The Nation Newspaper

Category: Insurance

  • ‘Insurance declines by 1.2% in five years’

    ‘Insurance declines by 1.2% in five years’

    By Omobola Tolu-Kusimo

    Real growth in the insurance industry declined by 1.2 per cent in five years, a rating agency, Agusto & Co has said.

    Although the rating agency said the industry’s gross premium has grown steadily in terms of nominal value, in real terms it has been dropping.

    Speaking at Agusto &Co’s media roundtable on its “Insurance Industry Report”, Senior Financial Institutions Analyst, Agusto & Co Limited, Ada Ufomadu, said inflation has caused decline in Gross Premium Income (GPI) of insurance companies, contributing to the decline in real growth.

    She said the life insurance business line supported growth in nominal term, particularly the life annuity business.

    She said while few life companies maintained the business despite its risk factors, many dropped out after making huge losses.

    She said: “If you remember sometime in 2017, the National Insurance Commission (NAICOM) and the National Pension Commission (PENCOM) came together and pave the way for insurers to be able to sell annuities to pensioners. The insurance companies took up the opportunity and grew their GPI to about N380 billion which is what you will see 2017.

    “Subsequently, growth has been maintained by other business lines because although the industry was excited about annuity, some withdrew after a while because they realise that there is something about it that they are not getting right. It was having a negative impact on their profitability and that is why some companies were dropping out from the business. But there are other companies like that said they will continue doing it because it is one of their strength. Also subsequently, you will see growth in non-life business lines. The oil and gas sector continues to account for a significant portion of non-life premium.

    “So, in the short term, we had expected GPI growth to hopefully be driven by an improved operating climate. I say hopefully because I look at what is happening now with coronavirus and I am afraid to say the climate is improving. But we are positive that things will get better. Before the whole coronavirus issue, we were expecting that the numbers will be better this year. The industry has also seen a lot of regulatory support. There have been initiatives around bancassurance and microinsurance. There has also been some awareness creation on insurance for the populace by the operators and the regulator and that has help premium growth.

    “As I said, although nominal growth has looked positive, real growth shows a decline of 1.2 percent over the last five years. One of the challenges insurance companies have is that they are not able to price in inflation into their premiums. Unlike the manufacturing industry where once there is inflation, they will can easily move the cost to their client, reduce their production amount or find a way to accommodate the increase in cost. But for insurance players have found it difficult to adjust their premium because of the stiff competition in the market.”

  • Wanted: stronger laws

    Wanted: stronger laws

    After 10 years of seeking to strengthen insurance laws, NAICOM’s frustration seems to have grown. Omobola Tolu-Kusimo writes that the commission is in dire need of strength through new laws to tackle issues against the development of the industry.

    A bill to amend the insurance laws has been in the works for 10 years, passing from one National Assembly to another without the desired progress.

    The bill, which was drafted by former the Commissioner for Insurance, Fola Daniel, was expected to have made progress and passed by the National Assembly during the tenure of  the immediate past Commissioner, Mohammed Kari, but his efforts did not did not see the light of the day.

    However, the Acting Commissioner, Sunday Thomas, is intensifying efforts by bringing the Bill to the attention of the Ninth Senate.

    In a keynote address by Thomas at the retreat for members of the House Committee on Insurance and Actuarial Matters in Uyo, Akwa Ibom State, he said the Commission, as a statutory regulatory agency, derives its powers from the National Insurance Commission Act 1997 and the Insurance Act of 2003 to oversight insurance practice.

    He believes the event provides him the opportunity to bring to their attention the fact that these laws in some of its provisions are fast becoming obsolete and thus require urgent amendments.

    He stated that it is imperative to note that a bill to amend the Insurance laws has been in the works for some years now, adding that they are optimistic that when the bill is eventually presented to the 9th Assembly, it will enjoy an accelerated attention.

    Thomas appealed to the 9th Senate to help the insurance industry achieve its full potentials which will in turn increase contributions to the nation’s economy by passing the bill.

    He said: “The Commission indeed needs total support of the National Assembly to be able to regulate the sector better. The sector consists of two major segments namely, the Underwriters which comprise Insurance and Re-insurance companies and, the intermediaries comprising Insurance Brokers, Loss Adjusters and Agents.

