Tag: NICON

The acquisition of NICON Insurance has continued to generate controversy. In this interview with Deputy Editor, Nation’s Capital, YOMI ODUNUGA, NICON Managing Director and Chief Executive Officer Mr. Bayode Samuel speaks on how the firm has been grappling with challenges and how it is being re-energised to serve customers better. He also speaks on the insurance industry and the path to profitability.

NICON Insurance used to play a critical role in the sector but one hardly hears about it today. Is this  a mere perception or the real story of a good firm gone bad?

I would not say it is perception. Of course, NICON after privatisation was meant to be agile and move at that fast pace expected of a private sector entity. Do not forget this company was a government corporation for more than forty years before it was privatised. As a business entity working under government bureaucracy, you would not expect anything less from what had happened to the company at that time. After privatisation, it is natural that a lot of patronage, a lot of account will leave NICON Insurance. And so, it became an open place for everybody to partake. There were some accounts that were being run by NICON that were not profitable, so NICON exited some of them. With the premium of N17 billion in 2005, NICON declared a loss of N5 billion. Compare it with the premium income of 2006 after privatisation which was N12 billion but we recorded a profit of about N5 billion and we were able to share dividends too to shareholders. Just after this, the government came to say it was taking over NICON Insurance. It was a turbulent period for the company and things were quite rough due to extensive political interference. But all that is over now and we were able to bring the company back into the market. The re-structuring of NICON actually started in 2013 and we are gradually getting back to our feet. You could not have seen much visibility of NICON Insurance but now, we are gradually moving to where we belong by re-strategizing and having a roadmap to get us out of the mess. We are going to be there possibly within this year.

Can you tell us how much claims you have paid since 2013 when the re-structuring began?

On claims, the whole of the industry was given a timeline of September 2015 to exit all claims. While I cannot talk about other firms in the sector, we at NICON paid all outstanding claims. As I speak, we do not have any outstanding claims on our books apart from those that are subject to litigation. Apart from that one and those that have incomplete documentation on the part of the insured, we do not have any other outstanding claims, I can confidently say that.

In terms of figures, what does that come to?

In a day, we paid N350 million as claims. We have been paying these outstanding claims before the final figure was approved and exited.

You talked about injecting N17.5 billion into operation. How has  NICON exploited this to promote and support corporate/social responsibilities?

In the first instance, we were asked to inject money at that time because there was a huge hole drilled in the finances of the company by those who took over. At the time, the liabilities were almost exceeding the asset of the shareholders’ fund. There was a review of the account by KPMG at that time, although there was contention between our auditors which is De’loite and KPMG on the side of government which recommended that, in order for the company to take care of the liabilities, it must inject N17.5 billion. It is only when you run successfully and get back to profitability that you can begin to talk about social responsibility. However, it is not as if we have stopped our corporate social responsibilities for one day, we will continue to sponsor events. We have a long list of proposals which NICON is involved in as far as public-social responsibilities are concerned.

What share of the market is NICON holding at the moment?

We are just in about 2.5 per cent of the share of the market right now. Even our budget shows that and our last year’s performance gave us the claim of that. Like I said, the restructuring and rebuilding have started so much that we have said that before the end of this year, we should take over 5 per cent of the market. Those of you that are familiar with the structure of NICON will find out that everywhere is wearing a new look, what is left is to focus on the external aspect. The restructuring is not only at the Head office alone, it also cuts across our branches nationwide. As I talk to you now, there are about two or three of our branches going through total renovation.

At this time of financial crisis, how feasible is the insurance sector?

We still think there is room for insurance companies that are innovative and responsive to their environment to make profit. Though, it may not be that kind of profits you were accustomed to in the past. I must say insurance is a global business with linkages all over the world, I can file my risk in Tokyo for example or any other place of the world. Our capacity as an industry is so poor that we export 95 per cent of the risk through re-insurance programme. Some time ago, it was JFT but they have joined AON now, the biggest re-insurance group in the world. We took 95 per cent of our own risk with the attendant premium out of Nigeria. But now, there is a local content law that says you should at least take up to 50 per cent of risk domestication in Nigeria. Secondly, we were free to take re-insurance treaties abroad. I doubt if there is any insurance firm in the industry in Nigeria that did not have a percentage of their treaties taken abroad. Therefore, there was a kind  capital flight to do this re-insurance. Government also made the law to increase the capacity of Nigeria’s market through the local content so much so that insurance companies will be strong like their counterparts in the world and that’s when the minimum capital for re-insurance was increased to N10 billion so as to expand their capacity to take risk in Nigeria. So re-insurance for life was 100 per cent domesticated, for non-life but if your market cannot carry it, you’ll need to seek a letter of no objection from the regulator. By and large, our insurance industry in terms of funds, market and income is almost fully domesticated. Like I said earlier, a proactive and responsive insurance company will still make profit.

