The Nation Newspaper

Category: Insurance

  • How to get prompt claims payment

    Bola Adegbaju

     

    In my last article, I mentioned some things that may make it difficult for insurance companies to accept liability.

    It should however, be noted that it is not a way of escape, as many would have thought, but practical facts that need to be understood and avoided.

    This will take us to today’s topic on how to get your claims settled promptly. Getting your claims settled is different from getting it promptly.

    My focus is on how you can get your claims faster so that you can move on with life and business.  For a business owner, the longer it takes to be reinstated the greater the loss.

    Why then will you allow your carelessness to cost you so much, when this can be avoided?

    It is important to state that the speed at which a claim is settled, whether promptly or otherwise, solely depends on how fast the substantiating documents are submitted.

    Imagine this scenario: a policyholder who reported a claim some years back was asked to submit the substantiating documents. He was submitting in bits. How would his claim be attended to promptly with this kind of attitude?

    Another major cause of delay is when there is disagreement in respect of the quantum offered by the insurer. ie. the policyholder is not accepting the amount of settlement. This may go on for a very long time and may also end up in litigation if care is not taken.

    Some insurance companies experience this with their customers and it can be another reason for not settling claims on time.

    Therefore, I want to advice insurance consumers to take note of the following which will assist in getting their clams settled on time.

    1. Be sure you are dealing with a strong and reliable insurance company. It will be better if you can lay your hands on the list of licenced insurance companies published by NAICOM.
    2. Ask for the substantiating documents from the right people (precisely the Claims Department) so that you are not tossed up and down. Seek the advice of a professional. A licenced/registered insurance broker will suffice.
    3. Understand what documents you are to submit for your claim because requirements defer from claim to claim.
    4. Get all substantiating documents together and submit once.
    5. Remember to make copies of the documents for your records. Do not be in a hurry to submit. There have been cases in which the claims documents got lost in transit and the insured never had copies.
    6. Do not inflate your estimate of repairs.
    7. Do not breach the contract conditions. Obey every rule to the letter.
    8. Ensure there are no discrepancies in your information. Any of such will be interpreted as a fraudulent case.
    9. Notify your insurer within the specified notification period stated in your policy document, preferably immediately the incident occurs.
    10. Do not insure the same property with two insurance companies. The principle of contribution will have to be applied. This means that the two companies will share the loss based on an agreed ratio.
    11. Notify your insurer immediately there is a change in the subject matter of insurance. Do not wait for a loss to occur before doing this.
    12. For life policies, you need to be clear with the beneficiary of the insurance proceeds. There are cases in which the insurance company had issues with who to pay the benefits to after the demise of the assured.
    13. Prevent further loss from occurring.
    14. Do not throw any damaged item away. They are referred to as savage. Let your insurer decide on what to do.
    15. Give the insurance company free access to your premises in case they want to inspect or investigate the loss reported.

    However, if you follow the above advice and you still feel your claim is unnecessarily delayed or you are not satisfied with the services received, you are free to change your insurance company at renewal.

     

  • NSIA Group marks silver jubilee

    Our Reporter

     

    NSIA Group, one of the leaders in the bancassurance sector in West and Central Africa, has celebrated its 25th Anniversary.

    The celebration held at the Group Head office at Abidjan and across Africa.

    Its President, Jean Kacou Diagou, in a statement, stated that the group founded in 1995 as Nouvelle Société Interafricaine d’Assurance (the New Inter-African Insurance Company) – renamed NSIA – has experienced a tremendous rise in recent decades.

    According to him, from a family company of 10 employees, with a capital of 300 million FCFA and operating in the insurance sector in Côte d’Ivoire, the NSIA Group has become a major player in bancassurance with 2,800 employees spread across 12 countries.

    He said: “NSIA’s gradual and continuous growth has been driven by strategic acquisitions, first in Côte d’Ivoire and then in the sub-region. Assurances Généraux de France (AGF), International Bank of West Africa (BIAO) and more recently Diamond Bank (in African countries like Togo, Cameroun, etc. with the exception of Nigeria) are among the most notable transactions.

