To ensure a radical change and eradicate the smear of poor public perception the insurance industry has risen to the challenge to take its pride of place in the country’s market that is dotted with lush opportunities for growth.
This new approach by the industry regulator, National Insurance Commission (NAICOM), is neither stray nor incidental. It is a product of deliberate policy aimed to make growth happen in the industry and gain traction. The industry targets to grow the percentage of the adult population that holds one or more insurance policies from 6 per cent to 25 per cent and dilate the insurance sector market size from 0.7 per cent to 3 per cent. The number of policies in the retail segment of the market is estimated at 2.5 million, but the target in the new dispensation sees the need to up this figure to 25 million and increase the proportion of the adult population that understands the benefits and uses of insurance products and services increases from 40 per cent to 80 per cent. Above all, a target of N1 trillion total premium income has been set for the industry against 2017. Going forward, NAICOM says it is all out to enforce compulsory insurance, especially at the states’ level and within the Federal capital Territory (FCT), Abuja.
We lend our support to this latest move by the industry regulator to pump up volume and ensure that the business of insurance remains deep-rooted in the Nigerian market. This is more so when it is considered that NAICOM has been left to survive on its own without subvention from the government for more than one year.
The move by the regulator has also become pertinent because of the need to grow the business of insurance in conformity with the nation’s status as Africa’s largest economy. We further believe that the latest steps being taken by the regulator would create a boon in the market for the overall interest of the various players in the industry, especially if all the compulsory aspects of the business are astutely harnessed.
We are aware that there are at least, 10 million motor vehicles on Nigerian roads, going by statistics from the Federal Road Safety Commission (FRSC). Meticulously enforcing and tracking just half of this compulsorily would generate so much money. So also is the case of compulsory insurance of all public buildings as required by the insurance law.
We are convinced that when more depth, volume and value are created by the industry through proper and sustained enforcement of compulsory insurance, this would position the service providers to have more passion for service delivery rather than cash, and remain more market based in their approach. It will also help their business to promptly pay claims to the insured when the risks insured against occur since insurance is business based on trust.
It is encouraging that Lagos and Ogun States are taking the lead in the effort at making the implementation of compulsory insurance a reality. Other states need to follow this example and support NAICOM in its initiative aimed at covering 12 States this fiscal year.
We are enchanted by NAICOM’s adoption of the Risk Based Supervision (RBS) rather than the old-fashioned 100 per cent Compliance Based Supervision in repositioning the industry to claw back to relevance and make more significant impact in aiding business and economic growth in the country.
RBS is a structured supervisory approach that is aimed at identifying the most critical risks that face each company and through a focused review by the supervisor to assess the company’s management of those risks and the company’s financial vulnerability to potential adverse experience.
The new approach requires supervisors to review the manner in which insurers are identifying, measuring and controlling their risks and to assess system of risk response of a firm with the supervisor’s own processes and interventions in line with the assessment. The central tenet of RBS is the relationship between risk and capital, the higher the risk profile of the insurer, the higher the capital it must hold. We believe this is the beauty of the new order of supervision, and urge the regulator to be firm and discreet in ensuring the success of the regime.
The key benefits of RBS are that it allows for the systematic assessment of insurers’ risks, using a formalised framework at regular intervals; allows for the identification of insurers’ strengths and weaknesses and areas within insurers where difficulties or challenges exist; encourages a strong risk management function in insurers; promotes the cost-effective use of regulatory resources; and allows for continuous monitoring, early warning indicators, prompt intervention and timely action.
This underlines our support for the new initiative.
Source: Daily Independent