The industry in Nigeria is not really pulling its weight given that its contribution to the economy is insignificant. What are you doing to up the ante?

All over the world, insurance controls the economy and insurance companies own banks including in Britain that we are close to. It is only because of our culture and the fact that you don’t have much to spend in terms of insurance policies. For instance, if you are employed today in the United Kingdom, you will get a letter from your bank offering you several packages that can go along with your salary,  such as mortgage, motor purchase, life insurance and the rest. Every aspect of life in the developed world, especially in the UK, is insured such that without soliciting, businesses flood your office. For example, if you take a mortgage, you are entitled to taking mortgage insurance, your health plan is also insured. What you find out is that, in the advanced countries, there is up to 90 per cent of insurance penetration amongst the populace. In Nigeria, I can confirm to you that insurance penetration is less than 5 per cent amongst the populace.  You cannot have any project in the advanced world that is not tied to insurance, you can’t have any credit that is not tied to insurance, therefore you have pool of funds coming to insurance industry that must be invested and these are funds you can term idle funds. So generally, you see volumes of funds coming in but the opposite is the case in Nigeria.

Why do you think this is so?

Here, if you are an Uncle to a young girl and you feel you should give her a car, you go buy a new car for N4 million, maybe you even give her the sum of N200 000 to celebrate the acquisition with friends. Once she drives that car out of the park, do you know where she would be going? She would probably go to the bank to first deposit that money given to her. Now the bank did not solicit for that business. The next thing you would expect her to have thought about is for her to insure the car in case of theft or anything. But what you will probably hear her say is; “do I need to do that? It will not happen to me or it is not my portion, God is in control”. So you now have insurance agents chasing her to come and insure, the next thing you hear her say is I’ll go to Road Safety or VIO. The Insurance industry does not benefit from that economic activity as it ought to, replicate her action to thousands of cars being bought and used daily in Nigeria, it is one of the challenges that make the banks to refer to the insurance industry as their poor uncle. This only happens in Nigeria, not even in Ghana. It is our culture that has made it so in Nigeria.

But can’t insurance firms have other subsidiaries as back up for funding?

It will interest you to know that most insurance firms in the world have banks. That is exactly the way the scenario is. However, a lot of things are being done to reverse that trend including awareness and government support. For the first time in a long while, insurance is being budgeted for. For instance in the 2006 or 2007 budgets, you will discover that even COT is budgeted for, you pay COT on funds you put in the bank, the bank has not solicited for that business in anyway, whereas when we tell them that you need to budget for insurance and all that, they tell you “forget about it”. But gradually, things are beginning to change and this was pioneered by the National Insurance Commission (NAICOM) two years ago. We have also formed the Insurers committee just like the bankers committee in order to have a say in the economic policies of government. I believe it is going to change gradually and then we are saying let us roll out our jingles for the world to see what insurance is all about. At NICON, we have a project to bring ourselves back to the psyche of the public and we will be going on air very soon. Other insurance companies are being seen on television now so this is the new awareness we are creating from the Insurers Committee to say, let people know about the products and services we are marketing so as to increase and deepen insurance penetration in our economy.

What exactly is new about NICON’s Students Welfare Insurance Scheme (SWIS)?

Yes, our Students Welfare Insurance Scheme was an innovation we developed when we came on board last year. The problem of insurance industry is that we are not as innovative as the banking sector, we don’t put on our thinking caps, we don’t think outside the box. For example, you hear that there is a programme going on at the Head of Service, everybody rushes down there and under-quote. Mind you, all these premiums were actually calculated. If you are of particular age, based on statistics and data all over the world, the insurance of your age per mil should be N14 per thousand. They are not magicians, it has been scientifically proven that in a group of this, this number will die, we don’t know who, that’s the basis at which premiums are calculated. All the Insurance companies are running to Head of Service to take group life insurance but everybody as low as N3 per thousand. Imagine me, a 55-year-old man, if I am to insure my life in Britain, I will be talking about N18 per thousand. Now, everyone was brought under the Head of Service Scheme and we are charging them N3, see the risk you are bringing to the table, see the premium you are charging me. That is the simple reason why they cannot pay the claims. There are circumstances that demand that we think outside the box and give government new policies. You know Federal Government College Buni Yadi was attacked by the Boko Haram. You are also aware of the floods at FGC in Abaji and other Government Schools as well as the risks to the lives and security of these kids. That propelled us to come up with a policy for the Federal Government, which caters for children in schools so much so that if they lose their breadwinners, we at NICON will continue to pay for the upkeep and school fees up until graduation. Also, nobody will be happy losing a child but anything can happen from incident of insecurity, flood or whatever, so what we do is to pay N500,000 on the loss of the child and burial expenses of N50,000. If students are involved in an accident to the extent that they are hospitalised, we pay hospital expenses of N50,000. That is the basic thing we thought of and the government took our advice at that time. But due to issues of culture, religion and ignorance, some parts of the country were not buying into the SWIS idea. We made a success of it to a certain extent and by the time they saw the claims being paid, more and more people responded to it. There is the case of a particular family that lost its breadwinner and has three children in one of the FGCs.  What we did and still do is the payment of N500,000 annually in respect of each of the children. The school fee sometimes may not be more than N200,000 but the rest will be for the upkeep of the child and then pocket money every month. That is the way the Students Welfare Insurance Scheme works. The public has also come to realise that it is very beneficial, those who are reluctant are now buying into the scheme. Also, competitors are now keying into it. That is why I said that we are not proactive in the insurance industry. We do not put on our thinking caps. You wait until someone develops a product and then you want to use your contacts and influence to scheme him out of the products.