    He said: “As at date, there are a total number of 55 insurance companies, two Re-insurance, three Takaful and two Microinsurance operators; over 500 insurance brokers and 2,000 agents. The Commission over the years in the course of discharging its duties and keeping to its mandate, had incepted a number of initiatives, especially in the area of market development to boost insurance penetration and growth. While a lot has been achieved by the Commission in this regards, there is a lot to be done if we must attain the desired goals as an industry.

    “While the industry is eagerly looking at a more positive outlook in the year 2020 and beyond, it may be necessary to have a peep into the performance of the industry in the last three years especially in the areas of claims payment, gross premium income and total investments. The industry in 2019, had a provisional gross premium income of N490.99 billion; claims of N330.37 billion, premium retention of N376.07 billion and invested N1.13 trillion

    “These figures give clarifications especially to the vexed issue of non-payment of claims by insurance operators. There is no denying the fact that there are indeed some cases of delays in the payment of claims by some operators, the Commission is however addressing such cases as soon as they are brought to our notice. It is for this reason that the Commission has strengthened its Complaint Bureau Unit in order to effectively address consumers’ complaints within the shortest possible time. The Commission has also as a matter of deliberate policy adjusted its strategy to focus more on developmental issues than compliance issues going forward in the overall interest of all stakeholders.”

    The Acting Commissioner emphasised that the foundation to ensure successful implementation of its initiatives in this regards is being laid.

    “Some of the initiatives of the Commission to drive its developmental agenda include but not limited to Recapitalisation; Financial Inclusion (Microinsurance & Takaful); Development of Agric Index Ins., Bancassurance & Retiree Life Annuity; Implementation of Risk Based Supervision Implementation of IFRS 17; Improving efficiency in the supervisory processes; Capacity Building of the Commission and Market workforce and Regional Integration of Insurance Supervision.

    “As you may have been aware, the Commission had in 2019 initiated the process to recapitalise the industry in order to upscale its financial standing to meet up with current economic realities and avoid imminent systemic collapse and solvency crisis in the insurance sector. This will ensure that the industry becomes more robust in its technical competence and financial base, build confidence, trust and enhance market value. It is further aimed at repositioning the sector for self-actualisation in terms of growth and development. The process is expected to be concluded by 31st December, 2020.

    “In 2009, the Commission launched the Market Development and Restructuring Initiative (MDRI) project aimed at a comprehensive pursuit of development of the industry as well as ensuring full compliance with extant laws in respect of compulsory insurances. The first phase of the project was successfully carried out in all the six geo-political zones in the country.

    The second phase of the MDRI project will soon be unveiled and it will mark out clear targets and tasks for all stakeholders in the industry. The Commission is committed to vigorously pursue the continued implementation of Compulsory Insurances to which collaboration and support from all stakeholders is key towards achieving the desired goal.

    “In 2009, the Commission launched the Market Development and Restructuring Initiative (MDRI) project aimed at a comprehensive pursuit of development of the industry as well as ensuring full compliance with extant laws in respect of compulsory insurances. The first phase of the project was successfully carried out in all the six geo-political zones in the country.

    The second phase of the MDRI project will soon be unveiled and it will mark out clear targets and tasks for all stakeholders in the industry. The Commission is committed to vigorously pursue the continued implementation of Compulsory Insurances to which collaboration and support from all stakeholders is key towards achieving the desired goal.

    “In 2009, the Commission launched the Market Development and Restructuring Initiative (MDRI) project aimed at a comprehensive pursuit of development of the industry as well as ensuring full compliance with extant Laws in respect of compulsory insurances. The first phase of the project was successfully carried out in all the six geo-political zones in the country.

    I must mention here that the Commission had hitherto been hindered in its various efforts to implement provisions of the current Laws by a number of challenges which are not within its control. We believe that going forward and in view of our renewed collaboration with the National Assembly, relevant security and sister agencies, enforcement of compliance with the laws will become much easier in no distant time.

  • Brokers join call for national security rejig

    Brokers join call for national security rejig

    By Omobola Tolu-Kusimo

    As spate of insecurity in the country increases, the Nigerian Council of Registered Insurance Brokers (NCRIB) has  called on the Federal Government overhaul its security apparatus and enhance collaboration with governments and institutions within and outside the country to an end the menace.

