The Nation Newspaper

Tag: Insurers

  • Insurers record high cash flow, says NAICOM

    Commissioner for Insurance, National Insurance Comission (NAICOM), Mr. Fola Daniel has revealed that the on-going implementation of the ‘No premium, no cover’ law which started on January 1, this year has significantly improved the cash flow of insurance institutions in the country.

    The NAICOM boss gave this hint at thesensitisation workshop for stakeholders, in new Karu, Nasarawa State. A channel he said is expected to raise public awareness on the key initiatives of the commission aimed at further opening up the market, and by extension increasing the sector’s contributions to the Gross Domestic Product (GDP) of the nation.

    He said it is expected that this positive turn of events would impact on the capacity of operators to settle claims promptly, thus removing a major sore point in the relationship of insurance consumers and service providers.

    Daniel stressed that the commission had to implement the law on ‘No premium, no cover’ law in order to put a stop to the vexed issue of delayed or non-payment of insurance premium by the insured.

    Section 50 (1) of the Insurance Act 2003 stipulates that the receipt of an insurance premium shall be a condition precedent to a valid contract of insurance and there shall be no cover in respect of an insurance risk unless the premium is paid in advance.

    He explained that invariably, it presupposes that no insurance cover shall be granted by any insurance company without having received the premium.

    Daniel said the insurance sector has great potentials for massive growth.

    “You will agree with me that the population and size of the country, if adequately harnessed, give an added advantage to the insurance industry to further develop its market,” he said.

    He noted that the various initiatives put in place by the Commission in recent times were all geared towards turning round the fortunes of the sector.

    He said to ensure adequate understanding and build capacity among the stakeholders, NAICOM has resolved to conduct a series of workshops and seminars for stakeholders adding that the sensitisation programme in Nasarawa was among the workshops and seminars earmarked to inform and educate stakeholders towards the attainment of mutually beneficial relationship between organisations.

    “The insurance industry has witnessed tremendous changes in recent times owing to the new reforms embarked upon by NAICOM.

    “These reforms include the introduction of Risk Based Supervision, migration to International Financial Reporting Standard (IFRS) from the Nigerian Generally Accepted Accounting Principles (NGAAP); Market Conduct Reforms, Claims Settlement Reforms, Financial Inclusion and others, all geared towards developing the industry and improving the general perception about insurance.”

    According to him, these reforms were in line with government’s Vision 20:2020 of deepening insurance penetration to become the insurance industry of choice among the emerging markets in terms of capacity, safety, transparency and efficiency.

  • Fed Govt, insurers meeting over premium deadlocked

    A meeting convened by the Head of Service (HoS) and insurers over Federal Government’s unpaid premiums for its workers’ Group Life has ended in a deadlock as parties were not able to agree on a common ground, The Naton has learnt.

    According to sources, a meeting was held last week in Abuja by insurance operators with the HoS with how outstanding premiums owed in 2011 and 2012 will be paid as top on the agenda of the meeting.

    At the meeting, it was learnt that the HoS proposed different rates on 2013 Group Life for different Ministries, Departments and Agencies (MDAs), a proposal which was vehemently turned down by the insurers.

    According to the source, based on the disagreement of rates, conclusion could not be reached for the insurance of government workers for 2013.

    The source said insurers have decided to clos ranks, speak with one voice and resist any attempt by the government to pile up premium debt, adding that the ‘No premium, no cover’ policy enforced by the National Insurance Commission (NAICOM) has set the pace for a new era in the industry.

    A source in NAICOM however said the commission will not compromise its position on ‘No premium, no cover’ policy adding that any underwriter who grants insurance on credit risks suspension of its license as stipulated in the law.

    Section 9(3) The Pension Reform Act 2004 states that employers shall maintain life insurance policy in favour of their employees for “a minimum of three times the annual total emolument of the employee.”

  • Insurers blame FIRS for excessive taxation

    Insurance operators have cried out over excessive taxation they are being forced to pay by the Federal Inland Revenue Services (FIRS), lamenting that the development was crippling the insurance business.

    The Nigeria Insurance Association (NIA) said FIRS imposes heavy taxes on premiums paid by the public, forgetting that when the unforseen happens, the insurance companies would pay claims.

    Spokesman of the association, Mr Davies Iyasere told The Nation that officials of the FIRS are ignorant of how insurance business operates.

    “Our claims are that they do not understand fully how insurance works. The tax they are charging insurance operators is (too) heavy. They tax all premiums we receive not minding the fact that we have to pay claim.