What is your projection for the year 2016?

We are still early in the year but we are projecting something close to N5 billion. However, we have conservatively told the board that we will do N3.6 billion from all the comebacks we have done, from all the appointments we have had even from late last year. It may take time to re-engage the confidence of the public. One other noble idea we have put in place is the customer loyalty department. Businesses all over the world have customer loyalty department that analyse and see the movement of customers over the year. It also engages them when they chose not to do business with them again, this they will do by asking them questions on what actually went wrong, what they think we can improve on. All these are geared towards getting back our customers and creating new awareness. These are all the innovations we have put in place. We have also introduced Railway Insurance Scheme. For instance, if you are traveling from Lagos to Kaduna and your ticket is about N3,000, we are partnering with the Federal Government to introduce railway insurance scheme for the passengers. All you need do is to charge them the sum of N300 extra. Should there be loss of baggage, accident or death, we make sure those involved are covered under the scheme. Again, we noted that the Nigeria railway still carries the bulk of goods around so we have given them a proposal to cover goods on transit. A lot of products are underway to make sure that we expand our markets.

Does NICON have assets offshore and what is the worth of those assets?

We consolidate our statements so that may not allow me to say this is precisely what our worth is offshore. However, we have full-fledged subsidiaries in several countries like Sao Tome and Principe, United Kingdom and Ghana. In the UK for example, the value of our asset there is about £14 million, that’s our physical asset that you can point to, in Sao Tome we have about $2 million, the balance sheet of the Sao Tome Company is about $10 million now but the physical asset is what we are talking about here. London operation is just meant to be what we call representative or contact outlet in working re-insurances arrangement. It is just a walking distance to Lloyds which is like the headquarters of all insurance market where syndicates buy and sell insurance. We are hoping to expand our operations to many West African Countries but first, we want to consolidate on what we have.

Since your appointment as Managing Director about a year ago, how would you rate your performance?

We cannot be blowing our trumpet but we have made significant achievements since we took over. When we inherited the company, so many things were not in place. We have upgraded the structures and smooth operations of the company. Our customers now get up to date services and we are still improving on them. So also are the branches, we have deregulated so much so that we put General Managers in all the regions. They are small CEOs who collect information and data, take informed decisions on their own and inform us. We have also invited Oracle, the software giants, they are trying to pull down all our IT systems and install new ones. By the time we are through, we shall be on top of our game again before the second half of the year. You know the position of IT in management system in the world today. So, we are spending about $2 million on that. We have also restructured in a way that majority of the staff are now posted to the front line, marketing so as to increase the awareness and income generation. These are all we have been able to achieve since we came and we are building on them.

In general terms, how much have you set aside to bring NICON back on track?

We are thinking of re-branding the corporation by the roadmap and the Board has earmarked the sum of $10 million for the restructuring, re-branding and rejigging of the company. The money is already sitting down somewhere.

Does it mean that, as we speak, NICON has not returned to profitability?

Right now, no. In most cases, companies show paper profits but we do not want to join them in doing that because there is an International Financing Standard and NAICOM which watch all these. In calculating a company’s solvency margin, NAICOM will always take into account, N1billion in respect of all the physical assets you have. As at last time, NICON has N42billion. If you take our N42 billion into consideration, we should be the most liquid and most solvent company in Nigeria. When you now make a law that you will only take N1billion of my assets into consideration while you are calculating my profitability margin, that won’t work! Our asset is far above N1billion and it is backed up with correspondent liabilities, you now take my liabilities fully and take N1billion out of the physical asset, how can such a company be termed profitable? But the roadmap has shown us that we should go back to cash, most of these assets that we don’t need, we are disposing them more and putting the cash side into the balance sheet so in a short while, we will know who is solvent and who is not.