Expert canvasses establishment of micro-insurance firms
Chuks Udo Okonta
The Managing Director Riskguard-Africa Nigeria Limited Yemi Soladoye, has called for the the establishment of micro-insurance firms to help provide insuarnce services at the grassroots.
He told Inspen that the entrenchment of micro-insurance operation which is the third tier of insurance would give people at the grassroot the opportunity to benefit from insurance practice.
He noted that micro-insurance practice which entails retail strategy would boost the industry's premium income. He called for a refocus of the industry, adding that the industry can never develop through the use of a single marketing channel.
He said: "There must be a trigger from within or a threat from without in the industry. The trigger from within will happen when one insurance company decides to change the market by providing improved customer service that will change the focus of the industry. A threat from without is when National Insurance Commission (NAICOM) appreciates the fact that insurance should not be distributed only through the traditional distribution channel.
"In other nations, places like shoprite, cooperative societies and megaplaza distribute insurance. When NAICOM is confidence enough to open the door for retail marketing there would be tremendous growth in the industry. NAICOM would always say they do not have the capacity to monitor such, but they should start from somewhere. If NAICOM opens the doors, what it gets from the N200 billion that is generated now by operators will be multiplied by five.
"For example, let NAICOM tells all insurance journalists that have been on ground for the past three years, bring in application to run a micro-insurance company with statutory capital of a car, rent a room and parlour, have a fan not an aircondition and the total cost must not be beyond N1 million, including application fee of N25,000 and renewer fee of N5,000. That will open up the industry. In countries like the Philipines, they have three tiers of insurance system. just like what we have in the banking sector. The national level operation has its capital base, state has its and the local government. If we do these, insurance will reach every where."
He noted that the un-tapped insurance opportunities can only be harness when the industry set its focus on micro-insurance which has been left fallow for years.
Friday 30 November 2012
Thursday 29 November 2012
CIIN inducts new awardees
CIIN inducts new awardees
Chuks Udo Okonta
The Chartered Insurance Institute of Nigeria (CIIN) is warming up for its 2012 Graduation and Awards Ceremony. The event which will witness the addition of sixteen new fellows to the Institute’s prestigious Society of Fellows, will also involve the induction of 134 new Associates into the fold of Insurance professionals.
President of CIIN, Dr. Wole Adetimehin has said that the Institute is committed to the production of fit and proper practitioners to continually drive the Insurance sub-sector of the Nigerian economy. Adetimehin further said that professionalism is key to the growth and development of the financial services industry stating that professionals are the custodians of the ethics and codes of conduct for all professions. ‘I am happy with the Institute’s giant strides in the area of producing Insurance professionals whose expertise will continue to impact positively on our sector today and in the future’, he stated.The CIIN Graduation and Awards Ceremony is scheduled for Wednesday 5th December, 2012 at 10 Degrees Events Centre, Billings way, Ikeja. The Graduation Lecture titled "The Professional and Nation Building" will be delivered by Mr. Wole Oshin, Managing Director, Custodian and Allied Insurance Plc.
A release signed by Mr. Joseph Obah, CIIN’s Director of Corporate Communications also stated that the Commissioner for Education, Lagos State, Mrs. Olayinka Oladunjoye will be the Special Guest of Honour. The honourable Commissioner will be at home in her former constituency as an Insurance practitioner prior to her present appointment.
Amongst those to receive the Institute’s Fellowship are, Abubakar Sabin Bello of the National Insurance Commission and Mrs. Folashade Onanuga, former President of the Professional Insurance Ladies Association (PILA) who is now with the Lagos State Pensions Commission. Others are, Mr. Uche Aniago, Chairman of CIIN’s Port Harcourt chapter and Branch Manager of Union Assurance in the oil city; Mr. Kins Ekebuike, Managing Director, UnityKapital Assurance plc; Aremo Adeniyi Ogunsanya of Oriwu Insurance Brokers and Mr. Ayodapo Ajayi Shoderu, Deputy President, Nigerian Council of Registered Insurance Brokers as well as the underlisted:
Abidogun Ademola Ayotunde - Cornerstone Insurance Plc
Adekeye Oluseyi Olasunkanmi - SCIB Nigeria & Co Ltd
Adekoya Adeyinka Abisoye (Mrs.) - Cornerstone Insurance Plc
Akingbade Akinjide Ajao - Sterling Assurance Nigeria Ltd
Apampa Moruf - AIICO Insurance Plc
Arusiuka Adetutu (Mrs.) - AIICO Insurance Plc
Duru Japhet Ogueri - International Energy Ins. Plc
Olabiyi Festus Idowu - AIICO Insurance Plc
Popoola Samson Olugbenga - Hogg Robinson Nigeria Ltd
Sogbesan Gregory Olanrewaju - SCIB Nigeria & Co Ltd
The Chartered Insurance Institute of Nigeria which has as part of its statutory duties, the responsibility of maintaining a register of members, has continued to satisfy this requirement. The Institute had 1,805 active and 815 inactive professional members as at the end of May 2012. This comprised 148 active Fellows and 40 inactive Fellows. 1,667 active Associates and 775 inactive Associates.
It will be recalled that the Federal Government through the Federal Ministry of Commerce has been engaged in the preparation of a list of Active and Inactive professionals in Nigeria for the purpose of verifying the status of professionals in the country. For this reason, the CIIN had categorized its professional members and submitted a list of its active professionals to the commerce ministry for inclusion in its data. Director General of the CIIN, Mr. Adegboyega Adepegba while clarifying the ‘Active’, ‘Inactive" status, stated that the active members are those who have fulfilled their financial obligation to the Institute stating that the inactive ones are those who have defaulted in the payment of their annual dues.The CIIN has a total number of 2,624 professional members made up of 188 Fellows and 2,436 Associates. These figures will be adjusted at the end of the Institute’s Graduation Ceremony when the existing number of Fellows and Associates will receive a boost.
'Retail strategy panacea for insurance growth'
'Retail strategy panacea for insurance growth'
Insurance operators have planned to raise their premium income from N200 billion to N1 trillion this year, but available statistics show that the projection cannot be achieved. The Managing Director Riskguard-Africa Nigeria Limited Mr Yemi Soladoye in this interview with Chuks Udo Okonta, said insurance growth and development hinge on the adoption of retail marketing strategy.
How has the Market Developement and Restructuring Initiative (MDRI) fared?
The MDRI is the turning point of the Nigerian Insurance Industry. To access a project effectively, you must look at where you are coming from. The initiative is a turing point because the operators, regulator,support service providers, journalists and government realise the fact that there is something going on in the industry. MDRI is also a turing point because it is from that stage we saw the regulator leading the market. There is a united focus for all of us. Whether you adopt it or not, we all know that there is a project on ground and there is a destination to reach and there is a direction as to the way we can go for us to secure increased penetration for insurance business in this country. Every where in the world, implimentation has always be the challenge to achieving projects. MDRI is a case of delayed implimentation. Most people are reading the strategy document and not relating it to when implimentation took off. If there is a projection that in year four, we will get N1 trillion and as we could see from the paper, we were to start in 2009, we had what we are to achieve in 2009, 2010, 2011 and 2012. So, N1 trillion is in year four which is 2012. If implimentation started in 2011, it will be a case of shifting the deliverables forward base on the difference on the ground between the strategy crafting and the implimentation. The initiative is a watershield in the history of the industry and it is also an evergreen thing . You cannot wish it away, as it has brought about many developments. When you read the strategy document, you would see that micro-insurance is part of the area that was recommended as were the industry will get development. Takafu is also an aspect of the initiative. As MDRI is targeted as restructuring, therefore, all the restructuring that are happening in the market are embedded within the the programme.
Will the delay necessitiates an adjustment of the MDRI programme?