    “We have to invest the money paid as premium so that we can pay claims. Sometimes the claim occurs immediately or in the future. We have to make valuation and projections for 10 years and this is why we are saying they cannot tax on every premium collected. They are looking at premium and not claim and we believe this is not fair on insurers. We have reached the Inland Revenue and the channel of communication has been opened,” he added.

    To find solution to the problem, he said the NIA and the National Insurance Commission (NAICOM), the supervisory authority, are engaging the FIRS, adding that the association has also been speaking with the Consumer Protection Unit (CPU).

    He lamented that no progress has been made on finding solution to the problem.

     

  • West African insurers, banks attracted to East Africa

    Oil and gas finds in East Africa have become very attractive to West African financial services firms with some firms starting up divisions there.

    With this move, West Africa’s financial services firms want to capitalise in insuring and financing oil and gas projects in East Africa.

    South Africa’s banks and insurance companies had also identified this opportunity a little more than three years back.

    Insurance firms Ghana Re and Nigeria’s Continental Re have launched new wholly-owned firms in Nairobi in the past 12 months, paying more attention to the oil and gas sectors.

    Old Mutual Kenya, a wholly-owned subsidiary of the London and JSE-listed life insurer Old Mutual, has introduced its products in Kenya. It is not clear if it will expand to other parts of East Africa.

    GTBank Plc, two weeks ago, said it was acquiring a 70 percent shareholding in Kenya’s Fina Bank with the aim of providing finance in the oil and gas sectors.

    Another West African lender, Ecobank, has seen its Kenyan unit, Ecobank Kenya, say it will start an investment bank in the next two months to lend in these sectors.

    In 2008, South Africa’s Standard Bank acquired Kenya’s CfC bank with the aim of exploiting imminent opportunities in the country.

    In 2011, FNB, a wholly-owned subsidiary of FirstRand, South Africa’s third biggest bank, set up its first branch in Dar Es-Salaam, the capital of Tanzania.

    The bank, which already has a presence in Kenya, has plans to expand to Uganda and Rwanda.

    It is believed that Kenya and Uganda have about 2.5 billion barrels in oil resources while Tanzania has unprocessed gas resources amounting to 33-trillion cubic feet.

    East Africa’s financial services firms have been slow to take up these opportunities because they are not well capitalised and lack appropriate skills.

     

  • Rate cutting: Insurers accept N3000 on third party motor insurance

    Rate cutting: Insurers accept N3000 on third party motor insurance

    Insurers charge as low as N3000 premium for third party motor insurance as against a flat premium of N5000, investigations by The Nation have revealed.

    This is despite measures by the National Insurance Commission, to stem rate cutting in the industry.

    Third Party Motor Insurance is mandatory for vehicle owners and is fixed at a flat premium of N5000.

    Sources said rate cutting has eaten deep among insurers and brokers and has continued to affect the industry negatively.

    One of the sources, an insurer, alleged that insurers are engrossed in bad competition and are accepting rates that are not commensurate with claims that may occur in future.

    “It is saddening that some insurers are accepting as low as N3000 premium on third party motor insurance that is fixed at N5000,” he lamented.

    He added that the same rate cut applies to other types of insurance cover, stressing insurers are killing the industry’s growth by their unprofessional act.

    “This is part of the reasons the industry has not been able to achieve the set premium target of N1 trillion,” he added.

    A broker, who admitted the problem has become a menace that may not leave the industry soon, blamed insurers.

    She said insurers are the ones promoting rate cutting because they accept these terrible rates from the brokers.

    “If insurance companies ensure they do not go below a particular premium rate, the brokers too will be forced to accept the right rates from the market.

    “They are accepting rates contrary to what their reinsurer ask them to collect. I believe things can be better if insurance companies can be ethical, professional and stick to a fixed rate or not cut it below what they can use to pay claim,” she said.

    Two weeks ago, the Nigerian Insurers Association (NIA) set up a rating committee to determine minimum rates for some risks in the industry. The move was to stem rate cutting and establish uniform standard in the pricing of risks in the industry.

    Managing Director, Sovereign Trust Insurance Plc and member of NIA council, Mr Wale Onaolapo, who heads the committee, is to determine the minimum rates on motor insurance, group life, industrial all risk, money and fidelity guarantee for banks.

    Before now, the association had advocated the enforcement of minimum rates in the market because of the inability of insurance companies to charge economic rates in business underwriting, which weakened their financial capability to meet obligations to stakeholders in the market.

     

  • Insurers fret over life annuity hijack

    Insurance operators are becoming more agitated over fears that Pension Fund Operators (PFOs) will grab another major chunk of their business – the life annuity business.

