The Nation Newspaper

Tag: premium

  • Fed Govt owes N24b premium

    The Federal Government is owing insurance firms N24 billion premium while it has paid N669 billion to banks as interest in one year, the Managing Director Cornerstone Insurance Plc Mr Ganiyu Musa said.

    Speaking at the Members’ Evening of the Nigerian Council of Registered Insurance Brokers (NCRIB) in Lagos, Musa added that only N300 billion was generated by the industry since its recapitalisation in 2007, describing the figure as poor.

    More appalling, he said, was that assets of banks are worth N22.5 trillion while that of insurers is about N0.621 trillion.

    Citing insurance companies’ performance with banks, Musa said while insurance companies are richer than banks in developed countries, it is not so in the country.

    He urged his colleagues to do things differently for the public to take seriously.

    He said: “Although we have been competing fiercely and robustly, there is the need for us to do more.

    “The need for the industry to achieve a better premium income as against the N300billion generated is crucial to the growth of the industry.

    NCRIB President, Laide Osijo said the professional body has attained a height where it has become an envy among professional institutions in the country and beyond.

    She said: “Through the entrenchment of sound ethical practice and professional conduct, insurance brokers now have a conspicuous place in the comity of respected professionals.

    “It is a thing of delight that the respect and amity that now exists between the NCRIB and the National Insurance Commission (NAICOM) and other professional bodies is unprecedented.”

     

  • ‘No premium, no cover policy boosts industry’

    The enforcement of ‘No premium, no cover’ policy by the National Insurance Commission has improved the finances of the insurance industry, the Managing Director of Scib Insurance Brokers, Mr Sola Tinubu, has said.

    Tinubu told The Nation that although it seemed to operators as if preparations by the regulatory body to enforce in January were not detailed, it was a lot more successful and the industry is better for it.

    He said: “A lot of us felt preparations were not detailed in such a way that it would be less painful by operators coming together to anticipate the challenges we had with it before it will start.

    “Across the industry, we all believed it was a good direction to move. The only difference we had was the modalities and timing, but we all realised later that it was the way to go for the industry to make progress.

    “For us brokers, we encountered challenges with the enforcement of the policy and it cost us a lot doing compliance issues.’’

    Tinubu added that it brought additional cost of manpower, but they realised that as an industry and country, they cannot be in isolation.

    “Everywhere in the world, corporate governance and compliance are the challenges of the day. What happened to the global economy was essentially an example of the collapse of corporate governance and compliance.

    “We do not want to invite the same kind of economy collapse on ourselves here and so we need to ensure that we have rules and regulations and guidelines,” he said.

    On his firm, he said the company’s expertise in broking has continued to grow, noting that the pursuit of excellence of risks solution of a global standard using innovation remains their mission.

  • ‘Slow uptake, culture hinder premium expansion’

    Decades of slow insurance uptake exacerbated by widespread cultural aversion and the inefficiency of the micro economic parameters, have slowed down the desired growth in the sector.

    A report by Nigeria Insurers Association (NIA) obtained by The Nation, indicated that this was happening despite significant headway for premium expansion the grassroots base provides

    NIA said if the various initiatives in the sector are strengthened, the sector’s revenue will assume a positive dimension in the coming years.

    It said: “The long term call on the sector is ably supported by its obvious demographic advantages and Nigeria’s economic growth prospects relative to other emerging markets.

    “Based on statistical data made available by Swiss Re Economic Research & Consulting, insurance premium on the global scene resumed growth in 2011 as insurers gradually restore underwriting capacity to pre-crisis level, while building larger capital buffers after two years of sluggish growth following global economic crisis.

    “Robust economic recovery and reforms especially in the developing economies continue to fuel strong rebound in premium across a broad spectrum of the insurance industry value chain.

    “Globally, the near term outlook suggests that risk aversion will continue to wane, supporting modest premium growth across regions, as the world assumes full speed economic recovery.”

    The report continued “Meanwhile, global life insurance premium shrank by 2.7 per cent. Similar trend permeates both the advance and emerging markets while the non-life segment proved robust in most cases. The emerging market of the non-life sector recorded 9.1 per cent in premium growth and 1.9 per cent over all. The fluctuations in life market resulted in -0.8 per cent record decline in world total.”

    On global losses of 2011, NIA said the promising start to the year was shortlived by disruptive disasters of monumental proportions.