The initiative is a business agenda, which entails enforcement of compulsory insurance, entrenchment of retail insurance system and development of micro-insurance. All these were used to arrived at the N1 trillion premium target. So, N1 trillion is an effect, the things that will cause the effect are the enforcement of compulsory insurance, prominence of retail insurance system and development of micro-insurance and that insurance companies adopt retail system, whereby they would have a lot of foot soldiers. We also projected that by 2012, we should have about 5000 insurance agents in the market. The insurance companies feel that retail system is not the area they want to adopt, despite the fact that the regulator has put in place for them a lot of incentives to make them go into agency recruitment. Note that the National Insurance Commission (NAICOM) does not have underwriting license neither does it has a brokering license. The regulator has done all it could, believing that this is what is operating ease where and if underwriters adopt the initiative we will get there. From the reports available to us, we have observed that the underwriters are now realigning to embrace the initiative. The delay by operators which has to do with preparation really affected the implimentation. We believe that very soon we will achieve the N1 trillion mark which is for 2012, while N2.5 trillion for 2015 and N6 trillion 2020. In essence, MDRI has not ended, but since there was delay, we can as well adjust. Whether we like it or not, one day we will reach N1 trillion, and we will reach it faster than we have started. The results in the past five years that the Commissioner for Insurance Fola Daniel has been in position, is an indication that the industry will meet the projections.
What is the level of implimentation of the MDRI programme?
Before the coming of the commissioner the best we had on the premium income was 24 per cent increase, now it has increased to 36 per cent. With our projection, by the time all the insurance companies that are engaging agents fully commence operations, there will be tremendous increase. By December 2009, in the records of NAICOM, they have about 1695 agents registered with them by different insurance companies, by December 2010, the number increased to 3404, so, within a period of one year, there was like 2000 increase. While these are the numbers registered with NAICOM, it is on record that about 70 per cent of insurance companies do not register their agents, because they want their agents to perform before they can start paying huge fees on them. Today, I believe we should have up to about 10000 agents in the market. NAICOM cannot be solely responsible for the implimentation of the initiative. It has created the enabling environment for it, the operators and the public have a lot to do on the implimentation. When the operators fail to educate the public, NAICOM would not be able to do more. Like under the builders liability, it is when the public understand their rights and report infrations that NAICOM would be able to enforce the provision on section 64 which is on infraction. NAICOM has even gone further to help operators to sencitise the public on compulsory insurance, but the business culture of operators has not helped the situation. The operators like going to a broker to collect cheques, forgeting the fact that under the MDRI, there is focus on groups and alliances. Take for an example a group like the Nigerian Bar Association (NBA), I am sure it has about 20,000 members, if an insurance company designs a product for all members of NBA, and each of them pays N10,000 in a year, that would amounts to N200 million. The cost on this type of business is always low. This and many other types of business initiatives are what the MDRI focuses, which the underwriters are slow and failed to adopt. Despite the challenges, NAICOM is not relenting on its oars, as it has also gone to established the Insurance Consumers Association, which would very soon begin to educate the public on the need for insurance. On micro-insurance, NAICOM commissioned a consultant and colloborate with a foreign consultant to put it in place. That is also is aspect of the implimentation. NAICOM has almost perfected its work on consumer education, which is massive insurance education in the country, it would involve distributions of hand bill and media advertorials to dissiminate the information, so that within the next two years, no body in the country will be in doubt as to the benefits derivable from insurance operations and the rights of the public.
What is the present state of the micro-insurance initiative?
The final presentation of the micro-insurance initiative was made on October 24. NAICOM has also come up with the guidelines on its implimentation. The next stage is the implimentation. From personal observation, the commission is very prepared to commence implimentation of the initiative.
What are those things that have helped foreign underwriters that are lacking in the local market?
There are three things that are lacking in our market why it has not developed and until they are adopted the market cannot develop. The first thing is full adoption of retail insurance. The secord is full adoption of retail insurance and third full adoption of retail insurance. There is no other thing. We have a population of over 170 million people. Unless underwriters understand that insurance is like banking which focuses on retail and create access to insurance products, through the foot soldiers, wide spread offices, train people to sell products, give good services to customers, design and develop products that are relevant to the public and enter into strategic alliances with no traditional channels -what we are doing is using brokers who only engage in corporate and government business to distribute our product. If the Nigerian Insurers Association (NIA), would sit and agree to face the retail market, and strive to insure atleast 10 million people within the next five years, for about N3000 that would amount to huge premium income. To me, it is a national duty that insurance companies should give us financial protection in this country, but that is lacking.
What is you take on the call for reduction on the number of operators?
We do not have what I would call real insurance company in Nigeria. What we have is what I can call cuttage companies. What the industry writes as annual premium income, is not up to a premium that a branch or agency of a company writes in a normal insurance setting. For example, look out the results of Fortune 500, American Insurance Group (AIG) and more. These are companies that are generating about $250 billion premium each year. Covert that to naira, it is about N4 trillion. Last year, analysis was done of the 500 biggest companies in Africa, looking at the insurance companies on the report, there were 20, none is from Nigeria. So, we are not there. A small country like Mauratius, with a population of 1.2 million people, is generating 60 per cent of the premium income of Nigeria. This is because retail insurance has taken cetre place there. The number of insurance companies has not really impact the market. China, has a population of about 1.3 billion people, I am not sure the number of insurance firms there are up to ours. India has a population of 1.1 billion people the number of insurance firms is not up to 40. When the right thing is done, when operators have the vision to create a big visionary customers service oriented company, people will see the need to merge. People will see the need to create big companies.
How can the challenge of unhealthy competition in the industry be tackled?
Every problem in the industry is a manifestation of the refusal by the operators to adopt retail as a business policy. That is, the board of the various insurance companies, as a matter of urgency, should compel their management team to adopt the retail marketing. The operators are into the problem of unhealthy competition because they boxed themselve into a very narrow distribution outlet, which is brokering market. In any situation, price becomes the only competitative strategy, when people are not adding value. That the cleints are asking for reduced price every year, and the brokers are doing the same, it is a manifestation of the fact that they are saying that they have not seen any competitative strategy. So, the only thing that the marketers do, is to ask the broker, how much is the rate we gave you last year, we are ready to reduce it. It is the admission of the fact, that no other strategy. The insurance companies, consentrate on premium growth, as against market expansion. The future and the solidity of the operators can only come from market expansion. All the operators want is to ensure that their premium for this year is higher than what it was last year, and they are ready to spend anything to achieve that. If their market position last year was number six and they move to number five this year, their board would laud their effort, not minding the cost. The companies cost of doing business is indeed very high, the claims ratio is quite low. These are pointers to the fact that insurance companies need something new and better. The issue of unhealthy competition will be getting worst, until they look for better, cost effective and non volatile distribution channel. When I talk of retail, may be the operators do not understand what I mean. Bankassurance which is having a colloboration with banks is a retail channel. It also means engaging in strategic alliances with organisations, like Shoprite, Megaplaza and others. Colloborating with cooporative societies and more. It is so wide and until they adopt it, the market cannot expand. It is not a matter of if, it is compulsory, for they are already feeling the bite of the narrow distribution outlet that they are using at the moment. Most of the problems they face - high cost of doing business, premium reduction, unhealthy competition, are all manifestation of the fact that they are using narrow distribution method. If you have an alternative, you would be able to do business on your own terms, but when you do not have alternative, you have to achieve what ever any body tells you. That is the problem with the operators for they are not creating alternative distribution outlets for themselves. I think what they need to do is to go back to the drawing board to examine their operations. Each company needs to sit and draw strategy on how to develop their business and adopt retail marketing strategy. When this is done, issues of unhealthy cmpetition, premium reduction and others will stop.
What is your take on what NAICOM has done in recent time to sanitise the industry?
