Insurance companies sell complex promises and invariable there is the tendency for discrimination and abuse against customers.
It is worthy of note that central to insurance regulation is its classification as a public-interest business to protect consumers of insurance products and ensure that promises made by insurers are kept. Accordingly, the National Insurance Commission, NAICOM has ensured that the interests of insurance consumers are protected at all times.
Regulation refers to laws, rules, directives and guidelines prescribed by authority, especially to control the conduct of those to whom it applies. Supervision on the other hand, involves monitoring and examining the activities and conditions of a regulated entity and its compliance with regulations.
Virtually all aspects of insurance business practice, from licensing, operation and liquidation- are regulated in Nigeria. Insurance regulation is structured around several key functions, including company licensing, licensing of intermediaries, product approvals, market conduct, financial/prudential regulation and consumer services.
Hence, the principal object of the Commission as stated in the NAICOM Act 1997 shall be to ensure the effective administration, supervision, regulation and control of insurance business in Nigeria. The main objects of the Commission as stated in the NAICOM Act of 1997 can be summarized into three main headings which are policyholders’ protection which entails the provision of adequate protection for policyholders;
financial safety and stability which entails maintaining efficient and stable insurance markets as well as ensure a fair and safe market for profitable insurance business transactions; and market development which entails providing enabling environment and infrastructures to facilitate deeper market penetration in the insurance industry.
NAICOM and its journey so far
In terms of policyholders’ protection, NAICOM has embarked on consumers’ education through seminars, workshops, sponsorship of TV/Radio drama, social media and other public enlightenment programmes; introduction of insurance into school curricula – secondary & tertiary institution; engagement of stakeholders including workshops for independent directors, executives of shareholders’ associations and insurance correspondents;
market conduct regulations such as enforcement of fair treatment of customers during pre-sales and after sales services; risk pricing; disclosure of information; eradication of fake insurance products through arrest, investigation and prosecution of fake insurance sellers; premium collection and remittance (NPNC) Guidelines; as well as issuance of Guidelines on commission, rate and return premium.
Others are strengthening reserve, sound accounting and disclosure requirements in line with International Financial Reporting Standard, IFRS (Liability Adequacy Test, Asset Liability Management), enforcement of prompt claims settlement; establishment of consumer protection unit – Complain Bureau; insurance consumers’ forum in collaboration with Almond Production – a private electronic media producers; as well as NAICOM’s intervention in failing insurance institutions – through Enforcement and Compliance Unit.
In terms of financial safety and stability NAICOM embarked on recapitalisation and consolidation of insurance industry in 2007; enforcement of minimum solvency margin and capital base requirements; providing leadership for the industry’s seamless transition to IFRS in line with Federal government roadmap; formulating policy on Premium Collection and Remittance (NPNC);
investment regulations including issuance of guidelines on divestments; regulations on investments of policyholders’ funds; improving and strengthening solvency regulation and ALM requirements; publication of compliance status of companies, particularly on rendition of quarterly financial returns and audited annual financial statements; transiting to Risk Based Supervision and consolidated supervision (group wide supervision);
issuance of guidelines for development of Risk Management Framework; inflow of Foreign Direct Investments (FDI) – AXA, Old Mutual, etc as well as collaboration with other regulators , including issuance of NAICOM/PENCOM joint regulation on annuity, FSRCC Framework and guidelines on consolidated supervision, signing MOU– National & International regulatory authority etc.
As regards market development, NAICOM initiated the Market Development and Restructuring Initiative (MDRI) which entails enforcement of compulsory insurances, eradication of fake insurance operators and job creation; signed MOUs with identified law enforcement agencies for the battle against fake insurance operators; financial inclusion which entails Takaful and micro insurance regulations, poverty alleviation;
enforcement of local content development particularly in Oil & Gas industry through the issuance of guidelines on oil & gas insurance business in Nigeria; issuance of guideline on “No premium, no cover” to enhance the financial capacity of insurance companies to meet claims obligation; review of insurance brokers registration/renewal processes by reducing the renewal turnaround from the previous average of about 4 weeks to only 1 week;
improved regulatory oversight through strengthening of NAICOM’s core operational department and their processes (e-Regulation project – ERP, LAN, Data centre and Access Control, Contact centre, Document Mgt, Attendance Mgt System, etc); capacity building for NAICOM and the industry; as well as workshop for desk officers of some government MDAs- office of Accountant General and office of Auditor General.
Others are full participation at the North-East economic summit held in Gombe – through hiring a stand to display the Commissions initiatives on micro insurance and Takaful and opportunity of speaking to the audience; hosting local and international conferences and seminars – National Insurance Summit held in Dec. 2014; utilisation of and collaboration with trade associations – NIA, NCRIB, ILAN, etc – to facilitate access to insurance products as well as achieved growth in industry gross premium from less than N100billion in 2007 to over N300billion in 2014.
There are series of ongoing projects and initiatives such as e-Regulation; industry portal; supervisory database; business process Mgt (for A & P and Inspectorate); Enterprise Resources Planning (ERP) – Finance & Accounts and Admin. & HR); back-up data centre in Lagos; visitors Mgt system; Risk Based Supervision; Risk Based Framework; group wide supervision; collaboration with regulators under the umbrella of FSRCC; MOUs with regulators in other jurisdiction; supervisory college; capacity building as well as review of enabling acts