    The council believes the reported cases of kidnapping, terrorism and other criminal cases have reached a preposterous dimension which  is adversely affecting the pace of economic growth as genuine foreign investors are scared putting their monies into the economy.

    NCRIB President, Dr Bola Onigbogi spoke at the February edition of NCRIB Members’ Evening hosted by Linkage Assurance Plc in Lagos.

    She said: “As a critical player in the national economy, the onus is on the NCRIB to express grave discomfort about the increasing spate of insecurity in the country, in spite of government’s efforts to improve ease of doing business and reflate our national economy. There is hardly a day that passes by without reported cases of kidnapping, terrorism and other criminal cases that is fast making our country dreadful to live in.

    Read Also: Buhari commissions security committee to crackdown illegal activities at borders

    “We are calling on President Muhammadu Buhari to for instance rejig and reposition the National Orientation Agency (NOA) to conscientise Nigerians continually on the need for them to be their brothers’ keepers by breaking down belief systems, be they religious or cultural, militating against peaceful coexistence and sanctity of human lives.

    “Also, we implore government to join the league of developed countries of the world who have resorted to using Information Communications Technology (ICTs) to combat crime. It is not out of place for the federal, states and local governments to deploy the use of CCTV in all towns and cities in the country. This device would assist the law enforcement agencies to keep better tap on criminal activities throughout the country.”

    Meanwhile, the Managing Director/CEO of Linkage Assurance Plc, Mr. Daniel Braie, has assured the brokerage fraternity that his company would meet the new capital base of N10 billion.

    Braie said Linkage is not looking outside for funding to meet the recapitalisation requirement, but that it has the internal capacity to raise the needed funds.

    “Linkage Assurance will conclude its recapitalisation process on or before the end of second quarter 2020. We are financially strong and have the capacity to meet our obligations as and when due.

    The NCRIB members, unanimously commended Linkage Assurance for their professionalism and response time and gave their endorsement, charging the company to continue its exemplary leadership role in claims payment and customer service.

  • FBNInsurance donates to homes, hospices

    Our Reporter

    In line with their Corporate Responsibility and Sustainability initiatives, sister insurers, FBNInsurance and FBN General Insurance, recently donated various items to homes and hospices across three geographical regions, Lagos, Abuja and Port Harcourt.

    The companies visited children at the Heritage Homes & Orphanage (Lagos), The Poorest of the Poor Orphanage (Abuja) and Rhema Orphanage Home (Port Harcourt).

    The company donated items such as food, beverages, toiletries and electrical appliances to the Homes. Also recently, both companies made similar donations to the Down Syndrome Foundation Nigeria, Lagos.

    Most of the items donated were largely raised through the companies’ yearly Staff Gift Drive, an in-house scheme that encourages staff members of both companies to donate various items for a common cause. The FBNI Staff Gift Drive which began in 2015 is in its fifth year.

    Read Also: FBNInsurance settles N5.4b claims in nine months

     

    Speaking at the presentation ceremony in Lagos, the Heritage Homes & Orphanage Assistant General Manager, Mr. Reuben Amara, expressed delight at the goodwill of the insurers. “We cannot thank the Board and Management of FBNInsurance and FBN General Insurance enough for their commitment by continually supporting the Home,” he said.

    In her response, the Head, Marketing & Corporate Communications, FBNInsurance, Mrs. Elizabeth Agugoh, reassured the home of the insurers’ continued commitment to support the cause of the organisation in making the society a better place.

    FBNInsurance is a Limited Liability Company licensed to transact life insurance business in Nigeria. The company is owned by FBN Holdings Plc (65 per cent) and Sanlam Group, SA (35 per cent) while FBN General Insurance is a  subsidiary of FBNInsurance.

  • Investors acquire 39% equity in AIICO

    Our Reporter

     

    New investors, LeapFrog III Nigeria Insurance Holdings Limited and AIICO Bahamas have acquired 38.83 per cent in AIICO Insurance Plc, the Managing Director of the underwriting firm, Tunde Fajemirokun, has said.

    He said contrary to reports that LeapFrog III Nigeria Insurance Holdings Limited acquired 38.83 per cent major equity stake of the company, the investor acquired 28.24 per cent while AIICO Bahamas acquired the balance of 10.59 per cent stake.

