How Strict Regulation is Paying off in Insurance Industry

Chairman, Quicklink Insurance Brokers Limited, Mr. Rotimi Edu in this interview with Femi Ogbonnikan, spoke on various issues including apathy towards the insurance industry, claims payment and the roles of National Insurance Commission (NAICOM)

How has the ‘no premium, no cover’ impacted on the insurance industry in Nigeria?
I think it is one of the best things that have happened in the industry, but at the same time, we have not been able to achieve 100 per cent, because the lawmakers themselves are breaking the rules. Although government has tried, they have been trying, but it should be 100 per cent policy such that assets of the nation are insured, immediately. Some institutions in the federal and state levels do that, but some still are not attuned to insurance. It seems, they don’t even talk about insurance in their budget. It is funny in this century, but I think with time, that will be corrected.

How will you assess the contributions of insurance industry to the nation’s Gross Domestic Products (GDP)?
This is one of the countries where insurance is very poor, because insurance should actually be the one driving the GDP of this nation, but unfortunately, it is the other way round. The banks see us as their poor cousins, people don’t buy insurance, thinking that insurance is not necessary for them.

It might have been due to their perception about insurance in the past, but things have changed. Insurance practice in Nigeria has developed, but it has not been allowed to develop to an extent of having good influence on the GDP, which we should have. Reasons being that one, there is apathy. People still don’t buy insurance, as we are under – insured in this country.  Secondly the fact is that insurance in Nigeria is very cheap. Let me give you an example. We are saying, pay N5, 000 to Third Party, even from contributions; we end up paying N2, 500. In London, the minimum Third Party, that you will get is about 1,500 Pounds per annum.

In that context, how can the situation be improved upon?
Well, it can be improved upon, because our regulator, the National Insurance Commission is really trying. The last regime led by Mr. Fola Daniel has really done a lot. And there is no stop-gap, even the current leadership under Alhaji Mohammed Kari. He has also been doing all he can to change the face of insurance practice in Nigeria. And in regulating insurance practice, some of us, we feel that we are regulated and in actual fact, this is a financial industry that must be seen to be above board. Gone were those days people would collect insurance premiums and they would not want to pay claims. So, we place premium in the area of probity and in the financial transparency.

Most especially again, we are trying to comply with financial standard that is practised all over the world. And that is a very good development, too. So, looking at that regulations, nobody likes being regulated, but the regulation has really helped the insurance industry to the level that it is today. Also, there is self-regulation within the industry. There are various bodies, like NIA, NCRIB, and they are very, very important in the area of regulation.

Still talking of claims, there is this public perception that insurance companies are not ready to pay claims.  What is actually the problem?
That perception can be dated back to when insurance first started. That perception has ceased for a very long time now. It has ceased in the sense, that it is difficult for any insurance underwriter not wanting to pay claims in this present day. If it is genuine and I will use the word, if it’s genuine, and seen this from the principle of insurance, was there any breach? Was there utmost good faith, whether instituting your insurance or making your claims? So, all these are very important in claims settlement. And if eventually, you don’t get your claims settled, unlike before there were so many avenues of redress, you can go to court. You can report to National Insurance Commission (NAICOM) and within 24 hours, I can guarantee you, you will get a response. What insurance companies are facing in terms of fraud and it is such people that go out and say this and that insurance company has not been paying claims.

Look at somebody, who picked up an insurance policy on a dilapidated vehicle, for instance, and he wants to claim as if it is new. Look at an instance, where somebody’s vehicle is bought at a value of N1million and he is telling you, at a point, he tells an insurance company that his vehicle is worth N2 million and he doesn’t want to pay premium.  And when there is a claim, there will be problem, because the insurer is only to bring you back to the issue you were immediately, before the loss. So, you can’t insure something for N2 million and expect N5 million and from the N2 million you have really insured there would have been depreciation from day one.

The National Insurance Commission (NAICOM) is planning to introduce a maximum of ten years tenure for Insurance Chief Executive Officers (CEOs). What is your own view on this?
Let me say that, there is nothing wrong in introducing such a law, but 10 years is rather too low. In the ministry, for instance, they say 35 years of service or retirement age, but we can’t use that for an insurance company or an insurance broking firm. These are private investors, these are private professionals and how do you now tell them you can only work for so, so years? Yes, it is a financial institution, the banks, for instance, because of their nature, you can say say, and CEOs should not spend more than 20 years on seat.

But with insurance companies, for instance, I am a broker and I have invested money to establish my own company and by the time, if you are doing the work ethically and you are doing the work right, it might take you a minimum of five years to get success or get returns on your investment and within the five years, somebody is telling you that the company is no longer yours, it is not done. I don’t think, they will implement that anyway.

Even if it is going to be implemented, my own suggestion is that, number one, premium is too low and number two, they should take into cognizance the fact, that insurance companies are private and if you are talking about government – owned establishment, yes, the government is the owner and the government can say, I don’t want you to do more than ten years. But if I have put in my resources in a company I have invested in and I am investing because of my future, because of the future of my children and the future of my dependants and somebody comes and says, who do you want to give my investment to? Who want to return the money to me? These are the issues that make it different from what we are talking about the service in a civil service sector.

 

Source: Thisday