    “I am happy and proud of what has become of the NSIA Group, the leader in the Banking and Insurance sector. I thank our customers and investors who have accompanied and trusted us to this day. NSIA is also the fruit of the implication of each of the collaborators whom I would also like to salute.”

    NSIA Group Director-General, Kacou Diagou said committed to a winning strategy, the group targets Top 5 position in each of its businesses, in each of its countries of presence. This strategy revolves around innovation and internal growth.

    Read Also: NSIA Insurance kicks off campaign

    The NSIA Banking offers is well-established in Côte d’Ivoire. The next step for NSIA Bank will be to strengthen its positions in the five countries of presence and to expand its presence in the countries covered by the insurance arm. We intend to actively participate in the banking of the West and Central African populations through financial inclusion programmes.”

    The Group Deputy Managing Director, Insurance of the NSIA Group, Dominique Diagou Ehile, on his part, noted that the group’s insurance division intends to respond to the major challenges of transformation of the African society.

    On the personal market, he said the rise of the middle class would require supporting the needs of populations in terms of protection and provident insurance while providing innovative solutions.

    The digitalisation of our offers represents a tremendous growth driver. The NSIA Group intends to play a major role in the development of the African economy and provide lasting responses to the socio-economic challenges of the next decade, he added.

  • Mutual Benefits Assurance rewards 75 workers

    Our Reporter

     

    NO fewer than 75 staff members of Mutual Benefits Assurance Plc have been commended for their dedication to the underwriting firm.

    At the firm’s 24th Annual Thanksgiving Service in Lagos, at the weekend, 62 staff members, who have spent between five and 25 years, went home with Long Service Awards, while 13 staff  members received Retail Awards.

    Twenty-one employees of Mutual Benefits Assurance PLC and 12  workers of Mutual Benefits Life Assurance Limited, a subsidiary of the former, were also rewarded.

    Also, 13 workers from the parent company and eight staff members from its subsidiary, who have spent 10 years in the service were recognised.

    Read Also: Mutual Benefits raises N1.59b as rights issue

    The company’s Chairman, Dr. Akin Ogunbiyi, applauded the awardees for their dedication to work and keying into the mission’s company and vision to be a top insurer of choice in Nigeria, urging other staff members to emulate the gesture.

    Imploring the awardees not to rest on their oars, he charged the  staff members to increase their productivity.

    He said: “Looking back to what God has done for us, it is essential to start the year with a thanksgiving service like this. The last 24 years were full of testimonies. The company still remains solid and one of the top players in insurance industry. So, we need to thank God for this, while praying for his continuous support in the life of this company.”

    Earlier, the Managing Director, Mutual Benefits Assurance Plc, Mr. Femi Asenuga, said the management was making efforts to increase its top and bottom lines, adding that there were signs that there were better days ahead.

  • NAICOM, others move to end scarcity of actuaries

    In line with the National Insurance Commission’s (NAICOM) 2020 strategy on market development, the commission has taken up the challenge of dearth of actuarial analysts in the industry by sponsoring 500 students to become certified actuaries. Omobola Tolu-Kusimo writes

     

    Nigeria is facing dearth of actuaries. The Nigerian Actuarial Society (NAS) has 71 members, but only nine have qualified.

    Actuaries are professionals who solve financial problems using Mathematics and Statistics. They evaluate financial implications of contingent events and evaluate likelihood of future events. They have high level of technical knowledge; and understand legal and regulatory constraints that apply to the business. They are also high level business acumen and traditionally work in Insurance and pension businesses.

    The Federal Government, through the National Insurance Commission (NAICOM), has risen to end the problem.

    To this end, NAICOM has announced the sponsorship of 500  workers of insurance institutions to become Certified Actuarial Analysts (CAA), hoping to raise the figure to at least 100.

    CAA is an Internationally recognised professional qualification offered by CAA Global, a joint venture of Institute and Faculty of (IFoA), based in the United Kingdom, and the Society of Actuaries (SON) in the United States aimed at helping insurers meet the requirements for actuarial functions.

    On why the Commission is taking up the bills, the Acting Commissioner for Insurance, Sunday Thomas, said the qualified actuaries would take the industry to the next level.