    He noted that the acquisition was consummated through a private placement.

    He assured that the company would meet and surpass the N18 billion capital requirement for Composite insurance companies as mandated by the regulator, the National Insurance Commission (NAICOM) before the December 31, 2020 deadline.

    He added that the company will continue to create and protect wealth for their customers.

  • ‘Finance Act 2020 will boost insurance industry’

    Our Reporter

     

    The umbrella body of insurance companies in the country, the Nigerian Insurers Association (NIA), has lauded President Muhammadu Buhari for the speedy assent to the Finance Act 2020, describing the move as a welcome development which will usher in a new lease of life for insurance companies.

    The association also praised the  Minister of Finance, Budget and National Planning, Mrs. Shamsuna Ahmed and her ministry for taking special interest in matters affecting the insurance industry, noting that her desire to promote the business of insurance will continue to be appreciated.

    Its Director-General, Mrs. Yetunde Ilori in a statement, said the ministry is showing understanding and support for the industry as insurance is the backbone and livewire of any economy.

    According to her, the various amendments brought about by the provisions of the Finance Act 2020 has lifted a huge tax burden off the insurance companies which had endured years of excruciating tax burden under CITA 2007 which did not place insurance companies at a level playing field with companies in other sectors of the Nigerian economy.

    Giving specific details, she stated that Sections 5 and  6 of  the Finance Act, 2020 repeals the punitive and outdated provisions of Section 16 of the Companies Income Tax Act on the taxation of insurance companies, thus resolving significantly  tax issues identified on Insurance industry taxation.

    Also, the new Act has eliminated among other things restriction of tax-deductible claims and outgoings to percentage of total premium; restriction of period to carry forward tax losses to four years and the special punitive deemed profit basis for minimum tax computation.

    She added that the Finance Act also resolved the issue of computation of deductible unexpired risk by adopting the use of time apportionment basis in line with the Insurance Act.

    Expressing delight on the matter, she stated that insurance companies would now be able to carry forward losses indefinitely like companies in other sectors of the economy as opposed to the four-year restriction previously in place resulting in fiscal equity.

    She said: “The Finance Act has also simplified basis of computation of minimum tax payable by insurance companies as opposed to the 2007 Act which basis differs significantly from that adopted for other Nigerian companies.

    “The Finance Act 2020 provides an inclusion of proper definition of investment income for life insurance business as “income derived from investment of shareholders’ funds.”

    Read Also: Kudos, knocks for Finance Act

     

    This will ensure that income attributable to investment of life insurance policy holders’ (insurance customers) funds are not subjected to tax in the hands of life insurance companies; the tax deductible expenses have been expanded to include additional 10 per cent of estimated figures for “claims incurred but not reported.”

    Speaking further on the Act, she extolled the leadership qualities of Vice President Yemi Osinbajo who has pursued his reforms for the Ease of Doing Business with unusual fervour and drive, noting that the Finance Act and all the tax issues resolved therein are in furtherance of the goals of Ease of Doing Business.

    The director-general stated that notwithstanding the above, the Finance Act also provides for modifications to the Stamp Duties Act (SDA) which legalises the charge of stamp duties on electronic receipts and also appoints the FIRS and State Internal Revenue Service as the relevant competent authorities responsible for collecting stamp duty on behalf of the Federal Government and the state governments.

    This also puts to rest the dispute between the NIPOST and the FIRS as to which body is responsible for collecting the duties.

    Continuing, she said: “the Finance Act 2020 has solved the issue of excess taxation on company profits to the effect that no further tax will be paid on any undistributed profit that has already been taxed.

    It is a major succour for member companies in the on-going recapitalisation exercise and the Federal Government should be appreciated for the Act which has become a game changer by ensuring the fair taxation of insurance companies” she enthused.

    “The Act would promote reform of tax laws to align with global best practice and it is expected that it will enhance the industry contribution to GDP and encourage investors whilst entrenching Ease of Doing Business. This will help the insurance business to thrive and attain its full potentials”, she added.

