Tag: NAICOM

•Commission reviews capitalisation

The National Insurance Commission’s (NAICOM’s) plan to reach the grassroots through its microinsurance scheme seems to have hit the rock as investors within and outside the country do not show interest in purchasing the N350 million licence to register a microinsurance firm.

Findings revealed that only registered insurance firms are operating the business on the sideline.

This is coming five years after the NAICOM introduced the guideline on operations of microinsurance and pegged capital requirement for registering a the company at N350 million.

The Commission had wooed both local and international investors but the micro insurance guidelines seemed to have failed leading to the Commission to review the process. It plans to break down the N350 million capital requirement and allow staggered licence of unit, state, regional and national operations.

Like microfinance banks, which have the objective of deepening grassroots banking, NAICOM sought to register microinsurance firms to deepen grassroots insurance in the country. But the objective has not been achieved as investors did not show interest owing to capital issue.

A consultant to NAICOM on Market Development and Restructuring Initiative, Mr Yemi Soladoye, said the capital requirement by the Commission was not unattainable.

In an interview with The Nation, Soladoye said the plan by NAICOM to review the required capital for registering microinsurance in the country is commendable.

He said he had told the commissiom during the administration of former Commissioner for Insurance, Fola Daniel, that N350 million as capital requirement was too high.

He said: “Five years ago, I told them that N350 million cannot work because they won’t get people to register the business. I believe that if they find anybody to register with the current guideline, the person will not do the micro insurance business. Up until now, they did not get anybody to register except for registered insurance companies that only took a window.

“I told them to consider staggering the licence to unit, local government, state and national, give each a licence and different capital. For instance, I recommended N5 million capital for unit licence, which is the capital required for a broking firm, N20 million for operating a local government licence and N350 million for national licence.

“I am happy that the Commissioner, Mohammed Kari has finally in 2016 decided to give it a thought. I am optimistic that if he finally reviews the capitalisation, the objective of ensuring that insurance is downscaled to the grassroots will be achieved,” he added.

NAICOM’s spokesperson, Rasaaq Salami The Nation that  the commission has seen that microinsurance might not work with the  capitalisation.

He said the commissioner was trying to look at how to operate it successfully.

He explained that it would be different from the conventional insurance business for it reach the grassroots, adding that the commission would soon break down the capital requirement.

“We discovered that capital may be an issue and because of that they chickened out. But if we require a lower capital base, it will enable people operate in their locality.

“The commission is looking at staggered licence like unit, state, regional and national. This means that if you want to operate a unit office, you will not be required to register with the same amount like someone who wants to operate at a national level.

“This is the direction of the commission under the present commissioner. We believe by doing it this way, it will the microinsurance initiative will now work and more people will be interested in having the licence,” he said.

Two months after the expiration of the ultimatum issued to the 59 insurance firms in the country to clear all backlog of outstanding claims, the industry regulator, the National Insurance Commission (NAICOM), is yet to make public the level of compliance with the directive. Enquiries by The Nation at the NAICOM office met a brick wall as its officials, for over one month, declined to make any comment on the issue.

Spokesperson for the regulator, Rasaaq Salami failed to respond to questions raised on the issue. Salami, who had earlier promised to respond to this reporter’s email never did as at the time of going to press.

NAICOM, acting on the Insurance Act 2003, had issued a September 30 deadline to operators in the industry in default to pay up claims to the insuring public, a situation that has made the general public perceive the sector in bad light.

In NAICOM’s circular which shows an admission of non-settlement of claims as a major problem in the industry, Kari stated: “You would recall that the Commission collated claims details from all insurance companies and complains on delayed and unsettled claims from members of the insuring public in its efforts to verify the persistent complains of the consumers of insurance about an unsavory attitude of the providers that has brought the image of the industry to disrepute.

In the circular signed by NAICOM Commissioner for Insurance, Mohammed Karl dated July 6, 2015 and titled, “Claims settlement and the image of the insurance industry”, the Commission threatened that erring insurance companies shall be sanctioned with full application of punitive sections of the Insurance Act including but not limited to sections 8 (1) (m), 70(1)(b) and 70(2) without further recourse.

These Sections not only stipulate the approved settlement period for claims, but also provides for punitive measures that may be taken against a defaulting firm. For instance, Section 70 (1) of the Act states that “subject to Section 69 of the Act, in every case where a claim is made in writing by the insured or any other party entitled thereto under insurance policy, the insurer shall- (a) where he accepts liability, settle the claim not later than 90 days after the insurance of discharge voucher; (b) where any claim remains unpaid as provided in (a) above, the insured may request the Commission to effect the payment from the statutory deposit of the insurer and the Commission shall have power to effect such payment ; or (c) where he does not accept liability, deliver a statement in writing stating the reason for disclaiming such liability to the person making the claim or his authorised representative not later than 90 days from the date on which the person delivered his claim to the insurer.”

Furthermore, Sub Section 2 of the same Act prescribes punitive measure for a defaulting insurer: “any insurer who contravenes this section commits an offence and on conviction is liable to a fine of N500, 000.”

Stakeholders in the industry, who declined to be named for fear of being seen as “antagonistic” to the Commission, regret that two months after the expiration of the deadline, and in spite of the threat by the regulator to evoke the full application of punitive sections of the insurance Act including but not limited to sections 8 (1) (m), 70(1)(b) and 70 (2) without further recourse, from October 1, 2015, is now proving to be a toothless bulldog. Such acts, they further said, would make operators belief that heavens would not fall if they fall foul of any other infraction in future.

Investigations by The Nation revealed that insurers still delay or refuse to pay claims as at when due. For instance, an insurance firm (name withheld) failed to pay an insured following expiration of the policy at full term. His policy had reached its full term since last June but the company failed to honor his request that he should be paid sums due going by the policy. He was only paid in November following intervention by The Nation.