    He spoke at the Actuarial Development Sensitisation Workshop organised by the commission in Lagos with management staff or head of actuarial function/unit of insurance and reinsurance firms as participants.

    The Acting Commissioner said the initiative was in partnership with the College of Insurance and Financial Management (CIFM) and aimed at developing necessary professional skills and talents to drive the insurance sector.

    He said: “As part of the Commission’s goal of developing the insurance market and in its response to the dearth of qualified actuaries in  insurance industry, we have instituted a quick win approach to some challenges faced by prospective students with limited funding, access to study materials, inadequate tutorial centres, study time, among others. In alignment with the educational developmental function of the Commission and in partnership with concerned institutions, we are in the process of facilitating sponsorship programme for staff of insurance institutions in Nigeria who are interested in becoming Certified Actuarial Analysts (CAA).

    “Part of our plans is that within the next five years, we want to produce at least 100 Certified Actuarial Analysts (CAA) and we will take responsibility for the commitment. We must analyse our job, role and the need to change our focus on how to develop the market and ensure compliance with regulatory policies. Part of the development is the human capital development, as the growing potential of the industry is built on the capacity to have the required capital that will drive it forward.

    “The issue of measuring and taking necessary steps for effective pricing have made the Actuarial profession to be more pertinent more than ever before. There is need to develop young professionals and give them a future in the insurance industry and we are determined to develop their potential and make them relevance to the sector.”

    He urged the beneficiaries to be committed to the programme, as the commission would only give candidates the opportunity to re-write a failed course twice.

    “This programme requires sharp, determined, qualitative- minded and serious individuals. So, think critically about it before opting for it. We are ready to give you all the necessary support and will persuade the chief executive officers of the insurance companies to give the candidates adequate time to study,” he said.

    CIFM Rector Dr Yeside Oyetayo lauded NAICOM for the programme. She noted that processes for the programme would commence immediately and the college would be developing a policy, in collaboration with NAS.

    She said, among others, the college would assess candidates for the sponsorship, register selected candidates, offer free registration for CAA examination twice a year.

    “We will also offer two weeks’intensive tutorial and mock examination before the actual examination and arrange for a compulsory 160-hour study leave for candidates with their employees.

    “The prerequisites for admission into the programme include that a candidate must be citizens of Nigeria with a valid identity card and must possess analytic skills. The beneficiaries must also be engaged in the industry, either as an underwriter, loss adjusters or academia, among others. The beneficiaries must, however, be interested to work as an Actuary in the insurance industry for at least five years post- qualification and must be referred by a guarantor who is preferably an employer.

    In a lecture, an actuary with AXA Mansard Insurance, Mr Tola Fakoya, said: “Actuaries identify the specific risks that can affect insurers and consider the relevance of those risks to a particular insurer. Also, within the product design process, actuaries assist in identifying market needs, for example, through the analysis of sales patterns, competitors’ products, and social and demographic trends.

    “Actuaries are often responsible for modeling the asset and liability cash flows, and assessing the effects of various risk factors on the results. On a broader scale, actuaries are often involved in developing and implementing business strategies designed to increase the profitability of an insurer. Actuaries are also often involved in the assessment of solvency and adequacy of capital. They can calculate the minimum capital required for regulatory purposes, both currently and based on projections of the growth in business.’’

  • Why you don’t get your claims paid

    By Bola Adegbaju

    Last week I explained “what you need to know about your insurance contracts”. I went further to talk about how this is very important in getting your genuine claims settled. I used the word, “genuine” because some claims are fraudulent. Experience has revealed to us that here in Nigeria and even some other countries, losses are staged or acted.

    Hence, if a fraud is suspected in any claim, it may take a longer time to investigate before settlement or it may eventually be repudiated (declined).

    Practically, a lot of factors can make an insurance company not to settle a claim.

    These factors include:

    • Insolvency of the insurance company: If an insurance company is not liquid enough, this may cause delay in or non-payment of claims, especially huge ones.

    To avoid this, the industry is currently undergoing another recapitalization exercise which will be concluded in December 31, 2020.

    • Lapse policy: Any mistake of not renewing policies immediately they fall due can cost the policy holder a lot because whatever happens within that short period will be borne by the policy holder.

