Category: Insurance

Despite hitches on recapitalisation, COVID-19 and others, the regulator and operators are set, through various initiatives, to grow the industry  this year. Omobola Tolu-Kusimo writes.

 

Insurance in Nigeria remains fragile and realising the potential of the fragmented sector has been difficult.The number of uninsured Nigerians remains among the world’s largest within prospective insurance markets.

According to the National Insurance Commission (NAICOM), this is as a result of its inability to enforce the compulsory insurance laws and lack of cooperation among  operators.

But all hope may not lost for the regulator as it believes the battle to grow the sector’s potential can be achieved.

This year, the regulator is moving forward with its plans on various policies and initiatives to deepen insurance penetration, to ensure that more Nigerians and assets are insured.

Most importantly, the regulator is optimistic that the N1 trillion target set for the Market Development and Restructuring Initiative (MDRI) goals will be met.

This is not minding the challenges before the regulator in whipping the operators into line, ensuring that all claims, including COVID-19 and #EndSARs, are paid.

Other objectives for the commission include consolidating the sector’s capital, Human Capital Development, Financial Inclusion, Bancassurance initiative, Life Annuity, New Insurance Law, African continental free trade agreement, and Improving efficiency in the supervisory processes.

The Commissioner for Insurance, Sunday Thomas, told reporters that the interest of the industry is paramount to them and that it would expose the market more.

He said: “Our focus for the year basically is how to expose the market. So, the question is: What do we do to deepen our market? We believe that 2021 will be a great year for us. It is unfortunate that the unexpected happened in 2020 with a lot of inactivity in most parts of the country. Hence the initiatives that are lined up to realise some of the goals could not be achieved. But notwithstanding, I must say that deepening the market was our goal and will still be our goal. Part of the mechanism of developing the market was reaching out.We couldn’t do much of this because of COVID-19 and #EndSARs restrictions on movement. But we have been developing some things inhouse that we believe will deepen the market.

“In November last year, we registered five additional companies, four insurance companies and one reinsurance company. The last insurance company that was registered  or licensed in Nigeria was about 35 years ago. So, we believe that we need an additional operator in that area because the level of retention is on the downward trend.

“We need to shore up this by renting a licence in a local company. We see what is happening within the pension arena that has grown to over N11 trillion. The insurance sector is not playing. We ought to be leading. Out of the four insurance companies that we registered, three of them are life companies that will be playing in the annuity market and this will be big for the sector.”

 

Market Development

The primary mandate of the Market Development Unit is to develop the insurance market and further deepen insurance penetration in all the states of Federation, with the goals of promoting market efficient, fair, safe and stable insurance market for the benefit and protection of policyholders.

The Commissioner said these initiatives would cover enforcement of compulsory insurance, introduction of Micro-Insurance for low-income market, and Takaful insurance as an alternative to conventional insurance products.

Consolidation

Although the recapitalisation mandated by NAICOM on insurance and reinsurance firms has been suspended by the court, the commission is optimistic that it will vacate the injunctions and continue the exercise.

Thomas told reporters that the recapitalisation was necessitated by Identified Assets Liabilities mismatch and to avoid imminent systemic collapse and solvency crisis in the sector.

He said the principles of Capital Adequacy and Solvency entail an objective and consistent “valuation of assets”.

“It is also required that assets have to be appropriate, objectively valued and sufficiently realisable. Capital Adequacy and Solvency regimes are necessary to address assets and liabilities match,” he added.

He stated that during their supervisory review and analysis, the commission observed that the symptoms and causes of some ailing insurers with a possible consequence of failure could be attributed primarily to factors that include risks arising from macro-economic environment, high inflation and interest rates (foreign exchange rate – N120 – N153 in 2007 and N306 – N360 in 2019) with consequential effect on the value of insured assets over the years.

“Others include investment and financial risks, poor risk analysis, impairment of certain investments; effect of IFRS on fair value assessment; mismatched assets and liabilities; insufficient liquidity. There is also the effect of risks from governance and risk management structure. This includes underpricing which occurs with inadequate premium; under-provisioning and reserving; poor record keeping occurring with paucity of data and inadequate IT infrastructure; poor corporate governance and ineffective risk management practices.