  • Hope rises for ‘un-recapitalised firms’

    The National Insurance Commission (NAICOM) may not liquidate any insurance company that is unable to recapitalise by the end of the December 31, this year deadline as earlier stated in the recapitalisation plan. Omobola Tolu-Kusimo writes that the Commission is extending an ‘olive branch’ to likely unrecapitalised companies.

     

    Liquidation of an insurance company has been described as very difficult and  the regulatory authority, the National Insurance Commission (NAICOM), has been avoiding it.

    Despite that there are some ailing companies in the industry, instead of outright liquidation, the Commission rather takes over and set up interim management to manage the companies, with such interventions running endlessly.

    But in its wisdom, the Commission mandated companies to recapitalise, an exercise it hopes to use to separate the wheat from the chaff.

    The Commission, it was learnt, expects that the ailing companies would die a natural death when they are not able to recapitalise, come December 31, this year.

    In a twist, the commission seems to be refraining from enforcing its order in its recapitalisation plan, where it stated that any company that fails to meet up with the deadline would lose its operating licence.

    Rather, the commission is offering regulatory forbearance which would provide an opportunity for un-recapitalised firms to team up together to enable them remain afloat.

    Ahead of the ongoing insurance industry recapitalisation, the National Insurance Commission (NAICOM) made a statement last Wednesday.

    Speaking at the Chartered Insurance Institute of Nigeria (CIIN) 2020 Business Outlook in Lagos on Recapitalisation & Stability in the Insurance Industry – Role of the Regulator, the Acting Commissioner for Insurance, Sunday Thomas, said the commission do not want any insurance firm to be liquidated after the recapitalisation.

    He stated that the commission would offer regulatory forbearance to un-recapitalised firms to remain afloat.

    The NAICOM boss explained further that commission would provide an orderly exit for un-recapitalised companies.

    He noted that liquidation of firms often turns out to be difficult to handle due to issues around it and that it never favours both the regulator and operators.

    He also disclosed that the commission will issue guidance note on recapitalisation by the end of first quarter 2020.

    He maintained that recapitalisation is necessary because when the industry is stabilised, it would help other sectors.

    On roles of the commission in the ongoing recapitalisation, he said NAICOM as a regulator would ensure transparency and certainty of the process; orderliness of the recapitalisation process; ensure an enabling environment – palliative and level playing field – fair to all.

    Other roles, according to him, include; ensuring that recapitalised companies are liquid; safety of funds raised – Payment into Escrow Account; orderly exit of un-recapitalised companies and efficient resolution of pre and post-recapitalisation governance/conflicts.

    Read Also: Senate, NAICOM move to reposition Nigeria’s insurance policy

    Thomas maintained that the commission is committed to sustainable growth in order to enhance the stability of the industry in Nigeria.

    Managing Director/Chief Executive Officer, Excel Professional Services Limited, Dr. Oladimeji Alo, who spoke on: The Nigerian economy 2020 Issues, challenges and prospects for the insurance industry, said many of the economic policies and plans for 2020 hold great prospect for growing the economy, promoting job creation and reducing poverty.

    He said insurance firms that would do well in 2020 are those who had invested in their brand equity; innovation capabilities; talent management capabilities and information technology resources and capabilities.

    The President and Chairman of Council, CIIN, Mr Eddie Efekoha, said the most important issue in the industry presently is recapitalisation and they hope to continue to get first-hand information on the role they intend to play during the process.

    He said figures from the Africa Development Bank Group suggest that GDP growth in Nigeria is expected to rise to 2.9 per cent in 2020 from 2.3 per cent in 2019.

    “However there are negative indicators such as insecurity which could deter foreign investors, shrink the domestic economy, and ultimately dampen prospects for economic growth.

    Equally, rising public debt and associated funding costs could pose fiscal risks if proposed adjustments are not implemented. Ultimately, Nigeria has many opportunities to transform its economy, particularly in agro processing and local manufacturing in general.

    There is a need to accelerate structural reforms in order to promote economic diversification and industrialisation to minimise vulnerability to external shocks.

    “It’s been said that good things come to those who wait, with the current developments in the industry and the country, good things will only come to those who work hard.

    We are tasked to pull up our sleeves and slave our backs for our industry to grow to the next level. This year will present new opportunities and we must be functioning at peak levels mentally, physically and psychologically to be able to capitalise on these opportunities.  It is our hope that this year 2020 will bring better dividends for us all,” he added.