    To avert this, they have begun lobbying at the National Assembly on the proposed Pension Reform Act of 2013, a replacement for the Pension Reform Act 2004, which, they believe, will determine their fate on the issue of having to leave life annuity funds with PFAs.

    At a forum in Lagos, insurers expressed fears as they deliberated on how to tackle the problem.

    On their mind is that another major cut is rearing its head in their business going by previous businesses that have been taken over from them by other sectors.

    In 1999, they lost health insurance; in 2004, they lost pension and lost the control of Workmen’s Compensation in 2010.

    Going by this, the industry has lost three critical classes of insurance business in 10 years. The PFAs have become a major threat to them.

    They alleged that some PFAs in their desperation to continue to manage Retirement Savings Account (RSA) holders’ pension savings run down life annuity products and their providers, an allegation the PFOs have debunked.

    Section 4 of the Pension Reform Act provides that upon retirement an employee is entitled to two options, you either take the programme withdrawal, which allows your Pension Fund Administrator to continue to manage your fund until you exit the system or you take an annuity.

    Life annuity, as prescribed by the pension law, is a contract between the annuitant and a life insurer for the payment of agreed amounts of money at agreed intervals to the annuitant.

    The annuitant transfers part or all of the balance in his RSA to the life insurer as consideration for him to receive given amounts over a given period of time at agreed intervals.

    Programme Withdrawal pays pension over an expected life span and is sold by PFOs

    While annuity pays pension for life and can be purchased from a life insurance company licensed by the National Insurance Commission (NAICOM), with monthly or quarterly payments making it a regular income.

    It is noteworthy that whereas the PFOs have started programmed withdrawal since 2005, the insurance companies only started annuity programme in 2010.

    Also, where a retiree chooses life annuity, he negotiates with the life insurer based on his Retirement Savings Account balance projected to the date of retirement and gets an Annuity Provisional Agreement from the insurer, which he submits to his Pension Fund Administration (PFA).

    Within seven days of receiving retiree’s application, the PFA seeks approval from PenCom to transfer the agreed premium to the insurer, attaching a copy of the provisional agreement.  PenCom is required to forward copies of approval to PFA/PFC and NAICOM and within seven days of receiving approval, PFA must instruct PFC to a issue cheque for the premium in favour of the insurance company.

    Upon receiving the cheque from PFC, the insurer must within seven days notify the proposed annuitant of such cheque and the latter and his insurer jointly must execute an annuity contract within 21 days from the date of receiving payment. The insurer then forwards schedule of policies written to NAICOM not later than 30 days of the execution.

    The balance in his RSA having been transferred to the life assurer, the retirees gets monthly annuity/pension from the insurance company.

    Most importantly, life annuity payment under contributory pension is guaranteed for a minimum of 10 years in case of death, but the retiree is free to go for a higher guaranteed period with monthly annuity not less than half of his monthly emoluments at retirement.

    In 2006, the NAICOM and the National Pension Commission (PenCom) collaborated on regulation of Annuity under Section 4.1 (B) of the PRA 2004 for giving effect to the provisions of the Pension Reform Act (PRA) 2004 as it relates to Life Annuity

    It states: “A holder of retirement savings upon retirement shall utilise the balance standing to the credit of his retirement savings account for annuity for life,, purchased from a life insurance company licensed by NAICOM with monthly or quarterly payments.”

    Former President of the Chartered Insurance Institute of Nigeria (CIIN), Mr Sunny Adeda, appealed to insurance practitioners out of the fear of losing out on the pension reform act to take marketing of annuity to the people very seriously.

    Adeda made the call at a conference in Lagos.

    He said insurance companies are not marketing annuity as they ought to and the pension operators are taking advantage of the fact that they know when the retirees are retiring and offer them better terms before insurers even know they have retired.

    “There are few companies that are taking the annuity business seriously and there is the need for an interrvention. A lot of people do not know the difference between programme withdrawal and annuity products.

    Adeda noted that a few companies are making money from the annuity scheme, but there’s the need for others to also take a advantage of it.

    “What we need to do is to intensively mull a lot of campaigns. As it is, we are not doing anything. And this is why PFAs can say there’s no need for the money to go to the insurance company. They want the money to remain with them. We need to rise as an industry and address this problem.

    “Today, they are processing the pension reform act for amendment and we need to put ourselves together to lobby because if we don’t make a concerted deliberate effort, we will lose the business. And when we lose it, we start crying. That was how we lost the Workmen Compensation. It left us before we started crying,” he said.

    We must have people who are looking at this issue daily so that as the process is going, its being monitored to ensure that our interest is not jeopardised.

    Director-General, Nigeria Insurers Association (NIA), Mr Thomas Olorunda, assured his colleagues that the Pension Reform Act 2004 is being amended.