“The commission also attributed the symptoms and causes of possible consequence of failure to quality of human capital and emergence of insurance holding companies and conglomerates. We have issues of group risks like contagion, transparency, autonomy and arbitrage which are rarely reflected in consolidated financial statements.

“The identified needs made it expedient to increase the paid up share capital of insurance and reinsurance companies from the existing level of N2 billion, N3 billion, N5 billion and N10 billion to N8 billion, N10 billion, N18 billion and N20 billion for life, non-life, composite and reinsurance companies.”

He noted that the issue of recapitalisation was expected to strengthen insurance and reinsurance companies so that big ticket risk can be taken and retained largely within the market.

“If we see the content of the resolution, then we will see how to progress from there,” he said.

 

Human Capital Devt

NAICOM identified poor quality of human capital as part of symptoms and causes of some ailing insurers as possible consequence of failure

According to the Commissioner, there is inadequate human capital for underwriting, claims and investment management; insufficient actuarial services leading to inability to recruit and retain quality personnel; inadequate training and manpower development.

“We are pursuing the issue of human capital development with operator by making arrangement to have as many actuarists as we can have in the industry because we know the role of actuarist in risk assessment. This is one profession that is lacking in this part of the world.

“We are committing huge resources to actuarial development, in collaboration with the Chartered Insurance Institute of Nigeria (CIIN), through the College of Insurance and Financial Management, though the entire process has been affected by advent of the COVID-19.

“We are engaging some institutions like the Shipper’s Council to see how best we can block some of the leakages we have noticed. Most importantly, awareness creation. This and many more are part of the programmes we will rolling out this year.’’

 

Financial Inclusion

Thomas said the financial inclusion strategy has been central to the Federal Government’s developmental plan and the Commission has over the years invested hugely in the development of financial inclusion mechanisms which include the introduction of Microinsurance and Takaful Insurance products.

“The introduction of these lines of insurance is intended to deepen the penetration of insurance in the country and bring into the fold majority of the populace that are hitherto excluded. So far, some milestones have been recorded in this regard with three stand alone Microinsurance and four Takaful insurance companies already granted approvals.’’

 

Life annuity business

The annuity business has become a boost to the sector. According to the NAICOM boss, the public is becoming more knowledgeable about the workings of annuity, noting that they expect it to continue as the future is looking very bright for the business as we have witnessed.

“This has also shown a positive growth in trust and confidence in the sector. Annuity business is important to us in the insurance sector. Some three to five years ago, life insurance used to be like 20 percent of the total portfolio of the sector. We are excited that it has grown to 40 per cent in the last two to three years; so it is quite important to us.

“With the Memorandum of Understanding (MoU) signed by the commission and the National Pension Commission (PenCom), we are working together to establish limit roles and responsibilities of both institutions in terms of regulatory oversight. We are also looking at areas that may overlap so we avoid regulatory overlap while we also avoid regulatory arbitrage.

“On the implementation of the guidelines, we are working together and sometimes we have some standing committees that have been engaging each other. Where we have issues with our regulated entities, we come together and find ways to resolve them.”

 

Claims Payment

The Commission is committed to ensuring financial soundness and viability of the insurers and the adequate protection of policyholders at all times.These will continue to be part of our regulatory priorities. We will continue to ensure that genuine claims are promptly paid while also ensuring a reasonable protection of investments of shareholders. In demonstrating its willingness to protect the policyholders, the commission has further strengthened its Complaint Bureau Unit to respond to public complaints over claims settlement. Available statistics have shown that there has been great improvement in this area.

 

Technological enhancement

Effective deployment of technology for ease of transaction is among the key areas the commission will be emphasising this year, said Thomas.

“Digitalisation of insurance business is no longer an option, but an imperative which we and the operators have to work towards its actualisation. As we may all be aware, the industry is lagging behind other financial services sectors in this area. The Commission is working vigorously to see that all its operations are digitalised. 2021 is a year for us to turnaround the fortunes of the industry and this cannot be accomplished without digitalising our processes and encouraging the industry to imbibe same.”

 

African Continental Free Trade Agreement

‘’The African Continental Free Trade Agreement is a great development. We are quite grateful to President Muhammadu Buhari, for allowing Nigeria to subscribe to this great initiative,’’ Thomas stated.