  • AIICO partners EdFin MFB on education

    By Omobola Tolu-Kusimo

    AIICO Insurance Plc has partnered EdFin Microfinance Bank to provide sustainable education.

    Over 400 schools were represented at EdFin’s Stakeholder Forum on Education, which held in Lagos.

    Participants, which include school owners, PTA representatives, deliberated on issues affecting education with the aim of proffering solutions for the growth of the sector and sustainable future for students.

    The event featured information sessions, such as financial literacy training, facilitated by Fate Foundation. It was followed by an exhaustive interactive session between the company’s Board of Directors and participants.

    Other sessions included live demos on Google Bolo (a speech-based reading tutor app to help children in rural regions with the reading skills) by Google Nigeria and Wowbii Tap – a world-class interactive board preloaded with intelligent educational content to help teachers improve the quality of instruction in schools and enhance subject-matter understanding among students/pupils.

    Read Also: AIICO increases share capital to N18b

    The Managing Director, EdFin MfB, Mrs. Bunmi Lawson expressed gratitude to the major sponsors of the event, noting that AIICO Insurance provides life insurance for pupils in the bank’s network of schools, and FlexiSAF, a software development company, for their support to the event.

    In demonstration of its passionate commitment for education, AIICO has several innovative product offerings targeted at risk protection for sustainable education of the Nigerian child.

    The Executive Director and Head of Retail Business at AIICO, Olusola Ajayi said education is a key area of focus in the company’s Corporate Responsibility and Sustainability function.

    He said: “We contribute our quota to the development of education through diverse initiatives and form strategic alliances with relevant stakeholders like EdFin to meet our objectives.

    “The partnership with EdFin Microfinance Bank is strategic, given their niche, their reach and positioning within the Nigerian educational sector.”

    AIICO commenced operations in 1963. It provides life and health insurance, general insurance, investment management and pension management services as a means to create and protect wealth for individuals, families and corporate customers.

  • Royal Exchange to end recapitalisation by June

    By Omobola Tolu-Kusimo

    Royal Exchange Plc is to conclude its recapitalisation plan by June 30, the Group Managing Director, Wale Banmore, has said.

    Banmore, who spoke at a press conference in Lagos, assured that the firm would conclude the recapitalisation before the December 31 deadline set by the National Insurance Commission (NAICOM).

    He stated that the firm is in discussions with three investors, which include two foreigners, who might inject fresh funds in the general and life businesses of the group.

    He said the firm was poised to play big post-recapitalisation role, noting that it is strong establishing structures that will support its operations in the future.

    He said one of the initiatives to reposition the firm’s operations is the re-launch of its website and creation of five more for the subsidiaries as well as a new mobile site.

    Read Also: Royal Exchange records N215.3m loss

    The company’s Group Executive Director, Operations, Mr. John Iwuajoku, explained that the new website was re-designed and that  its implementation of a  content management is suited for  the firm’s business needs.

    It offers visitors to the site, comprehensive information on general insurance, life assurance, financing, and asset/wealth management information for individuals, families and business, which can be accessed anywhere.

    He said: “It also boasts of conveniences, such as e-payment solutions, insurance quote request form, product features and benefits, access to our insurance procedures, investor relations, happenings within the Royal Exchange group and a live chat capability with the Call Centre operators for help on issues relating to the business.

    “Our new website is designed with great customer experience at the bedrock. It takes convenience to another level by providing frictionless self-service features that empowers existing and new customer to purchase products without any manual intervention.  For us, this is indeed a step in the right direction.  The re-launch of our website represents a revitalised Royal Exchange Plc and by utilising the latest web technology, Royal Exchange Plc is poised for the future, with a greater online presence.

    “The Royal Exchange website redesign was motivated by the need for online and offline brand consistency and Royal Exchange’s desire to develop a consumer-centric web presence. Before now, the company won the ‘Best Web Transaction Processing Website Award’, insurance category of the 2012 Web Jurist Award conducted by Phillips Consulting and came third in the same category the following year.”

    He noted that the company, which started  in 1921, continues to be driven by innovation and a determination to offer exceptional services.