To day, the fear of NAICOM is the beginning wisdow for any underwriter in the country. Six years ago, it was not like this. Now, every body knows that NAICOM is in charge. It is not that the law is new. it is the same law. What NAICOM is implimenting is the same 2003 Act, which has been there before Fola Daniel came in. It is a matter of who is at the drivers seat. To me, if any body wants to run insurance business, the person must be guided by public policy. All over the world, insurance premium does not belong to insurance companies. It is the policy holders money, that is held in trust by the insurance companies. 99 per cent of the regulator due is the protection of the policy holder. With the step taken by the regulator, members of the public have better confidence and trust in the Nigerian Insurance industry, believing that there is an effective regulator in place. It will now turn round, to help the underwriters. In the sence that once people have confidence on their product and insurance mechanism, they would get more business to the extent that the position and reform been embarked by NAICOM would be yeilding results. I believe with time all the reform strategy taken by NAICOM will be part of the operators and everything will be alright. NAICOM having pushed all these reform and sanctions to the market, in the next three years, should consentrate on how the industry can get quantitative results from all the good things they have done. If they have brought in MDRI, if they need insurance education and enlightenement to get the result - in which case, we can now begin to look at it in quantitative terms. If they would need to help insurers on skill developement they should do that. If they would help them even on product developement, they should do that. If they need to assist them in providing training, they should do that, for there is huge man power shortage in the agency system. Not many people know how to run agency, so many of them do not have experience, so, if NAICOM is to help them on retail market, it will be okay. If they would help them on payment system, especially mobile payment, they should also do that. So, that at the end of the day, NAICOM would consentrate on things that would bring about huge volume of premium.
What is your taken on government attitude to insurance?
I have studied insurance business in so many countries, and I think we should appreciate the effort of government in helping insurance growth. It is government that made the law of compulsory insurance, but if something is there and you are not ready to utilise it, there is nothing that the government can do about it. The Head of Service insurance came as a result of the Pension Reform Act 2004. When it was calculated it was N23 billion. Underwriters went behind to offer all sort of rates that reduced it. Note that it is the way you present yourself that people will take you. Look at the brokering side, do you share your Lawyer fee with him? Do you share your Auditor fee with him? Do clients share insurance commission with brokers? The answer is left to you to answer. It is a matter of how we present ourselve. If building under construction should be insured, you can imagine the number. Also public buildings are to be insured, but do underwriters insure their buildings according to the law? If we are ready to do the right thing, the government would definately do more. Accountants should have professional indemnity insurance, engineers must also have it, that is the way it is done in other countries. Operations like Power Holding Company of Nigeria (PHCN) Should have indemnity, Nigerian National Petroleum Corporation (NNPC) should have indenmity. All these are there but we have failed to utilise them. With the provisions in the insurance law, the Commissioner for Insurance weights the largest power among the regulators. If you do not go to the bank to borrow and save money, the Central Bank Governor has nothing to do with you. But when you do not insure, the commissioner has power over you in the compulsory insurance. The law gives the commissioner for insurance the power to bring everybody to him. And when you did not come near him, it is an offence. The commissioner has power over insurance operators, insurance consumers and non consumers. All these are there in our laws, the government has really helped. Insurance as an industry should show the ability to colloborate and compete with other sectors of the economy. Insurance is an act that should stimulate the activities of other sectors of the economy. It is we the operators that should let the government know that when it comes to the provision of social welfare, that that is part of our work. When you want to stimulate mortgage, come to us, for every sector cannot develop without insurance and that is why you see many houses not sold, for it is only insurance that provide long term funds for the mortgage sector, telecoms oil and others. The government has tried, it is the insurance people that would show the government other areas. The Lagos-Ibadan Expressway concession was canceled because the person in charge could not get money from the banks for the project. That ought to be done by insurance firms. It is when we make the best of the compulsory insurance, personal pension that we will make money. Insurance is the only product where you collect N1 and commit yourselve to a liability of N400. Even the area where we collect huge premium like motor, which the law placed at 10 per cent and the operators reduced to five per cent, they collect N1 to pay N20 and still insurers are like beggers. Until our operators know the importance of their business, they would not be taken serious.
Where is the place of brokers in retail marketing?
The role of brokers in insurance is clearly spelt-out. Take for example the Head of Service would never give its insurance to an agent. That is solely brokers business. Brokers are wary of agents because they do not have adequate knowledge of what retail marketing is about. The fact is that even the brokers need agents. I have been to a country where a broker has 3000 agents. Brokers need to sit and understand what we are talking about. In Kenya, there is a bankassuarnce agreement between two brokers and two banks. What the brokers did was to appoint agents that sell insurance to customers of the bank. Agents can only sell a particular product of a particular underwriter, but a broker sells products of all underwriters.
What is the way forward for the industry?
There must be a trigger from within or a threat from without in the industry. The trigger from within will happen when one insurance company decides to change the market by providing improved customer service that will change the focus of the industry. A threat from without is when NAICOM appreciates the fact that insurance should not be distributed only through the traditional distribution channel. In other nations, places like shoprite, cooperative societies and megaplaza distribute insurance. When NAICOM is confidence enough to open the door for retail marketing there would be tremendous growth in the industry. NAICOM would always say they do not have the capacity to monitor such, but they should start from somewhere. If NAICOM opens the doors, what it gets from the N200 billion that is generated now by operators will be multiplied by five. For example, let NAICOM tells all insurance journalists that have been on ground for the past three years, bring in application to run a micro-insurance company with statutory capital of a car, rent a room and parlour, have a fan not an aircondition and the total cost must not be beyond N1 million, including application fee of N25,000 and renewer fee of N5,000. That will open up the industry. In countries like the Phillipias, they have three tiers of insurance system. just like what we have in the banking sector. The national level operation has its capital base, state has its and the local government. If we do these, insurance will reach every where.
Insurance operators have planned to raise their premium income from N200 billion to N1 trillion this year, but available statistics show that the projection cannot be achieved. The Managing Director Riskguard-Africa Nigeria Limited Mr Yemi Soladoye in this interview with Chuks Udo Okonta, said insurance growth and development hinge on the adoption of retail marketing strategy.
How has the Market Developement and Restructuring Initiative (MDRI) fared?
The MDRI is the turning point of the Nigerian Insurance Industry. To access a project effectively, you must look at where you are coming from. The initiative is a turing point because the operators, regulator,support service providers, journalists and government realise the fact that there is something going on in the industry. MDRI is also a turing point because it is from that stage we saw the regulator leading the market. There is a united focus for all of us. Whether you adopt it or not, we all know that there is a project on ground and there is a destination to reach and there is a direction as to the way we can go for us to secure increased penetration for insurance business in this country. Every where in the world, implimentation has always be the challenge to achieving projects. MDRI is a case of delayed implimentation. Most people are reading the strategy document and not relating it to when implimentation took off. If there is a projection that in year four, we will get N1 trillion and as we could see from the paper, we were to start in 2009, we had what we are to achieve in 2009, 2010, 2011 and 2012. So, N1 trillion is in year four which is 2012. If implimentation started in 2011, it will be a case of shifting the deliverables forward base on the difference on the ground between the strategy crafting and the implimentation. The initiative is a watershield in the history of the industry and it is also an evergreen thing . You cannot wish it away, as it has brought about many developments. When you read the strategy document, you would see that micro-insurance is part of the area that was recommended as were the industry will get development. Takafu is also an aspect of the initiative. As MDRI is targeted as restructuring, therefore, all the restructuring that are happening in the market are embedded within the the programme.
Will the delay necessitiates an adjustment of the MDRI programme?