“We believe that with the free trade area, movements of goods will be enhanced. It is important to us in the insurance sector because last year, we started something that tends to harmonise insurance transactions along the West African English-speaking countries in preparation.

“Now we have Nigerian companies along the English west African coast and the capacity of the industry is expected to be bigger. So, we will not just be efficient in managing the local risk, but we will also bring in more from other jurisdictions and with the free trade area initiative, we expect this to enhance our access to businesses from another jurisdictions. With bigger capacity, we will be able to retain more and also bring in more businesses to the country.”

 

Insurance Consolidated Bill

The commission is seeking for the passage of the Insurance Consolidated Bill, 2020 to drive the development of the sector.

Thomas said realising the potential has been difficult with the sector fragmented and in need of consolidation.

“Nigeria has used policy interventions in the past to try and increase the rate of insured customers but execution of these policies has proven challenging as the long-awaited increases in minimum capital requirement is yet to be completed.

“To say the least, enormous opportunities abound in the Nigerian insurance sector and we have so many compulsory insurances that one can hardly find in any other jurisdiction. The problem has been enforcement and lack of cooperation among operators. With the advancement and deployment of present-day technology it is expected that all compulsory insurances will be adequately enforced.

“The nation’s population is also an advantage as insurance is all about number. Nigeria has that advantage hence major global players in insurance are all rushing to the country to grab a space. But the proposed insurance bill that is before the National Assembly will, no doubt, begin to receive the desired attention than ever from the lawmakers, the bill when it becomes law will assist tremendously in growing the insurance sector. The commission is, therefore, seeking for the passage of the Insurance Consolidated Bill, 2020, to drive the development of the insurance sector,” he noted.

 

Insurance Consolidated Bill

Meanwhile, operators are looking forward to a bill being passed into law but with a preference and resolve to pursue the enactment of a new Act that would help resolve the impasse associated with the suspended recapitalisation.

The operators under the umbrella body of the Nigerian Insurers Association (NIA) are not comfortable with the procedure adopted by NAICOM to recapitalise the sector based on minimum paid-up share capital as stipulated in Insurance Act 2003.

The operators are lobbying members of the National Assembly to infuse the Insurance Industry Consolidated Bill Risk-based Capital adequacy template. NIA Chairman, Ganiyu Musa stated that they were convinced that the template is the best for the industry, especially given that the 2013 International Monetary Fund (IMF) Report has prescribed it and the Commission agreed with it.

Director-General of the association, Mrs. Yetunde Ilori also emphasised that risk-based capital is the direction to go if the  industry is to attract the right investment and increase insurance contribution to the Gross Domestic Product (GDP).

Firms and brokers have been engrossed in rate cutting for decades. Omobola Tolu-Kusimo writes that things are set to change from this year when the regulatory authority, the National Insurance Commission (NAICOM), introduces its portal to solve the problem.

 

There are expectations that the newly created real-time digital portal by the National Insurance Commission (NAICOM) will end rate-cutting in motor insurance and other abuses in the insurance industry.

The full deployment of technology, according to top chieftains in the industry, would boost growth, other than the analogue system.

Rate cutting has eaten deep among insurers and brokers and has continued to affect the industry negatively. The operators are engrossed in bad competition and are accepting rates that are not commensurate with claims that may occur in future.

From investigations, some firms are still selling below the stipulated rate of N5000. They charge as low as N2000 premium on third party motor insurance as against the N5000 regulatory rate.

Officially, the rates for third party motor insurance are N5000 for private vehicles, N7500 for commercial motor (trucks, general carthage), N5000 for special types (ambulance) and N1500 for motor cycles (power bike and official ride) and 6.8 per cent for the group life insurance.

On comprehensive motor insurance, some firms charge as low as one per cent and some 1.5 per cent or two per cent rather than the 10 per cent recommended by the industry.  Some offer up to five per cent and some three per cent premium.

Some operators are, however, excited about the portal set to come up this year, hoping that it will end an era of unhealthy competition in the industry.

