Insurance practitioners have asked the government to make insurance policy mandatory for its contractors. They also want it to be mandatory in the Ministries, Departments and Agencies’ (MDAs) budgets.
They said this would help in institutionalising insurance policies, and deepen the 2014 budget, which is key to achieving inclusive insurance that will impact the low-income group and catalyse complete growth in the economy.
This is contained in paper titled, ‘Role of insurance in the National Budget,’ presented to the Federal Government by the Chartered Insurance Institute of Nigeria (CIIN).
Drafted by the institute’s Consultant, Biodun Adedipe Associates Limited, the proposal stated that a vibrant and effective insurance industry would contribute to the growth of the economy by enhancing its financial intermediation, creating liquidity and mobilising savings.
The institute added that the industry can also improve living standards and enhance social stability, support policy formulation and implementation towards the achievement of national objectives, create jobs and foster investment and entrepreneurship by creating an environment that ensures greater certainty.
The institute said is was time for stakeholders to drive the sector, urging that the government should be the facilitator and regulator. He added that each stakeholder has a role to play in ensuring the transformation of the economy through a vibrant sector.
In a addition, the group recommended that the government should ensure sanity in the sector through regulation and enforcement of rules, while operators provide best practices and clients access insurance policies and pay the premiums according to the contract terms.
They said: “The government should commence the implementation modalities for “Objective 3” under the housing section in the Vision 20:2020 document, on the establishment of a mortgage and title insurance system that will mitigate credit risks.
“There is need to fast-track implementation of agricultural and micro insurance, as well as social security schemes. Since such insurance products may not be profitable to operators, the government might need to provide either supply side or demand side incentives. This is corroborated by the United Nations Conference on Trade and Development (UNCTAD), which advised that to provide insurance as a public good, the Federal Government should consider placing support mechanisms by acting as a sort of reinsurer; creating public awareness, providing favourable regulatory and enforcement mechanisms, and exploring alternative insurance schemes. This can be like community-based schemes for rural populations or bank account holders receiving insurance instead of interest to strengthen rural insurance or micro insurance towards financial inclusion and inclusive insurance.”
The experts said should the Federal Government implements its suggestion, it would to project continuity whenever a project suffers a loss during construction or execution. This, they argued, would catalyse the industry to drive inclusive growth.
They urged the Federal Government to amend Section 1 of the Companies and Income Tax Act (CITA) 2007 tax policy, which does not recognise micro insurance and takaful as main classes of insurance. Also, Section 3 does not recognise agricultural insurance.
“The Federal Government should effectively enforce the compulsory insurance of imports and ensure that the Nigeria Customs Service is statutorily empowered to conduct surveillance at the ports to validate genuine insurance documents, adopt and use insurance bonds for government contracts, ensure insurance business is restricted to the practitioners who have the requisite skills for effective risk management, rather than allow other professionals to dabble into the field.
“Governments and their agencies should pay premium on time in order for the economy to reap the full benefits of compulsory life insurance for paid employees and self-employed individuals while the National Insurance Commission (NAICOM) should review its licensing requirements for micro insurance.”
The practitioners pointed out that most times, the reference to the national budget is to the numbers – giving attention to how much is allocated to MDAs’ programmes and projects rather than being treated as a policy document that dictates the specific actions that the government intends to take to achieve its objectives as stated in the budget.
The practitioners also noted that there are allocations in the N4.642 trillion 2014 Appropriation Bill for premiums, but that these would not be paid until the funds were released after approval by the National Assembly and signing into law by the President.
“The question is, how much of this provision will accrue to Nigerian insurance companies? The excuse often made is lack of capacity, which the local insurance companies can never build unless they enjoy deliberate government patronage,” they added.
