The nation’s insurance industry is making progress with push for compulsory insurances through stakeholder partnerships. Fola Daniel, Commissioner for Insurance in this interview with Modestus Anaesoronye on the sideline at the recently concluded African Insurance Organisation(AIO) Conference in Tunisia, speaks on compulsory insurances, New insurance Bill and the industry generally. Excerpts
Insurance, ordinarily thrives when the economy is thriving. With the current downturn in the economy, how will insurance buying be affected?
I think your question presupposes that because the economy is depressed people will no longer take insurance or insurance will no longer be a priority. But I can tell you that the reverse is the case. When an economy is depressed people hold on to their assets because the possibility and cost of replacement is enormous. So when the economy is depressed it is the poor people that should even do insurance because they resources to replace lost assets may be an uphill task. If you have a Mercedes Benz, for instance, you now say that insurance is not a priority if you loss it, perhaps when you bought it the naira was around N159, N160 and now it is N220 to a dollar, the cost of replacement becomes higher. So, in a really depressed economy insurance should thrive, though we do not pray for an economy to be depressed so that insurance should thrive.
I think the people that are worst affected in a depressed economy are those at the lower end of the ladder; the ordinary people because their disposable income shrinks therefore they want to prioritize. I think that segment constitutes the minority of people who buy insurance because when you talk about big industries, they are never going to stop taking insurance.
The efforts of NAICOM in driving market development initiatives has been applauded in all quarters, what do you have to say about this?
I think it is better for a third party to run comments about me or the Commission, I have nothing to say to that but irrespective of whatever they say either on the left or on the right, what we are emphasising is that all hands need to be on deck. If they say the Commission has done well, what have we done? They should do better. What the Commission has been doing in the last few years is to open windows which we expect the operators to tap into.
Somebody was interviewing me some days ago saying that you projected N1.3trillion in premium income, why was it not achieved?. And I said proudly to the person, ask the operators why it is not achieved and I said to him, as a Commissioner for insurance, am i go to Nigerian Port Authority to say you must insure? Where is the role of operators? Don’t we have ten million vehicles on our roads? We have? Don’t we have over five million houses that qualify to be called public buildings in Nigeria? We have them. Don’t we have what is called marine cargoes? We have. Why would the operators not stand up and engage Nigerian customs, for instance, and agree on modalities to ensuring that this is enforced. We are all supposed to play a role in uplifting Nigerian insurance industry. If the regulator is trying I think the operators should do more so that the dividends of that effort would manifest in a better way.
Issue of compliance on compulsory insurances has been the front burner in the desire to deepen insurance penetration, what in NAICOM doing about this?
Under the Market Development and Restructuring Initiative (MDRI) we tried the direct enforcement approach. You remember that we did road shows, here and there. We have sat down to re-evaluate that strategy to know whether it’s working or not? Yes, but not at the pace we expected. What we have been doing in the last few weeks was to engage our partners and stakeholders. Who are the partners or stakeholders in the implementation of these Compulsory Insurances? Take Motor, who are the stakeholders in Motor Insurance? Statutorily, the first stakeholder is the FRSC, we then engaged them that, this is your baby; you have the duty to enforce it to ensure that people are taking motor insurance. So we asked the Nigerian Insurers Association (NIA) to collaborate and I’m glad that the NIA collaborated by giving them the handset devices to enable them conduct on-the-spot checks to authenticate whether the motor insurance policies people are carrying are fake or not. So, we are having strategic partnership with FRSC.
On the public building and buildings in course of erection, who are the statutory partners? It is the fire service. Why are they strategic partners? The law recognizes them as having a significant role to play and also assigns to them, a proportion of insurance premium generated by insurance companies to enable them maintain their fire equipments. So, we engaged them, that look, if you collaborate effectively on the implementation of Compulsory Insurances of Public Buildings you will be able to make more money in such a way that you don’t need to rely on government budget to carry out your duties and they are keying into it. In August there is going to be a conference of all fire services in Minna and heads of all fire offices will be in that conference and NAICOM will sponsor it.
For pensions, it is not even my primary responsibility to ensure that people comply with group life but it is my business because a product of group life is insurance. So, if a lot of Nigerian employers are taking group life for their workers, insurance will become bigger. And that is why we entered into strategic alliance with the Nigerian Labour Congress. When we sponsored their conference last year in Enugu, we told the Congress that this law has been made for the benefit of your people and that if an employer is not putting in place group life for workers, those employees are short changed. And we told them the benefits, stressing that the employees are not going to pay a kobo. So we are working with various trade unions to ensure that they have the lists of companies employing them and they are checking for us.
What we did is to pioneer that but ideally it is the National Pension Commission (PenCom), that should be driving it, but we are partners in progress.
If you look at Section 9 of the NHIS Act it provides that every medical service provider must have a Professional Negligence Cover, which means if a nurse injects somebody wrongfully and it causes paralysis insurance will pay and that is, if that Professional Negligence Cover is instituted. So we had a meeting with the former Director General (DG) of the agency who was removed recently to see how we can make these hospitals comply and I think they provided the list to NIA to follow up, my duty is discharged as far as that is concerned.
So, we think using these stakeholders to achieve what we want to achieve will be more effective; it’s cheaper and faster and all the organizations we have approached are very, very enthusiastic, and they are working. We think that with the revised strategy we should get a better result.
There has been issues around the 2003 Insurance Act, what is the Commission doing to ensure its reviewed?
An insurance bill has been in the offing, since I came into office there has been musical changes in the Federal Ministry of Finance. I have so far worked with a handful of ministers within this period and because the continuity has not been there not much progress has been made with the bill. Unfortunately that bill has not made it to the National Assembly but we are going to urge the incoming government to give priority to the passage of that bill. I am very, very enthusiastic about it and I am very confident that the new government will look at it. I think it will be in the front burner of the new administration. So we are going to have a new Insurance Act.
I don’t think it is appropriate to say that the 2003 Insurance Act is obsolete, no. What we are trying to do with the new bill is to make it more developmental, more progressive, and more user-friendly. Under this 2003 Insurance Act the regulator is sweating. If I want to punish you, I have to write you to tell me why I should not punish you, I give fourteen days, then wisely you delay and probably you send the reply on that fourteenth day which is a Friday, I have lost three weeks. And if I want to intervene in a company, in most cases we need not write to inform them. It is not flexible legislation like the banking legislation. The Security and Exchange Commission (SEC) legislation is very flexible and it enables the regulator to take proactive action so that you do not take action when the die is cast. So that is essentially what we want to do with the new law to give the regulator more flexibility.