    “By July 2011, the sector was reeling from the impact of one enormous disaster after another, and was looking at the highest payout year on record, eclipsing the previous record payout year 2005.

    “A series of natural disaster, including the Japanese earthquake and tsunami in March, combined with flooding in Australia and Asia-Pacific, the New Zealand earthquake, tornados in the eastern United States, and political unrest in the Middle East and Africa racked up claims costs enormously.”

    It added “It was reported that on August 1, 2011, insurer Lloyd’s of London was reporting pre-tax losses for the first half of the year – $139.5million – and other insurers were also reporting steep losses.

    “In all, the sector is facing losses of more than US$50billion. In response, US catastrophes reinsurance rates went up by 10 per cent while premium in the areas most affected by catastrophes have risen in some instance by 50 per cent.

    “We expected fast growing economies in Africa, such as South Africa, Morocco, Algeria, Egypt, Kenya, Nigeria, Ghana and Angola to witness appreciable increase in nominal premium in the near term. However, the greatest downside risk to premium growth in Africa remains economics and political instability, insufficient awareness of the operation and structure of insurance policies, as well as their significance.

    “Population growth has, historically, outpaced growth in insurance premium in most African countries in the past, accounting for the low density across the continent. Nonetheless, we expect a deeper insurance market in Africa premised on expected rapid economic growth.”

     

  • Africa records $66.3b insurance premium income

    African Insurance Organisation (AIO), the umbrella body for insurance organisations in the continent, has said the insurance market raked in premium income worth about $66.30billion in the 2011.

    President of the association, Mr. Hassan El Sayeed, who made this known while addressing participants at the ongoing 40th AIO Conference and General Assembly in Cairo, said the figure translates to 1.66 per cent of insurance premium raked in by operators in the world in the same year.

    The conference, which brought together insurance practitioners from Africa, Australia, Europe, Middle East and Asia countries, has theme as, “The role of the African insurance industry to support the economic development of African countries”,

    He said the $66.30billion recorded in the year under review was against the N4.03 trillion raked in by the global market the previous year.

    He also said out of the continental insurance premium figure, $21.7billion was on non-life insurance business, which translates to 32.68 per cent of the total premium raked in by the market in the previous year.

    Chairman of the Organising Committee of the conference, Mr Abdel Raouf Kotb, noted that Africa is the continent of the future, adding that the future is looking up to it.

    According to him, Africa is becoming the continent of the future and the world is following and participating in its development and many have identified it as the main source of future growth, opportunities and profitability.

    “The African economic boom is set to go from strength to strength with the continent outpacing the global average Gross Domestic Growth (GDP). The main challenge is to ensure that this growth reflects on the average citizens and that the riches of our countries have the direct effect of alleviating, more Africans out of poverty and tackling inequality,” Kotb said.

    He added that the continent should be optimistic, warning: “Let us not underestimate the challenges before us. Our continent continues to depend on external demand making us susceptible to global economic slowdowns, particularly in China and the Eurozone.”

    He added: “Africa faces many domestic risks, such as youth unemployment, political upheavals, low insurance penetration and severe weather just to mention a few. The insurance and reinsurance industry has a pivotal role to play to ensure that these risks are properly identified and managed in order to ensure the sustainable development of our countries,” he said.

  • ‘No premium, no cover policy boosts insurance’

    ‘No premium, no cover policy boosts insurance’

    Liquidity has improved in the industry following the enforcement of ‘no premium, no cover’ policy by the regulator, the National Insurance Commission (NAICOM).

    Managing Director of Sovereign Trust Insurance Plc (STI), Mr Wale Onaolapo, told The Nation that he was excited over the enforcement of the policy.

    He said: “STI is reaping bountifully from the enforcement as business is moving and customers are warming up to the development.

    “Business is moving, liquidity has improved, renewals are being done and the development is positive.”

    Chairman, Ibadan Chapter, Chartered Insurance Institute of Nigeria, Mr Gbenga Falade, said the policy has been enforced such that no insurer was ready to offer cover on credit.

    Falade added that the financial report of the industry could be accurate as premiums are collected upfront.

    “The industry is very serious about the no premium, no cover policy. No insurer is ready to pay heavy sanctions imposed by NAICOM. Brokers have also come to terms with the fact that the policy has come to stay,” he said.

    From January 1, this year, NAICOM said it was ready to enforce the law, which states that all insurance services shall be provided on ‘no premium no cover’ basis.