The Managing Director, Law Union and Rock Insurance Plc, Mr. Mayowa Adeduro told reporters  that some firms, including Law Union, have been agitating for the right technology to solve the problem of rate-cutting and restore discipline in the industry.

Adeduro stated that this was necessary because there was no amount of appeal you could give to people, that would make them obey the rules.

He said: “There is no amount of appeal you can give to people, that will make them obey the rules. With technology, a lot of things will fall into place. We need a platform that can guide everyone that will see whether you are charging adequately.

“If you are doing so, it will correlate with the data you are supplying to the regulatory authority. NAICOM portal will give the ideal solution to the problem of rate cutting in the industry before the entire industry gets destroyed.

“I believe we should use technology to aggregate every activity of the industry, including the public sector, because until we get there, we will realise that the rule of thumb or the analogue system we are used to cannot take us anywhere.”

Managing Director, SUNU Assurance Insurance Plc, Mr. Samuel Ogbodu, during the parley with reporters said there was the need for operators to improve their operations.

He pointed out that company’s that use the right technology will be efficient and effective.

Speaking on SUNU’s motor insurance product, Ogbodu said his company was the pioneer of a motor product in insurance that turn out to be a flagship in the industry.

“When we went to NAICOM to defend the product, there was a template we submitted to them and that  is what we are still using. The template is that for every third party we will charge N5000. Some companies are selling below N5000. As a result, we are getting low premiums based on low patronage and that’s why the product has not met some expectations.

“NAICOM has come up with a portal. In fact, when they came up with it, we were jubilating because if you cut rate from this year, when you report to NAICOM, NAICOM will get to know and the necessary sanctions will be applied to companies found culpable. I believe that as operators, we are going to charge the N5000 flat premium on third party motor insurance. So, everybody will have no choice but to buy the third party through the Nigeria Insurers Association’s USSD. We thank NAICOM for coming up with the portal because it will help the industry and rate cutting will be a thing of the past. At the end, it will be a win-win situation for us. If everyone is doing very well, the industry will get better,” he said.

NAICOM Commissioner for Insurance, Mr Sunday Thomas, said the portal, which was in the works for six years, was finally completed recently as part of ongoing reforms by the management of the commission.

The commissioner said the new portal is such that wherever anybody is in the world needs information on the industry, it would be available to him at the click of a button.

“We will be looking at the digital world. Part of what we have done so far is that our portal that was on the drawing board for over six years has been fixed. It is taking us from where we are to the next level. We have sensitised the technical people in the industry and they gone through series of trainings.

“The next thing we are going to do is to engage the industry with IT guidelines. It is no longer going to be historical reporting. We try as much as possible to let investors, government and stakeholders into our programmes.The terrain is tough but we are determined to succeed. Nigeria is not by accident the largest economy in Africa. We must take advantage of the population. There are a lot of things to fasttrack the process. The digital world will drive regulation,” he pointed out.

“The integration of all insurance transactions into a single hub will soon go live. The implication of this will be a transformation of businesses to online. Our processes would have become fully automated and operational. NAICOM has at all times encouraged practitioners to imbibe the adoption of technology in their businesses. If the industry is to effectively key into the financial inclusion target of the Federal Government, it, therefore, behoves us to reinvigorate and face the challenge of digitalising our operations not only to build trust, confidence and reassurance of all stakeholders that the industry is ready to encore its peers, but to enhance penetration.

He warned that failure to key into the 21st Century demand for digital business services might spell doom for the industry.

He further stated that the industry’s failure to master Social, Mobile, Analytics and Cloud technologies (SMAC) means we will be unable to serve even the most basic demands of customers and a post-digital world.

“Hence, we will be prevented from embracing the next digital trends or disruption. It is important we work towards being part of the wave because this new set of technologies will ensure we rethink the entire industry and the parts needed to be played in the world.

“Insurance professionals need to be more alert and integrate SMAC as a baseline or core competency first before adopting newer technologies- the internet of things (IoT), telematics, “big data”, machine learning and artificial intelligence (AI), “chat-bots”, distributed ledger technology (DLT) and so on. Choosing carefully the customised and on-demand customer experiences we intend to target is essential before we can work backwards to map out or develop a strategy on these three things,” he added.