The initiative is a business agenda, which entails enforcement of compulsory insurance, entrenchment of retail insurance system and development of micro-insurance. All these were used to arrived at the N1 trillion premium target. So, N1 trillion is an effect, the things that will cause the effect are the enforcement of compulsory insurance, prominence of retail insurance system and development of micro-insurance and that insurance companies adopt retail system, whereby they would have a lot of foot soldiers. We also projected that by 2012, we should have about 5000 insurance agents in the market. The insurance companies feel that retail system is not the area they want to adopt, despite the fact that the regulator has put in place for them a lot of incentives to make them go into agency recruitment. Note that the National Insurance Commission (NAICOM) does not have underwriting license neither does it has a brokering license. The regulator has done all it could, believing that this is what is operating ease where and if underwriters adopt the initiative we will get there. From the reports available to us, we have observed that the underwriters are now realigning to embrace the initiative. The delay by operators which has to do with preparation really affected the implimentation. We believe that very soon we will achieve the N1 trillion mark which is for 2012, while N2.5 trillion for 2015 and N6 trillion 2020. In essence, MDRI has not ended, but since there was delay, we can as well adjust. Whether we like it or not, one day we will reach N1 trillion, and we will reach it faster than we have started. The results in the past five years that the Commissioner for Insurance Fola Daniel has been in position, is an indication that the industry will meet the projections.
What is the level of implimentation of the MDRI programme?
Before the coming of the commissioner the best we had on the premium income was 24 per cent increase, now it has increased to 36 per cent. With our projection, by the time all the insurance companies that are engaging agents fully commence operations, there will be tremendous increase. By December 2009, in the records of NAICOM, they have about 1695 agents registered with them by different insurance companies, by December 2010, the number increased to 3404, so, within a period of one year, there was like 2000 increase. While these are the numbers registered with NAICOM, it is on record that about 70 per cent of insurance companies do not register their agents, because they want their agents to perform before they can start paying huge fees on them. Today, I believe we should have up to about 10000 agents in the market. NAICOM cannot be solely responsible for the implimentation of the initiative. It has created the enabling environment for it, the operators and the public have a lot to do on the implimentation. When the operators fail to educate the public, NAICOM would not be able to do more. Like under the builders liability, it is when the public understand their rights and report infrations that NAICOM would be able to enforce the provision on section 64 which is on infraction. NAICOM has even gone further to help operators to sencitise the public on compulsory insurance, but the business culture of operators has not helped the situation. The operators like going to a broker to collect cheques, forgeting the fact that under the MDRI, there is focus on groups and alliances. Take for an example a group like the Nigerian Bar Association (NBA), I am sure it has about 20,000 members, if an insurance company designs a product for all members of NBA, and each of them pays N10,000 in a year, that would amounts to N200 million. The cost on this type of business is always low. This and many other types of business initiatives are what the MDRI focuses, which the underwriters are slow and failed to adopt. Despite the challenges, NAICOM is not relenting on its oars, as it has also gone to established the Insurance Consumers Association, which would very soon begin to educate the public on the need for insurance. On micro-insurance, NAICOM commissioned a consultant and colloborate with a foreign consultant to put it in place. That is also is aspect of the implimentation. NAICOM has almost perfected its work on consumer education, which is massive insurance education in the country, it would involve distributions of hand bill and media advertorials to dissiminate the information, so that within the next two years, no body in the country will be in doubt as to the benefits derivable from insurance operations and the rights of the public.
What is the present state of the micro-insurance initiative?
The final presentation of the micro-insurance initiative was made on October 24. NAICOM has also come up with the guidelines on its implimentation. The next stage is the implimentation. From personal observation, the commission is very prepared to commence implimentation of the initiative.
What are those things that have helped foreign underwriters that are lacking in the local market?
There are three things that are lacking in our market why it has not developed and until they are adopted the market cannot develop. The first thing is full adoption of retail insurance. The secord is full adoption of retail insurance and third full adoption of retail insurance. There is no other thing. We have a population of over 170 million people. Unless underwriters understand that insurance is like banking which focuses on retail and create access to insurance products, through the foot soldiers, wide spread offices, train people to sell products, give good services to customers, design and develop products that are relevant to the public and enter into strategic alliances with no traditional channels -what we are doing is using brokers who only engage in corporate and government business to distribute our product. If the Nigerian Insurers Association (NIA), would sit and agree to face the retail market, and strive to insure atleast 10 million people within the next five years, for about N3000 that would amount to huge premium income. To me, it is a national duty that insurance companies should give us financial protection in this country, but that is lacking.
What is you take on the call for reduction on the number of operators?
We do not have what I would call real insurance company in Nigeria. What we have is what I can call cuttage companies. What the industry writes as annual premium income, is not up to a premium that a branch or agency of a company writes in a normal insurance setting. For example, look out the results of Fortune 500, American Insurance Group (AIG) and more. These are companies that are generating about $250 billion premium each year. Covert that to naira, it is about N4 trillion. Last year, analysis was done of the 500 biggest companies in Africa, looking at the insurance companies on the report, there were 20, none is from Nigeria. So, we are not there. A small country like Mauratius, with a population of 1.2 million people, is generating 60 per cent of the premium income of Nigeria. This is because retail insurance has taken cetre place there. The number of insurance companies has not really impact the market. China, has a population of about 1.3 billion people, I am not sure the number of insurance firms there are up to ours. India has a population of 1.1 billion people the number of insurance firms is not up to 40. When the right thing is done, when operators have the vision to create a big visionary customers service oriented company, people will see the need to merge. People will see the need to create big companies.
How can the challenge of unhealthy competition in the industry be tackled?
Every problem in the industry is a manifestation of the refusal by the operators to adopt retail as a business policy. That is, the board of the various insurance companies, as a matter of urgency, should compel their management team to adopt the retail marketing. The operators are into the problem of unhealthy competition because they boxed themselve into a very narrow distribution outlet, which is brokering market. In any situation, price becomes the only competitative strategy, when people are not adding value. That the cleints are asking for reduced price every year, and the brokers are doing the same, it is a manifestation of the fact that they are saying that they have not seen any competitative strategy. So, the only thing that the marketers do, is to ask the broker, how much is the rate we gave you last year, we are ready to reduce it. It is the admission of the fact, that no other strategy. The insurance companies, consentrate on premium growth, as against market expansion. The future and the solidity of the operators can only come from market expansion. All the operators want is to ensure that their premium for this year is higher than what it was last year, and they are ready to spend anything to achieve that. If their market position last year was number six and they move to number five this year, their board would laud their effort, not minding the cost. The companies cost of doing business is indeed very high, the claims ratio is quite low. These are pointers to the fact that insurance companies need something new and better. The issue of unhealthy competition will be getting worst, until they look for better, cost effective and non volatile distribution channel. When I talk of retail, may be the operators do not understand what I mean. Bankassurance which is having a colloboration with banks is a retail channel. It also means engaging in strategic alliances with organisations, like Shoprite, Megaplaza and others. Colloborating with cooporative societies and more. It is so wide and until they adopt it, the market cannot expand. It is not a matter of if, it is compulsory, for they are already feeling the bite of the narrow distribution outlet that they are using at the moment. Most of the problems they face - high cost of doing business, premium reduction, unhealthy competition, are all manifestation of the fact that they are using narrow distribution method. If you have an alternative, you would be able to do business on your own terms, but when you do not have alternative, you have to achieve what ever any body tells you. That is the problem with the operators for they are not creating alternative distribution outlets for themselves. I think what they need to do is to go back to the drawing board to examine their operations. Each company needs to sit and draw strategy on how to develop their business and adopt retail marketing strategy. When this is done, issues of unhealthy cmpetition, premium reduction and others will stop.
What is your take on what NAICOM has done in recent time to sanitise the industry?