    After that date, any insurer, who grants cover without receiving premium or premium receipt notification from the relevant insurance broker, shall be liable to a fine of N50, 000 on each cover so granted.

    “All insurance covers shall be provided on ‘no premium no cover’ basis. Consequently, only cover for which payment has being received, directly by the underwriter or indirectly through duly licensed insurance brokers, shall be recognisable as income in the books of the insurer.

    “Cover may be granted on annual or time-on-risk basis. Irrespective of the period of insurance, underwriters should ensure that at any point in time, they have received directly or indirectly, through the insurance broker, the premium for the cover being granted.”

     

  • NCRIB seeks payment of 59% outstanding premium

    The Nigerian Council of Registered Insurance Brokers (NCRIB) has called on the Federal Government to pay the outstanding 59 per cent of last year’s group life premium.

    Its President Mrs Laide Osijo, who disclosed this at the April edition of the monthly Brokers’ Evening in Lagos, said the government has only paid 41 per cent of the total group life premium for last year, stressing that the non-payment of the outstanding is unhealthy for the insurance industry.

    She said: “I want to appeal to the Federal Government for the release of outstanding premium on group life for 2012. As it stands, only 41 per cent of the premium has been paid; remaining 59 per cent to be paid.

    “This situation has made many insurance companies to discountenance claims under the year in review of the now existent No Premium No Cover policy. This, as we are all aware, is to the displeasure of some beneficiaries especially to those who died in active service.

    “The impression many of them have is that the insurance industry is insensitive to their plights, a situation that creates serious image smear for the industry.”

    She called on the government to assist the industry to avoid further accumulation of unpaid premiums and claims, adding that such could negate the new premium collection system.

    Osijo said the initial apprehension on the workability of the no premium no cover policy is gradually being laid to rest as brokers and underwriters now testify to the gains from the initiative.

    Managing Director LASACO Assurance Olusola Ladipo-Ajayi, lauded the NCRIB, pledging the company’s commitment to work with brokers to deepen insurance in the industry.

    He said the company would continue to esteem professionalism and sustain its achievements, adding that the firm presently is the leader in special risk businesses and remains the only underwriting firm in the country with ISO certificate.

  • Non-life accounts for 61.6% of premium, says report

    A report by Researchmoz, world’s renowned research agency, has said the non-life segment of Nigerian Insurance Industry, accounted for 61.6 per cent of the premium underwritten by insurers, last year.

    The agency, which undertook in-depth market analysis, information and insights into the insurance industries in Nigeria, Gabon, Uganda, and Rwanda, said the Nigerian Insurance sector experienced strong growth over the review period, adding that the industry’s growth was supported by relatively stable macro-economic conditions and a favorable investment climate.

    It said: “The insurance industry in the country is very small, yet highly crowded and competitive. The key segment driving the overall industry is the non-life segment which accounted for the largest share of 61.6 per cent of the industry’s total written premium in 2012.

    “For low income earners, the Nigerian government has concertedly promoted micro insurance; however a poor understanding among consumers of the benefits of such products and inefficient distribution channels is limiting their spread,” the report indicated.

    According to the agency, the report provides a comprehensive analysis of the insurance industry and also provides historical values for the industry for the 2008 to 2012 review period and also provides forecast figures for the 2012 to 2017 forecast period.

     

     

     

  • ‘Court rulings ‘ll empower NAICOM to implement premium payment’

    The National Insurance Commission (NAICOM) has said it will take advantage of court’s rulings to implement the new premium regime.

    In a circular entitled: Settle court case on partial/instalment/non-payment of insurance premium, signed by its management, the commission noted that the settled Appeal Court cases on insurance premium are clear indications that anything short of full payment at the commencement of an insurance contract renders such transaction null and void.

    It said the Provision of Section 50 (1) of the Insurance Act 2003 which states: “The receipt of 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”, is indeed in the interest of the insured going by decided cases on the issue by competent court of law.

    The Commission quoted case one as Court of Appeal in Ajaokuta Steel Co. Limited V. Corp. Insurance Limited where it was decided that the fundamental purpose of an insurance contract is to give cover for an insurance risk. Thus, a law, such as Insurance Act, which says that there is no insurance cover unless premium was pre-paid, is, in fact, saying that the contract is void if no premium was paid.

    The Commission said: “By virtue of Section 50(1) of the Insurance Act, No 2 of 1997 (as amended), the receipt of insurance premium is a condition precedent to a valid contract of insurance and there can be cover in respect of an insurance risk unless premium was paid in advance.”