    There was an unfortunate incident with a client some years ago. The motor insurance policy fell due for renewal. He had the intention of renewing but he never took a final decision. Just some few days after the policy expired, the vehicle was stolen. I am sure you can guess the end of the story……….. No premium, no cover, no claim!

    • The peril is not covered: A peril is an event that causes a loss. For instance, in most fire policies, the insured perils that cause the fire could be fire, flood, storm, or explosion. So, we can say we have insured /uninsured perils and if a peril that caused a loss is uninsured, and then the claims will not be settled. Examples of perils that not insured is pre-existing ailments in life policies.
    • Suspicion of fraud: As I mentioned earlier, claims are staged or inflated and hence referred to as a fraudulent one if this is discovered. When fraud is suspected, insurer will not take the liability of settling the claim.
    • Double insurance: Sometimes, a policyholder may have two different policies (or same policy) on a particular property, with different underwriters. This is against the principle of insurance and it is therefore not acceptable in our practice, whether it is done intentionally or ignorantly.
    • Change in the subject matter of insurance: It is not an offence for you to change the property you insure but it is an offence if you do not inform the insurance company.

    For instance, you must inform your insurer where the following information applies to the risk insured:

    • Change of the vehicle colour or use.
    • Purpose of building changes from residential to business or vice versa.
    • Change of occupation.
    • Change in personal data etc.
    • Breach of warranty or terms and conditions: Each party of a contract has an obligation to fulfill. The same applies to insurance contract. As much as you expect the insurer to settle your claims, you must make it a point of duty to do your part as stated in the policy document. That is why we always advise that you should get someone to explain the wordings in case you don’t understand.
    • Excess amount: Excess is the share of the loss born by the policy holder. It is usually stated also in the policy document under “Excess Clause”. All non-life policies have excess. It is not applicable to life assurance.

    So, if the amount of loss is not up to the excess amount, the insurer will not pay the claims because that is the amount the policy holder bears. For instance, if the excess amount is N100,000 and there is a loss of N60,000, insurance company does not pay. But if the loss is N220,000, the insurance company will pay N120,000 which is N200,000 less excess amount (N200,000-N100,000).

    • Late notification: A claim will not be attended to if the notification is beyond the specified days stated under the “Notification Clause”. So check your policy document to confirm this. However, the most common one is 30days.
    • Policy limits: If the policy has limits then you cannot claim above the limit. Say, there is a limit of loss up to the tune of N10,000,000 per annum. Once the loss has reached N10,000,000 in a year, the insurer doesn’t indemnify (pay) you again.
    • Incorrect Information: There have been cases in which the information about the subject matter of insurance at the point of claim doesn’t correspond with the one given at inception. This is also another reason why you may lose you benefits with your insurer.
    • No adequate reinsurance arrangement: Reinsurance is the insurance of insurance companies. A reinsurance company insures the insurance companies’ risks. So it is expected that every insurer has a reinsurer. Some insurance consumers already know about reinsurance and they request for the reinsurance treaty whenever they want to place a business with an insurer. You may choose to request same from your underwriter.

  • Shareholders to inject N14b into LASACO, says CEO

    Our Reporter

    Major shareholders of Lasaco Assurance Plc are to pump in about N14 billion to increase the minimum paid-up share capital of the company to N18 billion, as mandated by the National Insurance Commission (NAICOM), the Chief Executive Director of the underwriting firm, Segun Balogun, has said.

    NAICOM on May 20, last year mandated the 58 insurance companies and two reinsurance companies in the country to increase their paid up share capital.

    The minimum paid-up share capital of a life insurance company was raised from N2 billion to N8 billion; non-Life insurance from N3 billion to N10 billion and composite insurance from N5 billion to N18 billion. Re-insurance companies were directed to raise their capital base from N10 billion to N20 billion.

    The regulator had early this month shifted the deadline for the recapitalisation exercise from May 20, 2019 to December 31, this year.

    Balogun, who spoke at the opening ceremony of a one-year sensitisation plan to mark the company’s 40 years’ existence in Lagos, said the company which has been operating as a composite company has been strong and stable despite economic challenges.