    He said: “We got wind of it and we have made our submission and we are following up on it.

    “One of the things we address in our submission is the issue of having to leave life annuity funds with custodians.

    “In our submission, we made it very clear that life annuity is different from programme withdrawal because how you deal with them, how you manage the funds relating to them are practically different,” he said.

    He noted that insurers must have influence and flexibility to manage life annuity funds without necessarily having to warehouse it with the pension custodians.

    The DG further said NIA has designed a publicity programme for annuity in English and Pidgin, which is coming on the radio in the six geo-political region of the country before the end of the month.

    He noted that the programme will run for at least three months and the association believes it will educate the people on why they should choose annuity.

    He, however, called on underwriters and brokers to join in the sensitisation.

    “I enjoin the Nigeria Council of Registered Insurers Brokers (NCRIB), who are buoyant to do something in publicity because we need to pump it into the mind of the people.”

  • MfBs, insurers to explore N60b micro-insurance potential

    Ahead of the release of guidelines for micro-insurance operation, micro-finance banks (MfBs) and insurance companies are contemplating how to explore the potential of the subsector said to be worth N60 billion.

    The National Insurance Commission (NAICOM) is expected to release the frameworks for the implementation of micro insurance operation in a few weeks.

    Through micro insurance, MfBs would be able to sell insurance products to those at the bottom of the pyramid. The initiative is expected to bring in more revenue and expand the markets of the insurance firms and the banks for growth.

    Insurance Commissioner, Mr Fola Daniel, said plans were underway to release the micro insurance guidelines before the end of next month to enable operators benefit from scheme.

    He said the guidelines would enable insurance operators take micro insurance policy to the grassroots where microfinance banks are major players.

    He said when the micro insurance guidelines are out soon, poor Nigerians can buy insurance at a cheaper rate. He added that the idea would ensure insurance penetration, especially in the rural areas where underwriting firms have done little to capture.

    Chairman, National Association of Microfinance Banks (NAMBs), Southwest region, Mr Olufemi Babajide, said the association is waiting for the guidelines to enable its members key into the scheme.

    Babajide said when the guidelines are out, the banks would be able to help in selling insurance products to its customers.

    He said the banks were not new to insurance, adding that they have been rendering insurance advisory services to people. He advised MfBs to tap into the opportunities offered by the micro insurance scheme.

    Babajide urged insurance companies to come up with simplified products and services that will be affordable to microfinance clients, taken into consideration the nature of the market they want to play. He said when the guidelines are able to solve technical issues relating to micro insurance products, there would not be problems in selling them.

    He said: “The issue of micro insurance is a good one. It is a positive development, and no doubt, we will embrace it with our two hands. The idea of micro insurance will help in safeguarding the investments in microfinance banks, especially in lending. For instance, we always give loans to poor people, and if their businesses suffer mishap, it will affect their repayment flow, hence making low recovery difficult. But with micro insurance, we are rest assured that our money is safe because if our customers suffer fire outbreak, theft among other risks, the underwriting firm is there to compensate them, and as a result they can repay their loans.”

    Managing Director, LAPO Microfinance Bank, Mr Godwin Ehigiamusoe, said the poor were more vulnerable to risks, adding that the impacts on them are always severe. This, he said, means that they need insurance more than the wealthy people.

    “The poor needs insurance services than even the rich people. While a financially comfortable person can access medical care, the poor cannot and in the long run, may die from preventable diseases. Based on this, the micro insurance is needed for the poor, which form the basis of micro banking activities,” he added.

     

     

     

     

     

  • Insurers seek compliance certificate to enforce MDRI

    Stakeholders in the industry have called on the National Insurance Commission (NAICOM) to introduce compliance certificate in its review of the Market Development and Restructuring Initiative (MDRI) to ensure full enforcement of compulsory insurance.

    They said the introduction of the certificate would make the public bidding for government’s businesses comply with the law on compulsory insurance.

    President Chartered Insurance Institute of Nigeria (CIIN) Dr. Wole Adetimehin, said the MDRI needs law enforcement to thrive. He said the presentation of compliance certificates by individuals bidding for government’s businesses, have helped in adherence to group life policy of the Pension Reform Act 2004.

    He noted that for the public to comply with the compulsory insurance, NAICOM should ensure there is a law.

    President, Nigerian Council of Registered Insurance Brokers (NCRIB), Mrs Laide Osijo, called for collaboration with the government in the enforcement of the compulsory insurances in the MDRI.

    She noted that though NAICOM has helped make some insurance compulsory, effort should be intensified on the enforcement of the laws.