    The second quoted case by the Commission in the circular was the case involving Leadway Assurance Company Limited Limited V. J.U.C. Limited (2005) 5NWLR 539 at 543: “By virtue of Section 50(1) of Insurance Act, 1997, the receipt of an insurance premium is a condition precedent to a valid contract of insurance, and there is no cover in respect of an insurance risk unless premium is paid. In other words, a valid insurance contract is made when premium for the insurance is paid.

    “Case 3, in IGI Company Limited V. Adogu (2010) INWLR pt 337 at 357 the Court held that the premium paid must be full and stated that: Section 50 of Insurance Act 2003 does not contemplate installment payment of premium in an insurance contract.”

     

     

     

  • Commission, operators to meet on ‘no premium, no cover policy’

    The National Insurance Commission (NAICOM) will soon meet some key players in the sector to find solutions to some challenges in the ‘no premium no cover policy’of the commisssion that started on January 1, The Nation has learnt.

    It was learnt that brokers are worried that underwriters may by-pass them to provide cover for businesses rejected by them due to non- payment of premium.

    President Nigerian Council of Registered Insurance Brokers (NCRIB) Mrs Laide Osijo said the operators have agreed with NAICOM to call the stakeholders in the industry – representatives of the brokers and underwriters – to chart the way forward for the implementation of the policy.

    She said: “These issues are fundamental to the operations of brokers, for 80 per cent of insurance business in the country is done through brokers. If we follow the law and underwriters refuse to follow, the whole thing would be a mess. We would try to ensure we get the modalities as to how to go about the policy.”

    She lauded NAICOM for its decision to bring sanity into the industry through the policy, adding that the idea of underwriters accusing brokers of non-remittance of premium will now be a thing of the past with the introduction of the policy.

    According to the Commissioner for Insurance Fola Daniel, when they were doing verification of accounts of brokers and underwriters, they observed that most of the outstanding premiums that brokers were accused of were not actually true. Some of the underwriters raised their books to cover their expenses.

    “NAICOM observed the mis-representations and sanctioned the errant underwriters. Some brokers who erred by keeping premium beyond the stipulated date were also sanctioned. I am not saying that brokers are perfect, but most of the accusation by underwriters is not really true. NAICOM observed that most of the withheld premiums are receivables,” she said.

    She said brokers have been enjoined to report underwriters who by-pass them to take a business they rejected, stressing that the operators have agreed to abide by the policy.

  • What premium for insurers?

     Insurance stocks have generally stagnated at their nominal values. With a negative year-to-date return of 18.60 per cent, insurance subsector still shows the hangovers of the stock market recession. What will bring back premiums to insurance base values? Taofik Salako reports on the underlining pricing trends in stock market’s largest subgroup

     

    The Nigerian stock market opens today with a year-to-date return of 28.66 per cent, indicating the generally bullish pricing trend that has characterised equity valuations so far this year. Substantial positive returns by other sectoral indices underscore widespread capital gains, which cumulated into the average overall return. Insurance sector index however opens today with double-digit negative return of 18.60 per cent, tagging along with the beleaguered oil and gas sector, which opens with -30.81 per cent.

    Out of the 32 insurance stocks, only three stocks-Aiico, Wapic Insurance and Mansard Insurance, have so far this year posted positive returns. Twenty five insurers remain dormant at nominal values while four stocks lose varied values. Compare the pricing trends in January 2008 and now, the extent of the recession in the Nigerian insurance sector looms larger than the global economic and financial crises. Insurance stocks have literally fallen off the cliffs. In the early 2008, nearly all insurance stocks were trading in three digits, in multiples of their nominal values and considerably in competitive prices with other related stocks. Prestige Assurance and Intercontinental Wapic Insurance-two sectoral leaders by share prices, opened February 2008 with four-digit values at N11.40 and N10.60 respectively. Today, Prestige Assurance is stuck at 51 kobo per share while Wapic Insurance has slumped to 56 kobo. Other insurance companies relate the same story. Aiico Insurance opened February 2008 at N3.43, Continental Reinsurance set out at N5.15, Cornerstone Insurance was N6.19, Crusader Insurance traded at N7.85, Custodian and Allied Insurance was N6.50, Great Nigeria Insurance opened at N3.80, Guinea Insurance’s price on board was N4.30, Lasaco Assurance was valued at N4.88, International Energy Insurance opened at N5.94 while Law Union and Rock Insurance was traded at N6.10. Other market considerations then included Linkage Assurance, N4.80; Mutual Benefits Assurance, N4.96; NEM Insurance, 4.35; Niger Insurance, N8.70; Oasis Insurance, N4.63; Royal Exchange Assurance of Nigeria, N5.43, Sovereign Trust Insurance, N4.56 while Unic Insurance opened February 2008 at N5.51 per share.