By Omobola, Tolu-Kusimo

 

Universal Insurance Plc has secured the approval of the National Insurance Commission (NAICOM) to underwrite Agricultural Insurance, the Managing Director, Mr. Ben Ujoatuonu, has said.

Ujoatuonu, in a statement, said the ‘no objection’ nod will enable the company support farmers and service providers in the agricultural value chain for greater sustainability and economic growth.

He listed products approved for the firm as Fishery Agricultural Insurance Plan and Poultry Agricultural insurance plan.

He noted that poultry policy covers the death of the poultry animals, resulting from accident or disease while the fishery policy covers loss of fish caused by death and cost of reconstruction of fish pond in the event of collapse.

According to him, the agribusiness sector needs insurance to remain sustainable and achieve long term growth expectation.

He stated that stakeholders in the agricultural value chain must embrace insurance if they want to reduce retained risk by transferring the burden to insurers for effective risk management.

He said: “With this approval, Universal Insurance is now well positioned to broaden its product offerings to consumers, which is in line with the federal government’s objective to deepen insurance penetration in Nigeria.

“The company by this development, is strategically accelerating its business objective of building a dominant company in the Nigerian insurance industry.”

 

 

By Omobola, Tolu-Kusimo

 

AXA Mansard has emerged as one of  the Top 50 Brand at the yearly brand evaluation.

The company received the award from Top 50 Brands Nigeria, a lead-ing brands research firm, when it held its yearly Brands event themed #IAMBRRANDNIGERIA.

The event, which is geared towards helping brand owners appreciate the value of their intangible asset, has become the most valuable asset of a corporate organisation and a key sustainability of the existence of the business.

The top brands this year are those that have been able to conceptualise consumer’s decision pattern and present well justifiable propositions that meet the customer’s needs.

Chief Customer and Marketing Officer, Jumoke Odunlami, said AXA was also recognised by Inter brand as one of the top 50 brands in the world today and so they are happy that there is no exception in the market.

“We remain committed to delivering our brand promise and purpose of acting for Human progress by protecting what matters.

“Our customers remain at the forefront of all our thinking and innovating and we remain committed to fuelling their belief in themselves. We thank our Customers immensely for their support and trusting us to be their partner through various stages of their lives.’’

By Omobola, Tolu-Kusimo

 

Despite the hurdles faced by many insurance firms to meet with recapitalisation, SUNU Assurances Nigeria Plc has completed the first phase of its recapitalisation plan by increasing shareholders’ fund to N6.61 billion in the year from N3.47 billion in 2019, the firm’s Managing Director, Samuel Ogbodu, has said.

Ogbodu spoke at a press conference held at the company’s headquarters in Lagos.

The increase in shareholders’ fund, he said, represents a 90 per cent growth after share reconstruction and capital injection of N3.01 billion.

He stated that despite the challenges, the firm has continued to grow its market share and will close the year  with a premium production of at least N3.15 billion.

He said this was against closing year 2019, with premium production of N2.24 billion, which represented a growth rate of 40 per cent due to the restructuring initiatives and strategic business transformation carried out in recent quarters to mitigate the effect of economic challenges.

He further stated that the company would close the year with claims pay-out of N1.29 billion in 2020, while its underwriting profit grew to N1.22 billion in 2020 from N781 million in 2019, presenting a growth of 56.2 per cent, which was due to improved technical efficiency in business operations.

He said: “The bulk of the claims came from oil and gas and motor. However, due to the firm’s prompt response to claims settlement, old and new policyholders have been flocking to the firm to underwrite their risks. We have continued to focus on our strategic strengthens, centred on our technologically differentiated service delivery and delivery and operation.

“We are also continuing to focus our technologically differentiated service deliver and operations. We are also bringing the company more in-like with initiatives that will delight our customers, which are geared towards being a customer-centric company with firm aspirations of achieving sustained and orderly growth in the coming years,” he said.

The SUNU chief said the company is embarking on the growth phase while it remains committed to its strategic objectives and core values, which will also guide the future and culture of the company.

He maintained that the firm has concluded plans to inject N3.5 billion into its kitties through right issue which will be activated by March, next year.

He said business renewal by clients of the company has been awesome, adding that the performance being recorded in the renewal is due to the excellent service offered by the firm.

