s solvency. This, she said, will be achieved via the introduction of risk weighted capital charges similar to the banking Industry Basel 11 framwork.

    Olufunke expressed hope that with the introduction of the new supervisory regime, the expected cover for both the underwriting and investment risks will be covered.

    The policy will unearth the undercapitalisation in the industry, especially in emerging markets, such as Nigeria with relatively shallow financial markets, she said.

    Issues of transparency are currently being tackled through regulatory guidelines on corporate governance, enterprise risk management and more inclusive financial reporting model provided by IFRS, she added.

  • LASACO gets ISO certification

    LASACO Assurance Plc has bagged ISO 9001: 2008 certification, the management has said.

    In a statement, the Managing Director, Olusola Ladipo-Ajayi, said the Standards Organisation of Nigeria (SON) has provided independent confirmation that LASACO has met requirements of the ISO 9001:2008 certification.

    By this certification, LASACO has become the first insurance firm in Nigeria to be so certified, he stated.

    He said: ” By this certification, our company has been adjudged to meet the needs of customers and other stakeholders, including all statutory and regulatory requirements applicable to our operations. These standards are universally regarded as International best practices and are published by the International Organisation for Standardisation (ISO). It is administered locally by the SON.

    “Simply put, our company is committed to the method and model of quality prescribed by the standards.”

    Explaining the rationale for the certification award, Ajayi said: “The ISO 9001: 2008 deals with the fundamentals of Quality Management Systems. The certification is a powerful marketing tool because it places high priority on customer needs. It is expected to lead to superior operational performance required from companies operating in the international domain, especially when one of our main areas of operations is the oil and gas insurance, as well as other special risks.

  • How to insure firms’ reputation

    The need to insure the reputation of companies has been stressed.

    The Assistant Director, Nigerian Council of Registered Insurance Brokers (NCRIB), Mr Tope Adaramola, who canvassed the inclusion of the option as an insurable product, said this is one of the insurable interests being practised by companies in advanced countries, adding that it would help to deepen insurance practice in Nigeria, as well as indemnify firms if they suffer losses as a result of reputation problems.

    He explained that the concept refers to an interest in a person or thing that will support the issuance of an insurance policy; an interest in the survival of the insured or in the preservation of the thing that is insured, stating that in advanced countries where insurance is well accepted, almost everything is insurable.Even dancers are said to insure their waists, he added.

    ‘’For many’’, he said, ‘’these risks can be divided into operational, financial and business, with different individuals in the company being responsible for each one,’’ adding that while some big firms operating in Nigeria insure most of the different aspects of their operations, “one which has continued to cry for cover within and beyond our clime is image or reputation risk.

    ”We are definitely in an epoch when image matters above all things. This underscores the popular aphorism that image is everything. Whether as an individual or corporate institution, image projection and protection has remained a valued endeavour that must be factored into decisions of individuals or organisations.

    “Image or reputation, as some prefer to call it, comprises the personality, which has to do with the character and ethos of the organisation regarding its operational behavior; identity, which is the totality of what you or your organisation says or wants to be seen as and perception, which denotes how stakeholders view your company or impression that they hold about the organisation”.

    He stated that a company’s reputation is important because it affects the ways by which various stakeholders relate it. This applies to employees, investors, customers and the general public, and it influences such key issues as employee retention, customer satisfaction, customer’s loyalty and investor relations.

    Hre said: “Organisations that will have sustainable existence need to constantly realise that reputation is built in the realm of the mind as a set of memories, perceptions and opinions that sit in your stakeholders’ consciousness.”

    He argued that despite the crucial place of reputation, it is regretful that different stakeholders prioritise corporate reputation in a different order.

    He cited investors’ financial performance as the most important characteristics followed by quality of management. For customers, however, the quality of services and products, together with customer service are the highest priorities, he said.

    “Accountancy practices do not allow many companies to put a financial value on their own corporate reputation in the balance sheet. They treat the inclusion of individual product brand value or director’s reputation with a wave of the hand in their financial calculus. Despite all, Public Relations (PR) pundits have continued to hold the view that a company’s reputation conservatively constitutes between 66 and 100 per cent of its annual revenues.