    “Following the recapitalisation exercise in 2007, the company was reorganised into a group structure comprising Royal Exchange Plc as the holding company and five strategic subsidiaries namely Royal Exchange General Insurance Company Limited (Non-Life Insurance); Royal Exchange Prudential Life Plc (Life Assurance); Royal Exchange Healthcare Limited (HMO and Health Insurance); Royal Exchange Finance Company Limited (Financial Advisory); and Royal Exchange Microfinance Bank Limited (Banking),” he added.

  • Insurers urged to embrace ‘utmost good faith’ in claims payment

    Many Nigerians are wary of buying policies because of the fear of non-payment of claims when they are due. Experts have, however, advised insurers to do better in claims payment. Omobola Tolu-Kusimo reports.

    Insurance is a business of utmost good faith. Although the duty of good faith and fair dealing applies to the insurer and the insured, experts say courts when looking at an insurance contract, have viewed its requirements as a one-way street in favour of the insured because he or she needs the protection from the insurance company, and not the other way around.

    According to experts, an insurance company has the duty of performing its contractual obligations to an insured in good faith and not trying to take advantage of vulnerabilities created by the sequential character of contract performance – the insured pays premium and sometime later the company may have to pay a claim. In all, the principle of utmost good faith, states that the insurer and the insured must disclose all material facts before the policy inception.

    But insurers have been perceived not to pay much attention to the duty of good faith and this has made many not to have confidence in insurance companies.

    Despite the hard work done by insurers, people are still weary of buying insurance policies as they fear non-payment of claims when it crystalises.

    Group President/Chief Executive Officer, Standard Insurance Consultants Limited, Dr. Ahmed Salawudeen, said insurance business would grow when insurers practise utmost good faith.

    Salawudeen, a stakeholder in the industry, said insurers have not been honest enough in their claims drive.

    He said: “Some insurers are not honest. Insurance is a business of utmost good faith. That is to say, if anybody insure with you and a claims come up, you have to honour the claim. But do they? No. And that is why the business is going down.

    “The problem is that what we have in the industry now is rat race. The young insurers don’t want to go through the system the way they ought to. The younger ones don’t want to go through the right road. Everybody is in a hurry and it’s a big problem for Nigeria. In the early days, the insurance company finance banks and this is how it is all over the world. But Nigeria is different.

    “The insurance companies are trying to recapitalise, which is very good, but what is really important is building trust. Insurance is a business of trust. If there is no trust, there is no insurance. In Nigeria a lot of people don’t have confidence in insurance. Why? Because insurance companies are not living up to their responsibilities. The companies must be able to settle claims as at when due for the industry to grow. When they are not doing that, the public will not have confidence in them.

    “The bodies and associations in the industry like the Chartered Insurance Institute of Nigeria, the Nigeria Insurers Association, the Nigerian Council of Registered Insurance Brokers and others have to work together. But at present, everybody is on his own. We cannot survive under such a   condition. We can only survive when  we are working together effectively. Insurance business is a great business. It has impact on economy. Without insurance, nothing can be done. But in every civilised society, it is the responsibility of the companies to make sure that any claim emanating is settled.

    However, the problem remains that the public does not have confidence in insurance. In my company, we make sure that any business we are passing goes through a reputable insurance company that will not defect in case of claims. I have been a chartered underwriter since October 1976, so I know what I’m talking about. Insurance companies should work to make the public have confidence in them.’’

    The Managing Director, Anchor Insurance Limited, Ebose Augustine  explained that sometimes insurance companies are slow to pay a claim when they discover that it is fraudulent.

    He maintained that as insurers, they are in the business of paying claims that would restore people and businesses to the position they were before a loss occurs.

    “There are few arguments that sometimes arise from claims. The onus is on a policyholder to prove the claim is genuine. For instance, there was a claimant who claimed his car was burnt. Upon investigation, we found that the car that was burnt was not the car that was insured. The car that was insured was a saloon car but he brought a Mazda to us as the car that was burnt. So people do a lot of things to make money.

    “Insurers also try to be careful not to pay fraudulent claims because insurance is a pool of funds, which must not be mismanaged. We have seen many fraudulent cases over time and they come in different ways.

    “This notwithstanding, we still pay claims. For us at Anchor, we do not owe any claim. We are very serious with our claims responses and we made the process for policyholders seamless,” he added.