    Read Also: LASACO to raise N10b capital

    He stated that the company’s shares had been reconstructed following the approval by shareholders.

    After this, he said the company increased its units of shares.

    With this, the company now has 10 billion shares, which have been reduced to over N2 billion based on the reconstruction of the shares, he noted.

    He also said they have got approval to increase the authorised share capital from 10 billion units to 20 billion units.

    He pointed out that the issue or challenge is not increasing the authorised share capital to accommodate the increase they desire but where the money would come from.

    He, however, said they engaged top 10 shareholders of the company who holds 60 per cent of the shareholding on the plan.

    He said: “Recall that NAICOM came up with paid up capital, which is higher than what the tier base capital proposal type required. For us at LASACO, the first thing we did out of our recapitalisation plan was that we reconstructed our shares. We have over seven billion units of shares that have been sold to over 37,000 Nigerians at 50 kobo. So, to achieve the reconstruction plan, we reconstruct the shares to the extent that the number of shares that have been issued becomes less. So, instead of over 7 billion units of shares that has been issued, we had one third, which is two billion plus.

    “However, we still have almost eight billion units of shares unissued. In addition to reconstructing the shares, what it also means is that if you have one unit of shares of LASACO, instead of the one unit being valued at 30 kobo or 40 kobo, it means one unit of shares of Lasaco is now that amount multiplied by three. At the par value, 50kobo multiplied by three is N1.50kobo for one unit of shares. At the price of 30 kobo, which Lasaco shares is  trading, the value of share of Lasaco is now 90 kobo. What this means for investors is that instead of you getting dividend three kobo like we paid in 2017 or four kobo like we paid in 2018, it then means that what you will be paid will be more significant.

    “Instead of paying 3 kobo, it will be 9 kobo, instead of 4 kobo, it will be 12 kobo and this will be more meaningful. Even at three kobo that was paid, if you look at all the quoted companies in Nigeria, you don’t have many companies paying as much as 10 percent of the value of shares as dividend. If the value of your share is 30 kobo and you pay three kobo, that is 10 per cent. If the value of your share is 40 kobo and you pay four kobo, that is 12.5 percent. The big companies of Nigeria that their shares are priced at N30, N40, N120 or N150, the dividend they pay over the value of your share is usually not as high as 10 per cent or 12.5 percent. Yes, you can say, this payment is in kobo, in terms of the ratio of the dividend we are paying over your stock, it is more meaningful. You are getting better returns on your investments than the bigger ones.”

    He further disclosed that after the reconstruction, they decided to increase the number of units of shares of the company.

    He added: “We have 10 billion shares which the issue will reduce to over N2 billion. We also said we should increase the authorised share capital from 10 billion units to 20 billion units. On Wednesday, we received a letter from the Corporate Affairs Commission saying that our authorised share capital has been increased from 10 billion units to 20 billion units. What this means is that we have almost 18 billion units of shares to issue. The issue or challenge is not increasing the authorised share capital to accommodate the increase we want to do. The issue is: Where will the money come from? So, what we have done as a company as we have 37,000 shareholders. The top 50 shareholders control about 70 percent of the shareholding and we have the top 10 controlling almost 60 percent. What we have done is to engage these top 10 shareholders on the plan. As it is, we are going to offer rights issue and do private placement because there are individuals and companies that have shown interest to buy into Lasaco.’’

  • Recapitalisation: NIA praises NAICOM on deadline extension

    Our Reporter

    The Nigerian Insurers Association (NIA) has commended the National Insurance Commission (NAICOM) for its recent extension of deadline for recapitalisation of insurance and reinsurance companies in the country, describing it as a step in the right direction.

    Director -General of the association Mrs. Yetunde Ilori, while commenting on recent developments on the industry recapitalisation, stated that the commission had taken a bold step in the right direction by acceding to the request of companies for extension of deadline for the exercise.

    She said: “The association appreciates the Acting Commissioner for Insurance, Mr. Olorundare Sunday Thomas and management of National Insurance Commission for acceding to our request. This singular move has, no doubt, portrayed the Commission as one with a listening ear. It has proven to be responsive to the yearnings and aspirations of the insurance operators and shown that the interest of the market is uppermost in its considerations.