To day, the fear of NAICOM is the beginning wisdow for any underwriter in the country. Six years ago, it was not like this. Now, every body knows that NAICOM is in charge. It is not that the law is new. it is the same law. What NAICOM is implimenting is the same 2003 Act, which has been there before Fola Daniel came in. It is a matter of who is at the drivers seat. To me, if any body wants to run insurance business, the person must be guided by public policy. All over the world, insurance premium does not belong to insurance companies. It is the policy holders money, that is held in trust by the insurance companies. 99 per cent of the regulator due is the protection of the policy holder. With the step taken by the regulator, members of the public have better confidence and trust in the Nigerian Insurance industry, believing that there is an effective regulator in place. It will now turn round, to help the underwriters. In the sence that once people have confidence on their product and insurance mechanism, they would get more business to the extent that the position and reform been embarked by NAICOM would be yeilding results. I believe with time all the reform strategy taken by NAICOM will be part of the operators and everything will be alright. NAICOM having pushed all these reform and sanctions to the market, in the next three years, should consentrate on how the industry can get quantitative results from all the good things they have done. If they have brought in MDRI, if they need insurance education and enlightenement to get the result - in which case, we can now begin to look at it in quantitative terms. If they would need to help insurers on skill developement they should do that. If they would help them even on product developement, they should do that. If they need to assist them in providing training, they should do that, for there is huge man power shortage in the agency system. Not many people know how to run agency, so many of them do not have experience, so, if NAICOM is to help them on retail market, it will be okay. If they would help them on payment system, especially mobile payment, they should also do that. So, that at the end of the day, NAICOM would consentrate on things that would bring about huge volume of premium.
What is your taken on government attitude to insurance?
I have studied insurance business in so many countries, and I think we should appreciate the effort of government in helping insurance growth. It is government that made the law of compulsory insurance, but if something is there and you are not ready to utilise it, there is nothing that the government can do about it. The Head of Service insurance came as a result of the Pension Reform Act 2004. When it was calculated it was N23 billion. Underwriters went behind to offer all sort of rates that reduced it. Note that it is the way you present yourself that people will take you. Look at the brokering side, do you share your Lawyer fee with him? Do you share your Auditor fee with him? Do clients share insurance commission with brokers? The answer is left to you to answer. It is a matter of how we present ourselve. If building under construction should be insured, you can imagine the number. Also public buildings are to be insured, but do underwriters insure their buildings according to the law? If we are ready to do the right thing, the government would definately do more. Accountants should have professional indemnity insurance, engineers must also have it, that is the way it is done in other countries. Operations like Power Holding Company of Nigeria (PHCN) Should have indemnity, Nigerian National Petroleum Corporation (NNPC) should have indenmity. All these are there but we have failed to utilise them. With the provisions in the insurance law, the Commissioner for Insurance weights the largest power among the regulators. If you do not go to the bank to borrow and save money, the Central Bank Governor has nothing to do with you. But when you do not insure, the commissioner has power over you in the compulsory insurance. The law gives the commissioner for insurance the power to bring everybody to him. And when you did not come near him, it is an offence. The commissioner has power over insurance operators, insurance consumers and non consumers. All these are there in our laws, the government has really helped. Insurance as an industry should show the ability to colloborate and compete with other sectors of the economy. Insurance is an act that should stimulate the activities of other sectors of the economy. It is we the operators that should let the government know that when it comes to the provision of social welfare, that that is part of our work. When you want to stimulate mortgage, come to us, for every sector cannot develop without insurance and that is why you see many houses not sold, for it is only insurance that provide long term funds for the mortgage sector, telecoms oil and others. The government has tried, it is the insurance people that would show the government other areas. The Lagos-Ibadan Expressway concession was canceled because the person in charge could not get money from the banks for the project. That ought to be done by insurance firms. It is when we make the best of the compulsory insurance, personal pension that we will make money. Insurance is the only product where you collect N1 and commit yourselve to a liability of N400. Even the area where we collect huge premium like motor, which the law placed at 10 per cent and the operators reduced to five per cent, they collect N1 to pay N20 and still insurers are like beggers. Until our operators know the importance of their business, they would not be taken serious.
Where is the place of brokers in retail marketing?
The role of brokers in insurance is clearly spelt-out. Take for example the Head of Service would never give its insurance to an agent. That is solely brokers business. Brokers are wary of agents because they do not have adequate knowledge of what retail marketing is about. The fact is that even the brokers need agents. I have been to a country where a broker has 3000 agents. Brokers need to sit and understand what we are talking about. In Kenya, there is a bankassuarnce agreement between two brokers and two banks. What the brokers did was to appoint agents that sell insurance to customers of the bank. Agents can only sell a particular product of a particular underwriter, but a broker sells products of all underwriters.
What is the way forward for the industry?
There must be a trigger from within or a threat from without in the industry. The trigger from within will happen when one insurance company decides to change the market by providing improved customer service that will change the focus of the industry. A threat from without is when NAICOM appreciates the fact that insurance should not be distributed only through the traditional distribution channel. In other nations, places like shoprite, cooperative societies and megaplaza distribute insurance. When NAICOM is confidence enough to open the door for retail marketing there would be tremendous growth in the industry. NAICOM would always say they do not have the capacity to monitor such, but they should start from somewhere. If NAICOM opens the doors, what it gets from the N200 billion that is generated now by operators will be multiplied by five. For example, let NAICOM tells all insurance journalists that have been on ground for the past three years, bring in application to run a micro-insurance company with statutory capital of a car, rent a room and parlour, have a fan not an aircondition and the total cost must not be beyond N1 million, including application fee of N25,000 and renewer fee of N5,000. That will open up the industry. In countries like the Phillipias, they have three tiers of insurance system. just like what we have in the banking sector. The national level operation has its capital base, state has its and the local government. If we do these, insurance will reach every where.
Monday 26 November 2012
CPS' ll provide secure pension for workers - PenCom
CPS’ll provide secure pension for workers – PenCom
by Mudiaga Affe
The Commissioner Inspectorate, National Pension Commission, Dr. Musa Ibrahim, has said that the contributory Pension Scheme was set up by the Federal Government to solve problems that emanated from old scheme.
Ibrahim, said this during a strategic meeting with managing directors and chief executive officers of licensed pension operators in Calabar, Cross River State.
He said, "There were problems relating to payment of pensions in Nigeria . There were also all sorts of allegations relating to fraud, misappropriation and non-payment of pension for many years in which people suffered.
"In 2004, the Federal Government was bold enough to say lets draw a line and stop this. Once you give money to people to distribute to other people, you have problems and that was why the Federal Government had to set up the contributory pension system where every worker will open his own retirement savings account and contributions from the employer and that of the worker will be paid on monthly basis."
According to him, the country’s pension fund will increase from its present N2.9tn to N3tn at the end of 2012.
Between 2004 and 2012, he added that the country’s pension fund had grown tremendously.
He said, "By the end of this year, Nigeria’s pension fund will increase to N3tn which can be compared to the Federal Government’s budget of N4.9tn."
Ibrahim also expressed the hope that in the next five years the pension scheme would build up funds that could surpass the federal budget, adding that the enormous resources being gathered was not only to cater for retirement benefits of pensioners but also to boost the real sector of the economy.
In his remarks, the Director-General, PENCOM, Mr. M. K Ahmed, said the strategic meeting between the commission and heads of licensed pension operators became necessary in order to take stock of what the contributory pension scheme had achieved over its eight years of implementation.
He said that the forum was coming on the heels of the recent recapitalisation by pension fund administrators as well as the public hearing on the administration of pensions by the National Assembly joint committee.
Ahmed added, "The retreat is also aimed at generating enhanced understanding of the industry, prioritise the issues affecting the industry and provide workable sustainable solutions to the challenges."
He also stressed the need for the commission and pension operators to map out strategies for the successful implementation of some ongoing projects, including efforts to amend the Pension Reform Act of 2004.
Source Punch
by Mudiaga Affe
The Commissioner Inspectorate, National Pension Commission, Dr. Musa Ibrahim, has said that the contributory Pension Scheme was set up by the Federal Government to solve problems that emanated from old scheme.
Ibrahim, said this during a strategic meeting with managing directors and chief executive officers of licensed pension operators in Calabar, Cross River State.
He said, "There were problems relating to payment of pensions in Nigeria . There were also all sorts of allegations relating to fraud, misappropriation and non-payment of pension for many years in which people suffered.
"In 2004, the Federal Government was bold enough to say lets draw a line and stop this. Once you give money to people to distribute to other people, you have problems and that was why the Federal Government had to set up the contributory pension system where every worker will open his own retirement savings account and contributions from the employer and that of the worker will be paid on monthly basis."
