Globally, the insurance industry thrives on a tripod – underwriters, brokers and loss adjusters. But in Nigeria, the reverse is the case. The Managing Director of Corporate Loss Adjusters Limited, Chief Lebi Omobayowa, who is also the President of the Institute of Loss Adjusters of Nigeria (ILAN), speaks with UYOTTA ESHIET on a wide range of issues affecting the industry.
What is Insurance Loss Adjusting all about? What is its relevance to the industry and the economy at large?
Basically, there are three major arms in the insurance industry, the underwriters, the brokers and the loss adjusters. The business is sourced by the broker and delivered to the underwriter as a business to accept the risk if it is acceptable and issue the policy, that is the insurance contract. If there is a claim, the underwriter calls on the adjuster who is a professional in the area to carry out necessary investigations, verifications and claims adjustment. He advises finally on the liability attached to the policy.
How important is loss adjusting in the industry?
Insurance is like a triangle or tripod, it stands on three legs; the underwriter is a leg, the broker is the second leg and the adjuster is the third leg. The three legs must be present for the tripod to stand. If the adjuster is not there, the insurance industry is not complete. They add value by assessing claims professionally. They stand between the insured and the insurer as an independent arbiter. They hold the scale of justice with equal pulse between the insured and the insurer; interpret the policy conditions and terms stated therein and advise if claims are admissible or not. If admissible, what is the quantum of claims to the insured? We also advise on risk improvement measures.
What is the importance of adjusters to the economy?
If a claim is not properly adjusted, excess could be paid to the claimant or the quantum could be paid to someone who is not supposed to be paid. These are funds that are supposed to be channelled to some other areas that can help the economy. The adjuster can also help the nation to reduce losses associated with perils such as fire. If things are done properly in the country and professional advice is sought and taken based on the advice of adjusters, losses and other destruction could be eliminated and the huge amount usually appropriated for replacement or repairs of such damaged assets could be channelled to other areas for national development. If certain things that are supposed to be done are left undone, it can result to fire and fire is national waste.
What are the challenges of loss adjusting?
Despite the local content concept and laws, we are aware that some of the underwriters still allow foreign loss adjusters to come into Nigeria, do the business without the knowledge of the local loss adjusters and without taking the local loss adjusters along. This is against the law of local contempt. It is advisable that underwriters in the country should heed the law by ensuring that whenever there is a big claim that will warrant the presence of an international or oversea loss adjuster as may be demanded by the re-insurers, they should let the re-insurers know that there is a law in Nigeria that says if any foreign loss adjuster is to be invited, they must work with a resident loss adjuster. The law must be allowed to apply as it is done in other countries. This is a message to the insurance underwriters in the country that some claims managers in insurance companies do not care whether the local adjusters are involved or not. By this action they are killing the economy slowly. They are not growing the economy. They are not growing technology. They are not growing professionalism and are not allowing the local adjusters to acquire international exposure and experience that the local content is seeking to establish. All other countries do it and they are making it.
Doesn’t the National Insurance Commission (NAICOM) have authority over the issue?
NAICOM has authority over insurance companies but is it not only when NAICOM is aware that they can take corrective action aimed at correcting the situation? When a claim occurs and overseas adjusters come in, NAICOM will not know and the invited adjuster would have finished his assignment and run back to his country only to be paid there through capital flight because they will be paid in foreign currency. If we do the right things and Managing Directors of insurance companies have control over their claims managers, the right thing should be done to make sure that if there is the need at all for a loss adjuster to come from abroad in compliance with the directive of their re-insurers, the underwriting companies, through the claims managers should let them know that in as much as they are not objecting to the coming of foreign loss adjusters, there is an existing law in Nigeria, which says if a foreign loss adjuster comes here, they must work with a local adjuster so that the local adjuster can get his share of the professional fees and also gain international exposure and experience so that eventually Nigeria will grow like other countries.
Is there no mechanism within the Institute of Loss Adjusting of Nigeria (ILAN) for monitoring the situation and reporting to NAICOM?
If a claim occurs and a local loss adjuster is not called upon by the underwriting company, he may not know when or who has been appointed. There are certain claims that may be handled internally by insurance companies. So, it is not all claims that are known by ILAN members. If a loss occurs and the insurance company and the re-insurers agree to appoint an international loss adjuster, it is the underwriter here in Nigeria that should tell the re-insurer that according to our local laws, the invited foreign loss adjuster must work with our local loss adjuster. It is our own people here that must tell both the re-insurer and the invited loss adjuster that there is a law which they must obey.
ILAN is trying to set up a mechanism whereby if any foreign loss adjuster comes into Nigeria to do business without respecting the law of the country, when such a person is caught, he faces the law. It is necessary for them to know this though quite a number of them are aware, but because our local underwriters usually don’t draw their attention to it.
But the foreign loss adjusters cannot just come in on their own without being invited
The underwriter will appoint an adjuster and in complex cases, the re-insurer may want an international loss adjuster to also be involved, working along with the local adjusters. Our own underwriters here are those that are suppose to tell the adjusters who are appointed through the re-insurer that you cannot work alone in Nigeria because the law does not allow that; you must work with local adjusters probably an Associate, presenting to them the list of registered local adjusters for them to select from if they do not have one already. Our websites are there and our individual members also the websites where the foreign adjusters can interact with, interview and select whoever they chose as their partner here.
