Regime of penalties, fines causes ripples in Insurance

Stakeholders call for NAICOM board to check its
ROBUST and hard regulatory measures taken by the industry’s regulator – National Insurance Commission (NAICOM) may be causing ripples in the industry. It is not the best of time for operators in view of agitation by practitioners mostly underwriters and insurance brokers against what they regard as incessant heavy fines and penalties levied against industry operators.

The agitation is coming at the backdrop of regulatory action taken by the commission among others, the recent delisting of 108 insurance brokers by the commission as being too harsh and ill conceived, considering the ripple effect that such action would have on employment in the country and the fragile image of the insurance industry.

One of the brokerage firms affected but preferred anonymity stated “it stands to reason why NAICOM would allow some employees that will be relieved of their jobs in those delisted companies to join the over saturated unemployment market that will now go cap in hand struggling for the N5,000 unemployment benefits of the Federal Government”.
“The Commissioner’s action on the 108 delisted Brokers confirmed the views on the Commissioner’s assumption of office that he had vowed to reduce drastically the number of brokers operating in Nigeria to about 50 from its current number of 550.
“Much as it is understood that NAICOM, as a regulatory agency, has the responsibility to enhance ethical and professional discipline in the industry, the roles must be played in consensus with the operators and their regulatory bodies, rather than the unilateral imposition as being done by the commission at the moment”, he said.

According to him, as a way of assisting NAICOM to be less vulnerable to criticism for some of its policy implementation, we would advise the Federal Government to urgently inaugurate the board of the commission and ensure it is properly constituted, to serve as a check on the likely excesses of some of the officials. Anything short of this will definitely amount to NAICOM working at cross purposes to the Federal Government change agenda in its drive for sustainable economic development, for which the insurance industry has a crucial role to play.

To Insurance Industry shareholders who spoke recently at Ibadan, it is the regime of fines and penalties on every minute fault. This, according to them is a threat to the existence of a fragile industry with already battered image and poor performance at the stock exchange market.

According to the organised shareholders, “insurance institutions had alleged NAICOM’s imposition on their firms unbearable fines and penalties that have adversely affected their bottom line, resulting in their inability to pay dividend to shareholders”.
“The commission had been wielding its power to the disadvantage of the industry it was established to regulate and grow. Principally, the commission has foisted on the industry a plethora of regulations giving an impression that the industry, as it is today, is over regulated. Even though, NAICOM had at several fora claimed that the industry was under regulated in relation to the practice in other parts of the World”.

An industry manager lamenting the challenges in the industry said, “NAICOM has not done enough to grow the industry and empower it to live up to its mettle in terms of contribution to the nation’s Gross Domestic Products (GDP) unlike other sectors within the financial services sector. As at today, it is regretful that insurance which should be one of the most critical drivers of the economy is struggling for survival due to challenges of over regulation”.

In advanced climes, he said, insurance is a key driver of national economic growth and reservoir of huge investible funds for infrastructural development. The import of insurance in those countries is such that the entire human existence is inextricably tied to the risk mitigating device.

However, the Commissioner for Insurance, Mohammed Kari, speaking at the 2015 Champion Newspaper Insurance Day in Lagos, said you may all be aware of recent news publication in the media being orchestrated by shareholders of insurance companies putting the blame on the inability of their companies to pay them dividend squarely on the one per cent insurance development levy and fines and penalties paid to the commission.

He said: “For the benefit of discerning shareholders of quoted insurance companies and the general public, as government agency that believes in the rule of law, NAICOM has never charged insurance institutions any levy outside the law that governs its operations.”

Let me invite management of all insurance companies to make public the charges they have incurred from NAICOM which are outside the extant laws governing the sector. Besides, we also urge them to make public the sum total of charges each company has paid to NAICOM at the end of a financial lyear in relation to their gross premium income that has culminated in their inability to pay dividend to their shareholders.

On the issue of one per cent insurance levy, he said, it is imperative to note that this is a statutory provision of the law and not a regulation of NAICOM. For the avoidance of doubt, section 16(1)(b) of the NAICOM Act 1997 mandates all insurance institutions to remit one per cent of their gross premium to the commission as insurance levy. This system of funding of regulators applies to almost sector regulators in Nigeria – IFRS, CBN. SEC. NDIC, PenCom, etc.

Kari said “It may also interest the shareholders and indeed the general public to note that insurance is a regulated business. Operators who choose to play in the sector must be prepared to do so in strict compliance with the extant insurance laws. Fines and sanctions for any default/infractions by any operator are clearly spelt out in the respective laws to the knowledge and understanding of the operators.

The law may not be perfect, but as long as it remains the law, its provisions must be complied with and it is the responsibility of NAICOM , as the statutory regulatory agency of the sector to ensure every operator play by the rule”.

 

Source: Guardian News