The failure by government to enforce the provisions of insurance act as it relates to compulsory insurances has contributed immensely to the non-achievement of goals of increased insurance penetration in Nigeria.
The Group Managing Director Royal Exchange Plc, Mr Chike Mokwunye, stated this while speaking at the 2015 Champion Insurance Day organised by the Champion Newspapers in Lagos.
According to him, the enforcement of the compulsory insurances introduced by the insurance regulator, National Insurance Commission (NAICOM) under its Market Development and Restructuring Initiative ( MDRI), should be the responsibility of government.
“Insurance Act 2003 and all the related amendments are laws of the land and should be enforced by the government. The failure of government to enforce the provisions of the act as it relates to compulsory insurances has contributed immensely to the non-achievement of the envisaged goals of increased insurance penetration,” he stated.
Mokwunye noted that the industry discounts the efforts of the primary regulator (NAICOM), it is faced with a situation where it may be safe to say that government policies, actions or inactions, have not been favourable to the insurance sector.
He said that over the years, the government at all levels,has failed to respect insurance laws especially in insuring their assets.
Quoting NAICOM in its recent revelation that the Federal Government of Nigeria released less than 10 per cent of the N20 billion budgeted for insurance premium in 2014, Mokwunye , regretted that most state governments and other government agencies, are yet to comply with the provisions of the law on the insurance of assets, group life, and health .
He concluded that government presents a poor example to the public on the need for insurance.
He said while government in handling the economic crisis associated with the stock market crash between 2008 and 2010 provided bailout plans for the banking sector and the stockbrokers, no effort was made at ameliorate the
impact of the crisis on the insurance sector.
“This was quite unfortunate, considering the fact that insurance companies traditionally were the largest institutional investors. many insurance companies lost a large proportion of their assets to the crisis and that affected their ability to meet their obligations as and when due and plan for growth,” he stated.
He also spoke on the impact of the tax system on the industry saying that it has been adjudged to very hostile to the insurance sector.
“Applying the Nigerian tax laws as provided under Section 16 of the Companies Income Tax Act 1990 and the amended Act, 2007, with the introduction of limitation to reserves, a non-life insurance company must be taxed on a minimum of 15 per cent of its gross premium. In other words, at least 15 per cent of the gross written premium Mshall be taken as total profit on which the company tax rate of 30 per cent shall be applied”, he sated.
He added whilst the restriction on loss relief was removed for other companies, insurance companies remain restricted to four years after which any unrelieved loss is forfeited.
Maintaining that these have serious implications on the profitability of the industry and its capacity to accumulate capital for growth, Mokwunye said government should encourage and improve insurance penetration in the country.
He highlighted reasons government should encourage insurance penetration, saying “developed insurance market contributes to social and economic stability,
Insurance plays an important role as a veritable source for wealth accumulation; mobilizing domestic savings and providing a large pool of capital for government to finance budget deficits and capital projects.”