To save the industry from collapse, NAICOM introduced the ‘No Premium, No Cover’ at the beginning of this year. Why can’t the regulator also ensure that loss adjusting is not driven into extinction?
NAICOM should also reflect this in their regulations by publishing a reminder that no underwriting company should appoint or allow a foreign adjuster to handle a claim in Nigeria 100 per cent without the involvement of at least one local adjuster. NAICOM should put this into their regulation. They should protect the interest of the local adjusters. After all, we pay our normal charges to the government. The regulator should protect our interest. If NAICOM put this into their regulation, it will serve as a reminder to the insurers.
What are the other challenges facing loss adjusting in Nigeria?
There are about 45 functional registered local loss adjusting companies in Nigeria. It was more than that, but that is the number we have now. Others have closed due to poor remuneration. It is the only profession where the service provider has no authority to fix its own price but only rely on the consumer to do this. Some companies are dead because they did not have sufficient funds to run and to employ fresh graduates, train and to retain qualified loss adjusters. Over the years, ILAN, through her past successive governing Councils, has been asking the Nigeria Insurers Association (NIA) for an upward review of the old adjusters’ scale of fees which has been in use since 1992 without any review despite inflations and other economic vagaries that have rendered the scale palpably unrealistic, inefficient and potentially averse to the sustenance of professional adjusting practice in the country and the technical growth and development of the Nigerian insurance industry, and by extension, the national economy. Without sounding an alarmist, I am of the candid opinion that care must be taken to avoid a re-occurrence of capital flight if the local loss adjusting practice is forced into oblivion by frustration and thus give way to an influx of foreign adjusters who must be paid in foreign currencies that will automatically deplete our national foreign reserve.
We have complained variously in the past, but right now, I am adopting a new approach involving dialogue. We have agreed with NIA that there is need to have a review to encourage adjusters to earn a reasonable remuneration that can keep the loss adjusting profession in Nigeria in existence as it is in the developed or even developing economies. There is going to be a positive response this year. We are seeking audience with them and the new Council of NIA appear to be ready to go into discussion with us in the interest of the industry as a whole. The industry stands on three legs, the three legs must be there and function effectively before the industry itself can function effectively. NAICOM is not involved in fixing our fees but nothing is wrong if they get involved for the overall good of the industry.
Insurance penetration in other countries is said to thrive on enforcement. What is the situation in Nigeria?
Government has actually enforced a number of insurance products in the country, including the latest one on buildings under construction and the public buildings. I am happy that the government is trying to do that and I am equally happy that NAICOM is equally working hard on that. It now depends on insurance companies to go all out and ensure that it sanitises the insuring public to comply. They should also be in a position to monitor to ensure all buildings under construction, and all other public buildings are insured. Government should not be dependent on to do all things, we all must play our part. Insurance companies should set up machinery to find out buildings under construction without the appropriate insurance, buildings classified as public buildings fall within the purview of the law without appropriate insurance covers and make a report to the National Insurance Commission to take appropriate action.
After 70 years of existence, insurance still contributes less than 10 per cent to the Gross Domestic Product (GDP). Why is this so?
What is the level of education? Education is an important factor in this regard. The Industry is trying hard to create the necessary insurance awareness among Nigerians. Insurance awareness is still very low and too poor, that is why insurance cannot contribute much to the economy. In developed nations that understand the benefits of insurance, insurers are the owners of banks because the little insurance premiums become huge to do business with if there is proper management of it, if there is no undercutting of premium rates by unscrupulous underwriters and such other factors. It is where that sanity exists that you can see insurers owing banks, not banks owing insurance companies as is the case in Nigeria. We will get there if we do things straight, correctly and reduce drastically the level of corruption in the country.
Why are we still having issues with claims settlement?
Those complaining may be right and wrong. There are some genuine claims that underwriters may turn down for some reasons but as an adjuster, I have not witnessed a claim that I have adjusted that an underwriter will turn down. Some claims are handled in-house by some underwriters. The complaints could be from those ones handled in-house by the underwriters.
Following last year’s floods in some parts of the country, the Federal Government budgeted N17 billion as compensation, states and other bodies too have been announcing various amounts as compensation to the victims. As a risk and claims expert, is this proper ?
This is a misnomer. Even if these people were not aware of need for insurance, why given them the compensation in the first place, the government should have used that opportunity to tell them about insurance and warn them to take to insurance against future occurrence and get them to embrace it, but that was not done. At any rate our level of education in Nigeria is also militating against appreciation of insurance. Again, because of the high level of corruption, people are always looking for ways to line their pockets with the nation’s money.
Where do you see the NAICOM’s new policy on payment before insurance cover is granted taking the industry to this year?
It is a welcome development, a positive one too. Initially, it may be difficult. There is no good thing that starts from a smooth level. There is light at the end of the tunnel if we keep doing the right thing, if we do the business the way it is supposed to be done. In the next two to three years there will be very positive results through adherence to the law because the insuring public will become fully aware that you must pay premium before you can be granted insurance cover. Those that were used to getting cover on credit in the past, to them it will be difficult now but they will adjust.