    ‘’The question that may be agitating for answer therefore is; how can a company’s reputation be at a risk? Tope said the answer is simple. Although an occurrence or event on its own may rarely threaten a business reputation, more often than not, it is an event followed by poor management of the consequences that jeopardise corporate reputation. Events that sound reputation alarms include fraud, marketing fiasco, hostile take-over; loss of regulatory approval, etcetera, he explained. But how does the insurance industry mitigate reputation risks?’’ Tope said.

    “Traditionally, there are different risks underwritten by the industry, such as occupational risks, property damage and employers liability. In such cases, quantifying the immediate losses involved is straightforward.

    ‘’For property, it is a case of establishing the value of the property and its liability, losses are defined by the courts. Additional losses such as the increased cost working, following an event, are often covered under insurance policies. What is not covered is the impact on the company’s reputation,’’. he added.

    Of the various types of risks, reputation risk is perhaps the hardest for insurers to tackle he said. The reason is because reputation is essentially an intangible asset that accountants and specialist firms are still struggling to quantity in monetary terms.

  • NAICOM to check false declaration of accounts

    NAICOM to check false declaration of accounts

    The National Insurance Commission (NAICOM) is to start the validation of debts often believed to be overstated in the accounts of insurance firms to ascertain their authenticity, a source has said.

    NAICOM’s Deputy Commissioner Finance and Administration George Onekhena, who confirmed this, said the commission was poised to remove fictitious items from insurers’ books.

    He noted that the commission has received reports from the Nigerian Council of Registered Insurance Brokers (NCRIB) indicating that some debts in the books of underwriters are cooked.

    On steps to be taken by NAICOM, Onekhena said the commission has come up with some strategies one of which is the “No Premium No Cover” policy. This, he said, will stem the claims of withholding or unpaid premium often reported by underwriters.

    He said: “NAICOM would soon commence the validation of debts in the books of companies to ascertain the true position of the debts. “2012 is a year of reality; we are going to remove everything that is fictitious in companies’ books,” he said.

    Though some people believe that the “No premium No Cover policy” would not work, he said the commission would work and that they were going to adhere to the policy to wipe debts off the books of underwriters.

    He noted that the commission would continue to engage underwriters to ensure that they nip in the bud the challenges that they are having on the cleaning of their books for effective transition to International Financial Reporting Standard.

    He said many firms have been sanctioned for infraction, adding that while the commission disciplines firms, it would also ensure that the industry is protected.

    Meanwhile, as part of measures aimed at sanitising the accounting systems of insurance firms, the National Insurance Commission (NAICOM) has warned auditors of underwriting and broking firms, that henceforth they would be liable for approving falsified financial accounts.

    Onekhena, who disclosed this during a seminar organised by the Commission for external auditors to insurance and broking firms in Lagos, said auditors would be held liable for their opinion in the financial books of insurance operators in this International Financial Reporting Standard (IFRS) dispensation, adding that any auditor that approved a falsified account would be reported to the Financial Reporting Council (FRC).

    He urged auditors to clear grey areas with their clients before approving their accounts. He told the auditors to esteem integrity, noting that it is better not to have a job, than having one that would tarnish their image.

    He urged the auditors to report to NAICOM any challenge they observed in executing their responsibility.

    He said: “We are going to hold auditors responsible for their opinion in the financial accounts of companies. We would profile auditors with issues on their practice and report them to the Financial Reporting Council (FRC). Auditors should note that their responsibilities have increased in the current dispensation.

    “We do not want to make a mess of the International Financial Reporting Standard (IFRS) by next year; that is why we are investing in training and capacity building of operators and auditors.”

  • Why retirees fail to get benefits early

    Why retirees fail to get benefits early

    A fund manager, Mishahu Yola, has given reasons some retirees fail to get their benefits after putting in the required number of years in public service or private sector.

