Like most banks now struggling to keep afloat after the Federal Government’s drastic measure of pulling out all its accounts from Deposit Money Banks (DMBs), and transferring same into Central Bank of Nigeria through the Treasury Single Account (TSA), insurance companies rely on government assets for survival.
The insurance companies also devise every antics to have government’s accounts even at the cost of professional ethics. Should the government resolve today that no privately owned insurance company will insure its assets, the fate of insurance companies will be worse than those faced by banks in Nigeria, following the implementation of the TSA which sapped them of easy funds.
To secure a share of government’s accounts, dubious professionals within the insurance sector collude with corrupt officials reposed with the responsibility of insuring government assets; indulge in unwholesome practices detrimental to the sector and the economy in general.
Diversion of insurance funds
Two major examples of unprofessional practices include rate cutting and either non-insurance or under insurance of some government assets with its attendant negative consequences at the long run.
For instance, how much of the annual budget for insurance of government assets were actually spent for that purpose were unknown until a 2014 report revealed that of a whooping N2billion appropriated for insurance, only a paltry 10 per cent or N200million was spent. The rest was either embezzled or diverted to other purposes. Of course, the immediate effect is starving the sector of expected funds and exposing government assets to colossal unforeseen risks.
The quantum of diversion of appropriated funds meant for assets insurance must be on the increase, as nobody had been penalised or standing trial for misappropriation of the funds. It may not be improper to say that government’s inaction encourages the abuse of appropriated insurance funds by individuals or groups working in the Ministries, Departments and Agencies (MDAs).
Furthermore, government has not investigated why compensation was not promptly paid by insurers of its collapsed buildings or structures gutted by fire. In May 2015, a building complex in the Federal Secretariat Abuja, which accommodates the Education Ministry, was gutted by fire. But till date, no claims were paid by the insurer. Also, in April 2015, the popular Maman Kotangora House, in Marina, Lagos, was also gutted by fire but still no claims paid.
Payment of premiums
The aforementioned instances and many undisclosed others demand extending the gale of probes to the utilisation of government’s appropriated funds for insurance of its assets nationwide, in order to sanction those culpable of diverting the funds.
Due to entrenched manipulations of the process, insurance personnel in the MDAs connive with dubious insurers to pay a token as premium, but with an unwritten agreement that in the event of any risk on the asset, the insured should not ask for claims. Consequently, many government houses damaged by fire outbreaks or affected by any other disasters remained abandoned for years until government decides to either repaired them or convert them to alternative uses.
This ugly trend persisted until the National Insurance Commission (NAICOM), warned that any insurer who indulged in such acts, does so at his/her detriment. It insisted that as the adviser to government and the regulator of the insurance sector, it would ensure that insurers paid claims to the last kobo whenever they arise irrespective of how much premium was collected.
Despite NAICOM’s insistence on payment of claims by the insurers, the government insurance personnel devised other tricks of undermining the process. This time around, they agreed to pay the standard premium rate, but will not release the premium to the insurer. In the event of any risk, they resort to negotiating with the insurer to deduct the accumulated premiums, which ought to have been paid from the assessed claims while the balance should be paid as compensation.
The corrupt practices continued unchecked up till 2013, when NAICOM, in recognition of the dangers posed by the unprofessional acts came out with the policy of “No premium, no cover” to compel the insured to pay premiums as a prerequisite for insurance cover. Such unwholesome practices retard the growth of the industry and the long term chances of paying returns on investment.
Similarly, the non-payment of claims for damaged public assets to mitigate exposures to risks is a total loss to the economy. Given the current economic recession and attendant consequences, the need to protect government’s assets becomes imperative.
Comparatively, statistics showed that in the last 11 years of operating the reformed Contributory Pension Scheme, it has accumulated over N5.8 trillion pension fund assets, but the insurance industry, which had been in operation for more than 100 years, has netted only N300 billion. The large gap shows lack of government’s commitment to invest in insurance industry, and adequate regulatory framework targeted at growing the sector.
The insurance industry’s fortunes would have fared better if government had shown seriousness in insuring its assets. In the past, government had promised not only to ensure that all its assets including official vehicles are insured, but also appropriate funds for them, but were not matched with actions.
Notwithstanding the challenges in the administration of insurance in Nigeria, the President of the Nigerian Council of Registered Insurance Brokers (NCRIB), Mr Kayode Okunero, said members would embark on a major sensitisation programme, titled: “National Risk Alert” to point the way forward for government insurance.
According to Okunero, “There could not have been a better time to raise the issue of insurance of nation’s national assets than now, in view of the present administration’s disposition to prudence in management of the nation’s resources. It is our thinking that inputs should be solicited from the insurance industry in the government’s economic policies.
“As it is today, many of the nation’s assets are uninsured by government through its ministries and agencies, despite the promulgation of the law on compulsory insurances.
“We must not forget that aside from providing investible funds, insurance is one of the financial management strategies that must be factored into genuine economic revival development initiatives. In this vein, our Council wishes to commence a sensitisation campaign under the slogan, ‘National Risk Alert’ to continually draw attention of government to its risk exposures.”
Similarly, given the high level of defaults NAICOM had urged MDAs to ensure compliance with the provisions of extant laws in relation to the insurance of government assets, as well as support the industry as risk bearers in the economy.
The Commissioner for Insurance, Alhaji Mohammed Kari, while speaking at a meeting with the Nigerian Customs Service (NCS) management in Abuja, urged the agency to explore the window of opportunities by ensuring that it complied with the provisions of the law in all its insurance activities.
He also appealed to all MDAs to set up insurance desks or units in their various offices and ensure that they are manned by qualified insurance professionals to handle the insurance of their assets, thus cutting down on cases of diversion of insurance funds.
Meanwhile, the NAICOM boss disclosed of plans to set up a government assets insurance pool, through which the Commission intends to check unprofessional antics deployed by many insurers in a bid to win government accounts.