    Read Also: NAICOM extends licence renewals

    “By the extension, companies now have ample time to comply with the directive instead of having to go into the exercise without adequate preparation and diligent execution. This will also be in support of a seamless reinsurance arrangement which is an annual arrangement.  It would have been absurd to conclude the recapitalisation exercise by mid-year as this might have caused a lot of disruptions.

    “Now that the commission has provided the needed impetus for members to go about the exercise, it is my appeal that member companies should  give  the exercise all the seriousness it deserves. “We need to appreciate the commission’s gesture by working hard to achieve the recapitalisation threshold set for our various businesses. That way, we will encourage the commission to churn out more market- friendly policies,” she averred.

    She said the onus is on member companies to take advantage of the new date as some of the initial challenges thrown up by the first date have been addressed with the extension granted.

    “It is our hope that whatever recapitalisation option they have to take, the new timeline will give them ample opportunity to do so. The NIA wishes members success in their recapitalisation plans and pray for a hitch-free exercise”.

    Continuing, the DG stated that the market expects cheerier news from NAICOM by way of palliatives and incentives, especially those that are within the commission’s control.

    She stated that the appeal is based on the fact that the cost of the exercise will be too heavy on the companies and this will assist the companies to reduce the cost of recapitalisation and increase shareholder value.

    The commission in May last year, increased the capital levels for insurance and reinsurance companies operating in the market as follows: Life Insurance business   from N2billion to N8billion, General Insurance Business from N3 billion to N10billion, Composite Insurance Business from N5 billion to N18billion and Reinsurance companies from N10billion to N20billion with a deadline for the exercise set for June 2020.

  • Finance Bill excites insurers

    For 12 years, insurance operators cried as they were charged double tax in billions on premiums and claims paid to the insured. The new Finance Bill has just made the difference they have been clamouring for. Omobola Tolu-Kusimo reports.

    Underwriters have been pursuing an amendment to the Companies Income Tax (Amendment) Act 2007 (CITA) to relieve insurance companies of the heavy tax burden they grapple with.

    For several years, they engaged the Federal Inland Revenue Service (FIRS) over the controversial tax issues in the insurance industry.

    In the controversial law, some sections compelled insurance companies to pay out their capital in the form of a minimum tax because they are almost always in a never-ending refund cycle with the tax authorities. Originally, the CITA was meant to amend and simplify controversial aspects in its policy, instead, it made it more obscure particularly for the insurance sector.

    In Section 16(2)(a) of the CITA, the profits of a life business insurance company are calculated by taking management expenses, including commission, subject to subsection (8)(b) of the Act from gross income (investment income and revaluation surplus).

    Section 16(1)(b) states that profits will be calculated for non-life businesses, for tax purposes by deducting the reinsurance cost and a reserve for unexpired risk (the premium corresponding to the time period remaining on an insurance policy), subject to subsection (8)(a) of the Act from a gross premium, interest and other income receivable in Nigeria.

    Read Also: Kudos, knocks for Finance Act

    But with the new Finance Bill passed by the National Assembly and signed into law by President Muhammadu Buhari, insurers have been relieved of the unwholesome tax burden that had drained their earnings.

    The new law, according to the operators, has deleted certain inhibitive rules for them, making it possible for them to carry forward losses indefinitely as opposed to the four-year restriction that was in place.

    The Director-General, Nigerian Insurers Association (NIA), Mrs. Yetunde Ilori, said the industry has been looking forward to the tax review which is part of the new law.

    She stated that the review is a welcome and favourable development to the industry, noting that the tax relief will affect all stakeholders.

    The Chief Finance Officer, LASACO Assurance Plc, Akinwale Sofile affirmed that the new Finance Bill is a good thing to happen to the country especially, the insurance industry.

    He said Section 16 in the former Income Tax Act is not favourable to the industry which ‘’we have been fighting since 2007 and which has been taken care of in the new Finance Bill’’.

    He, however, stated that the 7.5 per cent Value Added tax (VAT) is another aspect of the new Finance Bill that has become contentious for insurers.