“SUNU Assurances is embarking on the growth phase while we remain committed to our strategic objectives and core values, which will also guide the future and culture of the company.

“There is so much to do and the business challenges posed by the second wave of the pandemic might present difficulties and uncertainty in 2021 but SUNU Assurance Nigeria Plc will ensure continuous improvement of service delivery to insuring public and we will come out stronger while the company rounds-up the execution of its recapitalisation plans,” he added.

By Omobola, Tolu-Kusimo

 

The Nigerian Insurers Association (NIA) has recommended the introduction of Risk-Based Capital in the Consolidated Insurance Bill.

The insurers believe it is the right capital model to align the market with international best practice and reposition it for  growth and development.

Making a presentation at the two-day Public Hearing on Consolidated Insurance Bill 2020 organised by the House of Representatives Committee on Insurance and Actuarial matters in Abuja, Chairman of the association Mr. Ganiyu Musa stated that in adopting Risk-Based Capital adequacy template, the association took cognizance of the need to consider insurance risk, market risk, credit risk, and operational risk as well as the need to apply such capital charges on assets and liabilities, all capital resources inclusive.

He hinged the association’s position on the 2013 International Monetary Fund (IMF) Report on the Nigerian Insurance Industry, which prescribed the risk-based capital model as most suitable for the  market.

He said: “The IMF report was duly acknowledged and admitted by the National Insurance Commission (NAICOM) as the right capital framework for the market as it seeks to limit the capital required by operators to the level of risks they can carry.

“When the Bill is eventually signed into law in line with this proposal, it will lay to rest, the contentious issue of the definition of capital which has been a major point of the association’s engagements with the commission during the ongoing recapitalisation.

“We are convinced that risk-based capital adequacy template is the best fit for the insurance industry in Nigeria, especially given that the 2013 IMF Report has prescribed it and the commission agreed with it. This will also align the definition of insurance with the various positions such as IAIS recommendations which include ICP 17 on Capital Adequacy; European Union Directives On Minimum Capital Requirement; OSSFI (Canada); APRA (Australia Prudential Regulatory Authority); SAM (Solvency Assessment Management) South Africa; Kenyan Model; and Malaysian Model.

NIA’s Director-General, Mrs. Yetunde Ilori emphasised that risk-based capital is the direction to go if the industry is to attract the right investment and increase insurance contribution to the Gross Domestic Product (GDP).

She expressed the hope  that the insurance companies are searching for funds to capitalise their operations, adopting this definition will make the insurance industry in Nigeria attractive to investors and save about N77billion payout as cost of recapitalising.

The 2020 Consolidated Insurance Bill is expected to address some of the gaps in the 2003 Insurance Act and reposition the industry for better results, she added.

By Omobola, Tolu-Kusimo

 

The National Insurance Commission (NAICOM) is committing huge resources to manpower development in the insurance sector, Commissioner for Insurance, Mr. Sunday Olorundare Thomas has said.

The commissioner, who spoke with reporters in Lagos, said the Commission is collaborating with relevant partners to bridge the gap.

He stated that the Commission has shifted its focus to market development for an inclusive development of insurance across all strata.

These initiatives, according to him, are anchored on innovation, distribution and efficient service delivery.

He said: “We expect that insurance institutions will also formulate policies along these directions. The Commission is committing huge resources for manpower development in the insurance sector in collaboration with relevant partners to bridge the gap in our system.

“The support and cooperation of operators is required in this regard for their institutions to benefit from the giant stride. The programme includes the development of professional underwriters, Certified Actuarial Analysts and qualified actuaries. The development of these professionals will no doubt define the growth trajectory of the business of insurance in Nigeria.

“We are pursuing the issue of human capital development vigorously because we know the role of actuarist in risk assessment. This is one profession that is lacking in this part of the world and we are determined to start it. The first set of students that will be writing the yearly exam that will assist easy qualification as actuarist are going to start by March next year but the process has started.

“The school is being funded by NAICOM. Apart from that we also have assisted a couple of institutions to strengthen their insurance departments so as to let us do what we call backward integration, lets develop the human capital that will be necessary to achieve the objective of the industry.”