    But contrary to the largely diversify and generally upward pricing trend in early 2008, insurance stocks open today with almost a generic depressive outlook. Currently, more than 78 per cent of quoted insurance companies are trading at their nominal value of 50 kobo per share while the remaining few are trading mostly around the nominal value.

     

    Suffering from the hangovers

     

    Without major natural or artificial disasters that could have shaken risks-bearing companies to their net assets, the current outlook of the insurance sector is largely a direct result of the stock market recession. Heavily exposed to the equities market, unyielding depression in shares prices directly built up losses and provisions in the profit and loss accounts and balance sheets of insurance companies. On the other end, share prices of insurance companies have generally been the worst hit by the recession as a hangover of negative industry perception, streak of impaired portfolio-induced losses and reticent management combined to single out insurance sector as the highpoint of the bear market.

    With huge funds raised during the capital market boom, and following the trails of squandering banks, insurance companies had turned mainly to the capital market to invest their bubble-induced assets. Small and medium insurance companies, which had metamorphosed into big companies with outstanding shares and equity funds larger than size of business, left the conservative nature of risk assessment and provision-the core expertise of insurers, and turned into speculators. However, the general depression in the insurance sector appears to be more as a result of psychological investing or class phobia- a segregation that tends to view an entire group within the same window irrespective of individual potential. While the historic fundamentals of most insurance companies were discouraging, emerging fundamentals of several insurers show good potential, especially when viewed against the bottom-rock share prices. With improving bottom-lines in the immediate past year, several insurance companies had resumed dividend payments.

    For instance, nine-month report for the period ended September 30, 2012 showed that Aiico posted a pre-tax profit of N1.86 billion as against N1.02 billion recorded in comparable period of 2011. Profit after tax increased from N836.69 million to N1.18 billion. Also, Oasis Insurance’s profitability improved considerably with a pre-tax profit of N183.21 million by September 2012 as against N56.44 million by September 2011. Net profit after tax jumped from N45.98 million in 2011 to N171.55 million in 2012. Several other insurance companies have substantial net earnings while net assets are considerably higher than market values.

     

    Discovering values for insurers

     

    While investors need to tread cautiously, the relatively low turnover-to-net assets ratios of most insurance companies and low share prices present attractive combinations for discerning investors. On one hand, there is significant headroom for underwriting capacity and growth. On the other hand, there is still much growth potential in the Nigerian insurance industry. From government to the National Insurance Commission (NAICOM) and to operators, insurance stakeholders have recently taken major steps to enliven the performance of the industry. The passage of the Nigeria Content Development Act and other laws on compulsory insurance by government has opened up tremendous business opportunities for insurance companies. The Local Content Act requires that all insurance risks associated with oil and gas sector including prospecting, exploration, drilling, constructions, shipping, distribution, marketing and transportation must be insured in Nigeria with registered Nigerian insurance company. This law alone represents immense opportunity for well-capitalised and stable insurance companies.

    Besides, NAICOM has also in recent period taken many far-reaching and proactive steps to standardize insurance operations and enforce conformity with best practices. NAICOM has introduced new accounting standards with more stringent provisions to ensure that insurance profit and loss accounts and balance sheet showed the true state of affairs. Insurers are also expected to make timely rendition of accounts, making their returns more predictable. With the broad provisions of the Insurance Act and related NAICOM guidelines, the tough stand of the insurance regulator has greatly improved the operating environment. The industry regulator is also leading the charge for compliance with existing compulsory insurance laws.

    Although insurance industry is still highly fragmented with some 51 insurance companies, well-managed quoted insurance companies stand to benefit both in the event of industry consolidation or market-driven competitiveness that places premium on security of insurance rather than lower rates. With estimated penetration of some seven per cent, Nigeria’s large population and expansive economy also put insurers on good footings. It is these medium to long term outlooks that should concern discerning investors. While immediate liquidity may be a challenge, relatively good and stable returns and appreciable long-term capital appreciation will compensate for the waiting period.