    He said: “The VAT raised to 7.5 percent from five percent in the new Bill will affect our business. The first reason is because we pay VAT on behalf of brokers. Premium is not vatable but the commission earned by brokers is vatable. Unfortunately, because the brokers deduct their commission before paying the insurance companies going by regulation, understanding and market agreement between the insurers and the brokers, the companies agreed to pay the VAT on their behalf.

    “So it means we will be paying 7.5 per cent for brokers and this is the only aspect of the Bill that will increase our overhead. But for tax, it is something that has lightened our burden as far as Company Income Tax is concerned. We will now pay tax as other companies are being taxed.”

    The Executive Secretary, Nigerian Council of Registered Insurance Brokers, Fatai Adegbenro, said the tax review is a good development for insurance industry as the amounts incurred on the unnecessary taxes would now be injected into the operations of the insurance companies.

    He said with the new Bill, Life and non-life businesses would no longer be liable to special minimum tax provision and all wholly, exclusively, reasonably and necessarily incurred expenses will be tax deductible.

    ”Furthermore, “taxable investment income” would be limited to “income derived from the investment of shareholders’ funds”. This seeks to clarify taxable income and limits it to income accruing to the insurance company as against income accruing to the insurance fund. Nonetheless, the Bill, when passed into law, would be a game- changer in ensuring the fair taxation of insurance companies.

  • What you need to know about insurance contracts

    Bola Adegbaju

     

    IT is worrisome that many Nigerians don’t believe in insurance!

    Even with evidence of settled claims, they remain adamant. The question is what and who could be responsible for this?

    Their attitude may be the result of previous records and past experiences, either as a result of the incapability of the insurance company or ignorance of the policyholder/insured.

    While some are not interested in these insurance contracts, others who are interested do not even know or understand the contract they have signed.

    If you as an individual or business owner enters into an insurance contract, you must create time to understand what the policy is all about. This may be achieved by employing the services of licenced brokers/consultants/agents, or by personally read through the policy documents (terms & conditions).

    The latter option looks unrealistic for a lot of people but the important thing is for you to understand your role/right and the underwriter’s role/right in the contract.

    Isn’t it so unfortunate that most people do this after the deed has been done? I mean when there is already a loss. My take is that you need to see yourself as someone investing in a business which must yield a profitable result.

    Therefore, when you pay your premium, be patient to understand the details of the insurance contract you are entering into. Try to ask as many questions as you can.

    Do not sign a contract that is ‘secretive’.

    Another surprising truth is that some people believe insurance is an opportunity to make extra money or profit, which is totally against the principle of insurance. You cannot make profit in insurance. The best you can get, which is the main purpose of insurance, is to get back to the position which you were in before you experienced a loss. Anything outside that will never work.

    Below are some key information you need to have and understand in any class of insurance:

    1. Name of the Insurance Company: The name of the insurance company must be stated as heading on any document given to you.
    2. Type/class of policy: This indicates whether the policy is motor or fire insurance.
    3. Policy No.: It is your identification number and evidence that you have an insurance contract with the insurance company.
    4. Insured Address: Your contact address is important as well – so it must be stated on the policy document.
    5. The Insured: The insured is the policy holder which is you in this case. Ensure your name is stated as the owner of the policy.
    6. Scope of cover: Under this section, the insurance company must state the extent of cover provided. For instance, in motor insurance it can be third party only or comprehensive.
    7. Period of cover: This is the period for which insurance is provided e.g from 11/11/1998 to 10/11/1999. The maximum and most common period is one year. It can, however, be less than a year.
    8. Excess: Policy excess is the percentage or part of the loss which is borne by the policyholder which is usually stated in the non-life policy document. This does not apply to life policies and it varies from one policy or underwriter to the other. It can be negotiated based on your claims history and relationship with the insurance company.
    9. Sum Insured: This is the insured value of the property you want to insure. In some policies like Goods-in-Transit or liability insurance, it will be replaced with limit any one loss, aggregate limit etc.