According to him, the country’s pension fund will increase from its present N2.9tn to N3tn at the end of 2012.
Between 2004 and 2012, he added that the country’s pension fund had grown tremendously.
He said, "By the end of this year, Nigeria’s pension fund will increase to N3tn which can be compared to the Federal Government’s budget of N4.9tn."
Ibrahim also expressed the hope that in the next five years the pension scheme would build up funds that could surpass the federal budget, adding that the enormous resources being gathered was not only to cater for retirement benefits of pensioners but also to boost the real sector of the economy.
In his remarks, the Director-General, PENCOM, Mr. M. K Ahmed, said the strategic meeting between the commission and heads of licensed pension operators became necessary in order to take stock of what the contributory pension scheme had achieved over its eight years of implementation.
He said that the forum was coming on the heels of the recent recapitalisation by pension fund administrators as well as the public hearing on the administration of pensions by the National Assembly joint committee.
Ahmed added, "The retreat is also aimed at generating enhanced understanding of the industry, prioritise the issues affecting the industry and provide workable sustainable solutions to the challenges."
He also stressed the need for the commission and pension operators to map out strategies for the successful implementation of some ongoing projects, including efforts to amend the Pension Reform Act of 2004.
Source Punch
Life insurance: FG pays 25% of workers’ premium
Life insurance: FG pays 25% of workers’ premium
by Nike Popoola
However, operators in the industry are worried about the delay in payment of the premium, even when the financial year is already getting over.
They are also worried because while claims had been mounting over the policy, they were still uncertain on when the remaining balance of the premium will be paid.
The group life assurance scheme in Section 9(3) of the 2004 Pension Reform Act, states that, employers shall maintain life insurance policy in favour of the employee for a minimum of three times the annual total emolument of the employee.
This compensation is to be paid by the insurance companies to the relatives of the worker who died while still in service.
In 2008, the Federal Government started this scheme for its entire workforce with a premium of N4bn.
The insurers are also worried because of the rise in claims from the federal group life policy, as a result of some top officials of the federal government, who also lost their lives when a Dana aircraft crashed recently in Lagos .
When the plane crashed, the Former Chairman, Nigerian Insurers Association, Mr. Olusola Ladipo_Ajayi, had said that by practice, the issue of no cover will not arise in this issue.
He said that since the group life started, the government had not been paying the premium as at when due but had always ensured that the premium was later paid and insurers had always been accepting the risks.
"It is no longer a legal issue for the insurance industry but a moral issue and the morality of the matter will override the legality. There are some clients that are in the habit of paying late and insurers collect their premium whether there has been a loss or not. There will be no dispute, it is only when dispute arises that they will say no premium no cover."
The former chairman noted that an insurer will always want to accommodate a major client who had always been paying his premium even when such transactions are usually delayed.
He said, "Since the customers have always observed the moral obligation of paying even for expired or past periods, insurance companies also exercise their moral responsibility by meeting such claims; it is moral decision that is based on commercial responsibilities rather than legal," he said.
According to him, the premium for the previous year was not settled before the commencement of the policy, but was later paid in full.
Source Punch
by Nike Popoola
The Federal government has paid about N1bn, which is about 25 per cent of the premium to provide insurance cover for its entire workforce for the 2012 financial period.
However, operators in the industry are worried about the delay in payment of the premium, even when the financial year is already getting over.
They are also worried because while claims had been mounting over the policy, they were still uncertain on when the remaining balance of the premium will be paid.
The group life assurance scheme in Section 9(3) of the 2004 Pension Reform Act, states that, employers shall maintain life insurance policy in favour of the employee for a minimum of three times the annual total emolument of the employee.
This compensation is to be paid by the insurance companies to the relatives of the worker who died while still in service.
In 2008, the Federal Government started this scheme for its entire workforce with a premium of N4bn.
The insurers are also worried because of the rise in claims from the federal group life policy, as a result of some top officials of the federal government, who also lost their lives when a Dana aircraft crashed recently in Lagos .
When the plane crashed, the Former Chairman, Nigerian Insurers Association, Mr. Olusola Ladipo_Ajayi, had said that by practice, the issue of no cover will not arise in this issue.
He said that since the group life started, the government had not been paying the premium as at when due but had always ensured that the premium was later paid and insurers had always been accepting the risks.
"It is no longer a legal issue for the insurance industry but a moral issue and the morality of the matter will override the legality. There are some clients that are in the habit of paying late and insurers collect their premium whether there has been a loss or not. There will be no dispute, it is only when dispute arises that they will say no premium no cover."
The former chairman noted that an insurer will always want to accommodate a major client who had always been paying his premium even when such transactions are usually delayed.
He said, "Since the customers have always observed the moral obligation of paying even for expired or past periods, insurance companies also exercise their moral responsibility by meeting such claims; it is moral decision that is based on commercial responsibilities rather than legal," he said.
According to him, the premium for the previous year was not settled before the commencement of the policy, but was later paid in full.
Source Punch
Why insurers can't achieve N1 tr premium income this year - Soladoye
Why insurers can't achieve N1 tr premium income this year - Soladoye
Chuks Udo Okonta
The inability of insurance industry to commence implimentation of Market Developement and Restructuring Initiative (MDRI) in 2009 as stated in its strategy document would deter operators from attaining the N1 trillion premium target this year, the Managing Director Riskguard-Africa Nigeria Limited Yemi Soladoye, has said.
He told Inspen that the N1 trillion projection was to be achieved with a four-year strategic plan, adding that there is no way the target will be achieved, with the commencement of implimentation of the initiative a year to the set deadline.
He noted that in spite the challenges, the MDRI stands as a turing point of the Nigerian Insurance Industry, adding that with the delay observed in the implimentation, there may be need for a shift in the deliverables to make-up for the lost period.
He said: "To access a project effectively, you must look at where you are coming from. The initiative is a turing point because the operators, regulator,support service providers, journalists and government realise the fact that there is something going on in the industry. "MDRI is also a turing point because it is from that stage we saw the regulator leading the market. There is a united focus for all of us. Whether you adopt it or not, we all know that there is a project on ground and there is a destination to reach and there is a direction as to the way we can go for us to secure increased penetration for insurance busness in this country. Every where in the world, implimentation has always be the challenge to achieving projects. MDRI is a case of delayed implimentation.
"Most people are reading the strategy document and not relating it to when implimentation took off. If there is a projection that in year four, we will get N1 trillion and as we could see from the paper, we were to start in 2009, we had what we are to achieve in 2009, 2010, 2011 and 2012. So, N1 trillion is in year four which is 2012. If implimentation started in 2011, it will be a case of shifting the deliverables forward base on the difference on the ground between the strategy crafting and the implimentation. The initiative is a watershield in the history of the industry and it is also an evergreen thing."
He noted that the initiative cannot be wish away, as it has brought about many developments, adding that efforts by the National Insurance Commission (NAICOM) to reposition the industry through micro-insurance, takafu and more are strategic plans stated in the MDRI document.
" When you read the strategy document, you would see that micro-insurance is part of the area that was recommended as where the industry will get development. Takafu is also an aspect of the initiative. As MDRI is targeted as restructuring, therefore, all the restructuring that are happening in the market are embedded within the the programme," he said.
Chuks Udo Okonta
The inability of insurance industry to commence implimentation of Market Developement and Restructuring Initiative (MDRI) in 2009 as stated in its strategy document would deter operators from attaining the N1 trillion premium target this year, the Managing Director Riskguard-Africa Nigeria Limited Yemi Soladoye, has said.
He told Inspen that the N1 trillion projection was to be achieved with a four-year strategic plan, adding that there is no way the target will be achieved, with the commencement of implimentation of the initiative a year to the set deadline.
He noted that in spite the challenges, the MDRI stands as a turing point of the Nigerian Insurance Industry, adding that with the delay observed in the implimentation, there may be need for a shift in the deliverables to make-up for the lost period.