    Yola, who is the Managing Director/Chief Executive Officer of Legacy Pension Managers Limited, spoke at a workshop organised by National Pension Commission (PenCom) on “The role of pension operators in the provision of efficient customer service delivery,” in Abuja.

    He said the previous scheme, which was operated on ‘pay as you go basis,’ “was not fully funded. The old retirement scheme, because of how it was run, created huge deficits totalling over N2 trillion or 25 per cent of the GDP.”

    He added that as a result, “retired workers were not paid as and when due.

    “Different regulators managed different schemes, complicating the entire process with many offices supervising retirement benefits of different organisations in the public service, creating confusion in the system,” Yola said.

    To arrest the trend, he said the government brought the Pension Reform Act, 2004 into force.

    Comparing the Act to the discarded NSITF scheme, Yola said while the discarded scheme was not fully funded, the new scheme is, as fund is set aside to meet future retirement benefits from the outset.

    Hesaid while the former scheme was on a ‘pay as you go basis, the current scheme is contributory as both the employer and employees contribute 7.5 per cent each to the retirement scheme.

    He said: “But even with the fact that the current scheme is fully funded, some retirees still do not access their retirement benefits on time,” stating that the factors vary from the individual, the Pension Fund Administrators and the employers.

    For the individuals, he said, the challenges range from providing invalid contact address after retirement, late verification/enrolment with PenCom by Federal Government employees, providing conflicting documentation at PenCom verification/enrolment exercise, such as retiree’s name with PFA being different from the name on the nominal payroll of the Ministry, Department and Agency (MDA).

    Others include date of birth being at variance with retirement age, date of first appointment at variance with length of service, lack of or delay in submission of complete documentation and delay in payment of outstanding remittances of employees by employers.

    He listed other challenges to include, lack of reconciliation between the retiree and the Retirement Saving Administrators (RSA), adding that excesses or shortfalls must be ascertained before commencement of administration.

    Other causes as enumerated by the guest lecturer include: delay by the employer in providing the confirmation of the status of past service benefits (private sector/ self funded institutions); withholding the issuance of retirement letter by employer, lack of agreement between retiree and PFA on amount of lump sum and programmed withdrawal, as well as untimely submission of Letter of Administration in cases of death benefit and conflicting next of kins in cases of death benefit.

    To remedy the situation and avoid delays in the payment of benefits, Yola said: “Valid contact details, closer coordination and cooperation between employers and employees to facilitate timely remittance of accrued benefits by private employers are needed.”

    He also stated that remittance of retirement bonds/accrued rights before due date of retirement by employers must be done, saying this will ensure that payment of monthly pension would commence immediately after the first month of retirement.

    He also said PFAs must maintain cordial working relationship with concerned Human Resource and pension desk officers of employers to garner information as it concerns retirees and deceased employees.

    PFAs should employ effective resources in educating retirees and serving employees on the processes and procedures for processing benefits.

    PFAs should institute internal processes and mechanism to improve and enhance speedy payment of benefits, he stated.

    He called for early release of accrued benefits and contributions by government and private organisations and urged retirees, deceased beneficiaries and PFAs to ensure that accurate and proper documents are presented for processing of benefits for payment.

  • Parents urged on benefits of life insurance

    Studies have shown that many parents do not have adequate life insurance coverage, a reality that has drawn the attention of World Financial Group.

    While it might seem reasonable to assume that becoming a parent would be enough to trigger a person’s interest in life insurance, a recent MetLife study found that this is not always the case.

    The study found that most individuals consider life insurance when they get married, but do not reconsider it, or purchase it in greater amounts when they become parents.

    As a result, many parents either do not have life insurance, or they have it in inadequate amounts. This study was analysed in a recent U.S. News and World Report story. The story has won the attention of World Financial Group.

    World Financial Group is a company that provides a variety of financial services to individuals and businesses across the United States and Canada.

    These services include retirement planning and small business advisory services, but also life insurance. WFG is passionate about life insurance, and maintains that every family should at least give it its due consideration.