    10.Policy Terms & Conditions: Here, you have the dos and don’ts stated. Amongst many others, you will see:

    • Warranties
    • Clauses
    • Policy exclusions
    • General exceptions

    Having understood the above terms in your policy document which is the contract of insurance, you must take precautions to ensure that:

    1. There is no breach of contract from your end i.e. you do not default.
    2. You notify the insurance company immediately there is a change in the risk that is insured.
    3. Do everything within your means to protect your property.
    4. You notify the insurance company immediately there is a loss.
    5. You do not intend to make profit by inflating prices in your estimate of repairs.

     

    By: Bola Adegbaju

    Instagram: @bolaadegbaju

    Twitter: @bolaadegbaju

  • Florida insurers facing ratings downgrades

    THE rating agency responsible for assigning financial stability ratings (FSR) to more than 40 Florida domestic insurers has warned that several carriers will receive downgrades due to deteriorating conditions in the state’s property insurance market, and more than a dozen more could be downgraded in the next few months.

    In a letter dated December 20, 2019 that was forwarded to Insurance Journal, Demotech President Joe Petrelli warned Barry Gilway, head of state-backed Citizens Property Insurance Corp., that Gilway’s hoped-for shrinking of citizens’ policy count might be “more difficult than expected as Demotech would be downgrading several carriers in January, February and March 2020.”

    Petrelli confirmed the authenticity of the letter in an e-mail to Insurance Journal this week and said the names of the insurers facing downgrades could not be disclosed, but that Demotech expects two to four downgrades by the end of January and then another four to six by the end of March.

    Petrelli said current market forces as well as carrier specific financial metrics have created a hazardous financial environment for many insurers. Though he acknowledged reforms passed in Florida to curb abuse of assignment of benefits agreements could provide some relief, Petrelli said the impact of the legislation passed in the 2019 session would be “long-term.”

    “Having provided these carriers with ample time to implement revised business models, secure capital infusions, implement rate revisions, re-underwrite established books of business and utilize other enterprise risk management activities, it is apparent that few have returned to profitability,” Petrelli wrote.

    He noted that as many as 18 out of the 40 plus companies Demotech reviews “will not produce a level of pre-tax profitability consistent with sustaining an FSR at the A level nor position themselves to do so in the near term.”

    Petrelli cited several factors that have affected the financial stability of carriers in the Florida market over recent years, including insurer investor capital appears to be exiting rather than entering Florida.

    A “burdensome” level of holding company debt and the interest of that debt that was infused to support growth, permit the strengthening of loss and loss adjustment expense reserves without a diminution of surplus, or otherwise support the implementation of business models, given the operating results, e.g. losses, of carriers that had to address the natural disasters of 2016 through 2019.

    The cumulative impact of carrier acceptance of rate revisions at a percentage change that eliminates the time, effort and expense for a hearing and decision, i.e., less than 15%, has had a cumulative impact over the past several years. Rates are below where they should be because companies have taken smaller than needed rate increase, according to Demotech.

    Judicial decisions that Demotech says have revised the claim settlement landscape.

    The revised rules of engagement for claims settlement, as set by the judiciary, have had an undue impact because the natural disasters of 2016, 2017, 2018, and the hail and tornadoes of 2019, have increased the number of claims that could be subject to the new rules of engagement.

    The letter was also forwarded to the Florida Office of Insurance Regulation, which confirmed its receipt. The regulator would not comment on the current state of the Florida insurance market but said “Florida is one of the most complex insurance markets in the world. OIR is closely and consistently monitoring the financial condition and operational results of the state’s domestic property insurers. As always, OIR engages in regulatory activities to protect consumers.”

    Gilway, who also confirmed receipt of the Demotech letter to Insurance Journal, said Citizens is a state-run insurer and has no regulatory authority over private insurers, though it pays close attention to the market.

    “We will continue to closely monitor market conditions and are ready to perform our residual duties if called upon to do so,” he said in a statement.

    The head of the actuarial firm that rates the Florida insurers described what he sees happening to place ratings in jeopardy.

    “The economics of the marketplace over the past several years have made it impossible for Demotech to sustain each of the Florida focused carriers that we review each quarter at a [FSR] of A, Exceptional,” he said.

    Petrelli said that after Demotech reviewed the third quarter 2019 financials of carriers, it requested year-end projections of operating results for nearly half of the 40-plus carriers it reviews and rates.