He said: "To access a project effectively, you must look at where you are coming from. The initiative is a turing point because the operators, regulator,support service providers, journalists and government realise the fact that there is something going on in the industry. "MDRI is also a turing point because it is from that stage we saw the regulator leading the market. There is a united focus for all of us. Whether you adopt it or not, we all know that there is a project on ground and there is a destination to reach and there is a direction as to the way we can go for us to secure increased penetration for insurance busness in this country. Every where in the world, implimentation has always be the challenge to achieving projects. MDRI is a case of delayed implimentation.
"Most people are reading the strategy document and not relating it to when implimentation took off. If there is a projection that in year four, we will get N1 trillion and as we could see from the paper, we were to start in 2009, we had what we are to achieve in 2009, 2010, 2011 and 2012. So, N1 trillion is in year four which is 2012. If implimentation started in 2011, it will be a case of shifting the deliverables forward base on the difference on the ground between the strategy crafting and the implimentation. The initiative is a watershield in the history of the industry and it is also an evergreen thing."
He noted that the initiative cannot be wish away, as it has brought about many developments, adding that efforts by the National Insurance Commission (NAICOM) to reposition the industry through micro-insurance, takafu and more are strategic plans stated in the MDRI document.
" When you read the strategy document, you would see that micro-insurance is part of the area that was recommended as where the industry will get development. Takafu is also an aspect of the initiative. As MDRI is targeted as restructuring, therefore, all the restructuring that are happening in the market are embedded within the the programme," he said.
Saturday 24 November 2012
NAICOM sets agenda for brokers
NAICOM sets agenda for brokers
Chuks Udo Okonta
The requirement of today’s regulatory and business environment require sufficient financial outlay and human capital to survive, the Commissioner for Insurance Fola Daniel has said.
The National Insurance Commission (NAICOM) helmsman gave the admonition at the 50th anniversary, lecture/ national conference of National Council of Registered Insurance Brokers (NCRIB) in Abuja.
He urged brokers to change their mode of doing business, adding that gone is the era of one man-one office-sole proprietorship. He said it is unpleasant to note that there are some brokers trying to operate below the radar for patronage basis.
He said: “The requirements of today’s regulatory and business environment means you need sufficient financial outlay and human capital to survive. I want to urge you therefore to up the ante, as they say, by restructuring not only your operations but the structure of your firms.
“From the standpoint of a regulator I do know however that there are new challenges to doing business which members of the Council will have to cope with in other to look back after another half a century and give a good account of memorable achievements.
“Consequently, it is very important I bring some of these challenges to your attention so that as you design your programmes for the immediate future, you will develop strategies for handling them.”
He identified the challenges as: regulations and operational guidelines, the Anti-money laundering law, taxation, various legislations requiring compliance – PENCOM Act and Employee Compensation Act, the IFRS adoption and mode of operations.
Daniel noted that the National Pension Commission (PENCOM) Act requires brokers’ compliance and also creates business for them, adding that it is no longer possible to do business with government without complying with the Pension Reform Act.
He called on the NCRIB to assist her members in meeting the new regulatory challenges. He advocated for adoption of the approach of the British Insurance Brokers Association (BIBA), which has programmes for assisting its members to cope with the demands of the Financial Services Authority (FSA) and other prerequisites for operations.
“The council would not have come this far without the loyal support and hard work of some members of the Council, both past and present. However, it is unpleasant to note that there are some brokers trying to operate below the radar for patronage basis. In spite of your half century it is worrisome that in some quarters we are still challenged by the issue of the value that brokers add to the insurance function. You cannot build capacity by remaining a brief case or patronage commission agent,” he said.
He said NAICOM will continue to act appropriately to ensure adherence to the ethics of insurance profession, adding that while that is done, the commission believes self regulation is the panacea to ease the burden of enforced regulations.
Friday 23 November 2012
NCRIB admits Tinubu, Mimiko, others as fellows
NCRIB admits Tinubu, Mimiko, others as fellows
Chuks Udo OKkonta
The Nigerian Council of Registered Insurance Brokers has swelled its list of Fellows with the admission of some notable Nigerians into its membership.
Those who were admitted into the prestigious Society of Fellows of the Council are Senator Oluremi Tinubu, representing the Lagos Senatorial District; Governors of Ondo and Osun States, Ogbeni Rauf Aregbesola and Dr Olusegun Mimiko, respectively, as well as the Commissioner for Insurance, Mr Fola Daniel.
Conferring the honourary Fellowships as part of activities to mark the 50th Anniversary of the Council, President of the NCRIB, Barrister Laide Osijo said the prestigious award was being conferred on the distinguished Nigerians based on their favourable disposition to the promotion of professionalism in Nigeria and their sterling support for the Council.
Osijo noted that with the newly inducted Fellows, the number of profesionals in that category had gone up to 48 and charged the new inductees to be good ambassadors of the insurance broking profession by upholding the ethics of the profession and excelling more brilliantly in their chosen avocations.
She said the recipients were considered for the award in consonance with provisions of section 11 (1) of the NCRIB Act which states interalia:"The Council may elect as an Honourary Fellow a person in ts opinion that has rendered exceptional service and contributions to the insurance broking profession".
Minister of State for Defence, Erelu Olusola Obada who was the Special Guest of Honour at the event commended the awardees for their contributions to the professions and national development; pointing out that the award would galvanise more Nigerians towards making more contributions to the Council and national development.
Responding on behalf of the awardees, Senator Oluremi Tinubu underscored the need for professional bodies to uphold sound ethics and continually make input into governance, bearing in mind that they were critical actors in the nation's polity.
In a similar vein, the Council also awarded distinguished awards on past Presidents; and founders of the Council, among them Dr Sunny Odogwu; Mr Talabi Braithwaite and Chief Akinwumi George.
NIA Chairman’s investiture holds November 30
NIA Chairman’s investiture holds November 30
Chuks Udo Okonta
The investiture ceremony of the Chairman of the Nigerian Insurers Association (NIA) Remi Olowude will hold on Friday, November 30, Inspen has learnt.
A statement by Head Corporate Affairs and Human Resources NIA Davis Iyasere, said the occasion which will attract the crème of the Society, elders of the industry and notable corporate players will hold at the Federal Palace Hotel, Lagos.
Director-General of the Association Olorundare Sunday Thomas, said: “The occasion will present the Association with another unique opportunity to forge closer ties with clients of insurance companies, brokers, investors and other stakeholders in the economy”.
He said the opportunity will also be used to showcase the insurance industry as a major player in the financial services sector of the economy, adding that Olowude took the oath of office as the Chairman of the association on Thursday, June 28th 2012 during the Association’s 41st Annual General Meeting (AGM).
Wednesday 21 November 2012
Early budget implementation good for insurance
Early budget implementation good for insurance
Chuks Udo Okonta
Early implementation of the budget would enable operators meet their projections the President Nigerian Council of Registered Insurance Brokers (NCRIB) Mrs Laide Osijo, has said.
She told Inspen that proper implementation of the budget would impact the industry positively, adding that operators performance would improve tremendously if premiums are paid as at when due.
She called on the government to put adequate compensation for the insurances of its properties, which have been made compulsory, adding that delay in implementation of the budget is affecting the insurance industry negatively
She said: “When proper premium is paid on group life scheme, there would be an increase in the income of insurance industry. We have been advocating early implementation of the budget. We have so many premiums that are outstanding due to late implementation of the budget.
“Premiums cannot be paid if the budget is not released. Therefore, if the budget is released on time, definitely, insurance companies would have their premium at the right time and all the risks would be covered adequately. No Premium No Cover policy is ignored, because of delay in the implementation of the budget. The delay in implementation of the budget is affecting the insurance industry negatively, if the government could implement the budget early and pay all necessary payments, insurance companies would benefit a lot.”