    She said: “I think the government has a lot to do. Some of the compulsory insurance are not enforced. NAICOM has tried in supporting the industry, by making some businesses to be compulsory under the MDRI. But the implementation and enforcement lie with the government at state and federal levels.”

    The Commissioner for Insurance, Fola Daniel, has said NAICOM will review the guidelines of the MDRI to align it, for better performance. He said the review is one of the commission’s programmes for the year

    He however declined to give the time table for the review and release of the guidelines.

     

  • Unhealthy competition worries insurers

    Stakeholders are worried that unhealthy competition in the industry may get worse this year, especially with the introduction of the ‘no premium no cover’ policy by the National Insurance Commission (NAICOM).

    Chairman, Independent Shareholders Association of Nigeria (ISAN), Sir Sunny Nwosu, said the policy would create a ‘rat race’ among firms.

    He said insurance companies would find a way to retain their customers, whether premiums are paid immediately.

    “What is most likely going to happen is that, if one insurance company does not take the client and finds a way to do business with them, another company will do it,” saying the major problem that confronted insurance firms in the past had been the issue of undercutting each other and this is going to continue.

    ”There is no way NAICOM will be able to catch all those destroying the sector because they will do it in such a way that there will be no evidence to show,” he said.

    The Managing Director, Riskguard-Africa Nigeria Limited Mr Yemi Soladoye, said unless insurance operators adopt cost effective and non-volatile distribution channels, unhealthy competition would get worse.

    He said most problems in the industry are caused by operators’ refusal to adopt retail strategy as a business policy, adding that one way to get out of the problem is for firms to adopt retail marketing.

    He said operators tackle the unhealthy competition because they have boxed themselves into a narrow distribution outlet – the brokering market – adding that in such a situation, price becomes the only strategy.

    He noted that clients are asking for reduced price because they are yet to see any strategy from the operators, saying insurance companies concentrate on premium growth instead of market expansion.

    “The future and the solidity of the operators can only come from market expansion and not competing for the few available channels.

    “Unhealthy competition will get worse, until they look for better, cost effective and non-volatile distribution channels,” he said.

    According to the Riskguard chief, retail marketing strategies means that insurance firms can identify organisations they can partner with to reach the target market.

    “Bankassurance, which is collaborating with banks, is a retail channel. It also means engaging in alliances with organisations, such as Shoprite, Megaplaza and others, which are working with cooperative societies.

    He said though the channels are there, the market will not expand except they are adopted.

    ”There’s no alternative; it is compulsory, for they are feeling the bite of the narrow distribution outlet that they are using at the moment.

    “Most of the problems they face, which include high cost of doing business, premium reduction, unhealthy competition, are manifestations of the fact that they are using narrow distribution method. If you have an alternative, you would be able to do business on your own terms, but when you do not have alternatives, you have to achieve what ever any body tells you. That is the problem with the operators for they are not creating alternative distribution outlets for themselves,” he added.

    He urged insurers to return to the drawing board to examine their operations, adding that each company needs to sit and draw strategy on how to develop its business and adopt retail marketing strategy and that when this is done, issues of unhealthy competition, premium reduction and others will stop.

     

  • Insurers advise govt on disaster management

    Insurers have asked the government to mitigate losses arising from human and natural disasters in the country.

    Managing Director, Royal Exchange Prudential Life, Mr Wale Banmore, said one way to do this is for the government to ensure that Nigerians embrace appropriate insurance.

    Banmore said it was wrong for the government to raise money to compensate victims of disasters while insurance companies, whose responsibilities are to indemnify people would have done that without taking a kobo from the government.

    He said the government should ensure that everyone are insured.

    He said the government should help its citizens to ensure that insurance firms pay appropriate claims to the citizens when disasters occur and not compensate those who suffer losses.

    Banmore said despite the damages that the Hurricane Sandy brought upon Americans, the government did not use public funds to compensate victims because the insurance companies are there to do that. He said if government stopped this practice all parties would benefit.

    Also, Chief Executive Officer, Custodian and Allied Insurance Plc, Mr Wole Oshin, said to mitigate losses arising from disasters, the government should put in place insurance schemes and other processes that would protect the citizens against such disasters.

    He argued that nobody expected crisis human and natural witnessed in the country in recent times.

    He said such crises have started happening, and that the government should put in place structures and processes to mitigate the risks.

    He explained that the government should not continue to fund the disasters caused by climate change or man.

    He said: “Some years ago, we never thought some of the disasters we are seeing in Nigeria could happen. We do not know when it would happen next and when it happens,” adding:’ “Will we go through this process again of raising funds, donating materials and so on? “