Monday 19 November 2012
‘Insurance industry needs catastrophic events to shape-up’
‘Insurance industry needs catastrophic events to shape-up’
Chuks Udo Okonta
The former Chairman Nigerian Insurers Association (NIA) and Managing Director Lasaco Assurance Plc, Olusola Ladipo-Ajayi, has said the insurance industry needs catastrophic events for operators to no know where they belong.
He told Inspen that the industry needs a revolution that would stem the level of unhealthy competition among operators, adding that the move would send some operators out of the industry while those capable to whether the storm would remain.
He said: “I cannot explain why much ignorance runs in the insurance system. I spent two years as the Chairman of the association explaining how to understand business issues to member companies, but the industry is blindfolded by stiff competition and cut-throat price war. We need some catastrophic events - market forces to send some parking and keep others. When I was the Chairman of NIA I went to present a paper to Ghanaian Insurers Association (GIA) and in the course of my research, I found out that in the early 1900, when motor vehicle made its debuts, in the first 10 years of its existence, almost all the insurance companies that wrote motor insurance went completely under, because they could not put their house in order. That was one of the reasons that led to a tariff change and that went for a period of 50 years, and then the operators agreed to bring down the tariff. So, unless something of that happens that would really shake the fabric of the industry, there would not be change.
“In the insurance market time was when risk for fire was rate .75 per cent. Then was when most textile companies had fire incidences, the rate of fire really went up. Today, most of us who were around that time are not around now and most of the practitioners around now were not around then, and if you tell them that textile industries had been rated at .75 before, it would look like you are telling them a story. So, market forces would get things right, it may take time, but that is more enduring.”
He said the association will not relent in its efforts to sanitise the industry, adding that the customer complaint bureau was set up to also make operators abide by the rule of a unified premium rate.
He noted that to counter free fall of premium, the association established the customer complaint bureau, adding that the operators have resolved not to go to court to settle insurance cases and that all the cases decided by the bureau, would be accepted by members.
IFRS: NAICOM predicts hard times for weak firms
IFRS: NAICOM predicts hard times for weak firms
Chuks Udo Okonta
Weak insurance institutions must adopt a new approach and transform their operations, if they are to remain afloat in the International Financial Reporting Standard (IFRS) regime, the National Insurance Commission (NAICOM) has warned.
The Deputy Commissioner Finance and Administration NAICOM George Onekhena, who disclosed this in Lagos, said the commission would henceforth, not tolerate companies’ financial statements that fail to meet the required standard. He urged the auditors of insurance institutions to be careful and vigilant in the auditing of financial statements their clients, noting that the credibility of the auditing firms is at stake when they compromise. “If you sign and affix your stamp on any account, it is taken that such an account should be credible. But anything contrary to this will impact negatively on your credibility and could put you in trouble,” he said.
He noted that weak firms would find it difficult to survive the IFRS regime which entails total transparency, adding that NAICOM would not fail to sanction firms that are not ready to embrace change.
He urged auditors to be professional in their duties as clients look up to them for quality advice, stressing that auditors are required to always advise their clients on doing the right thing. He urged auditors to report any firm that wants to subvert the auditing process to NAICOM for disciplining.
Onekhena noted that auditors are required to play immense responsibility in the industry’s transition and implementation of the IFRS, adding that insurance operators need to leverage on the professional competence of their external auditors.
Commissioner for Insurance Fola Daniel, on efforts by NAICOM to ensure the actualisation of the IFRS initiative said the commission has been engaging operators, auditors, directors and management of companies on how to seamlessly migrate to the initiative.
He said two main outcomes have been reached by NAICOM and stakeholders on the initiative, adding that first, it was agreed that the market should adopt common approach to IFRS provided that such option will not place any individual company or the market at a competitive disadvantage domestically and internationally. Secondly, it was agreed that an accounting practices committee made up of the representative of NAICOM, insurers/reinsurers and external auditors should be set up. The function of the committee is to address all accounting issues of concern to the industry including those emerging from IFRS standard setting process.
He said board of directors of each company are responsible for the issuance of financial statements, and that consequently, both transition and sustenance of IFRS in accounting practices, should be a major item on directors’ agenda at this time.
Daniel noted that NAICOM’s decision to engage stakeholders was informed by the need not only to create awareness of the implication of IFRS for financial reporting responsibilities but also to acquaint them with the scale of change and the sense of urgency in the attention it deserves.
“Our expectation is that at the end of our engagements, the stakeholders will have sufficient level of understanding as to know what critical questions to ask and what steps to take in the bid to ensure that their companies successfully transit to and embed IFRS in their accounting practices within the timelines specified in the Nigerian Roadmap. While saying this, it is important to note that we are committed to supporting the stakeholders in the process. For this purpose, we have set up an IFRS help desk in the commission to address issues that companies may have in the process of transiting to IFRS.
“We have succeeded in significantly improving the level of compliance with the Nigerian GAAP by getting some companies to amend their financial statements to reflect a standard we believe all operators should comply with, if their financials will be relevant and useful to both domestic and international users. The feedback we received from many informed users was encouraging. The price for this change for some companies was significant, as not only did they have to make major provisions that significantly impacted their shareholders fund, it took them quite some time to deal with our queries resulting in delays in the submission of the financials to the Nigerian Stock Exchange.
“In a bid to further improve on the quality of the financials of insurance and reinsurance companies, we recently released a proforma complete financial statement for comments by stakeholders. The key change that the document seeks to introduce is improved financial reporting from a disclosure perspective. We want to encourage companies to take advantage of the information in this document to improve both the presentation and disclosure of their audited financial statements. Perhaps it is important to say that companies that do not significantly improve their reporting along the lines prescribed stand the risk of being disadvantaged when their financial are compared with their competitors,” he said.
NAICOM said it is optimistic that the initiative would assist in cross border listing, attraction of foreign direct investment and easier regulation.
Friday 16 November 2012
Brokers urged to be creative
Brokers urged to be creative
Chuks Udo Okonta
Creative thinking, professionalism and adaptation to the changing dynamics of clients needs in the local and international environment should be the platforms for promoting robust insurance broking practice in Nigeria, Managing Director CKRe London Peter King, has said.
King, who disclosed this at a lecture to mark the 50th Anniversary of the Nigerian Council of Registered Insurance Brokers (NCRIB) in Abuja, said though insurance broking business in the country has a bright future, the professionals must continually adapt to the changing trends in global regulatory environment and pace up to the changing needs of the nation’s population.
On the international plane, King opined that the world’s overall concept is changing dramatically towards Africa, portending that all operators, including insurance brokers will face new and exciting challenges for which only fit, and ethically sound professionals will survive.
He said given the huge international interest now in Africa and the need to continue to attract foreign investment, the international interest, be it client or an international broker must adhere to the same professional rules as those applicable in their place of registered origin.
He said: “It is interesting to note that for many years, people outside Africa are looking towards the continent as a realistic trading partner, which they believed have competitive advantage over the emerging markets in the Middle East and parts of Asia where political instability and terrorism are now endemic”
King who spoke on merits of regulation to include protection of the practice of insurance broking and growth of business advocated against over regulation which he said was capable of stifling good brokers.
Minister of state for finance, Dr Yerima Ngama, applauded the NCRIB for encouraging professionalism amongst insurance brokers in Nigeria and confirmed that crucial reforms were in the offing to challenge the old ways of doing things and position the insurance industry where it should be.
According to him, the reform will seek to promote Out of the Box Thinking, in order to empower the professionals to log into international best practices and position the industry to play its pivotal roles in the economic development of the country.
President of the NCRIB, Barrister Laide Osijo noted that the NCRIB appealed to government to assist the growth of insurance business in Nigeria through its strict adherence to, and encouragement of mandatory insurance laws.
She said that governments at all levels should see to it that they ensure maximum insurance of their assets against incidences of loss, noting that some recent human and natural disasters witnessed in the country would have been succoured if government placed greater premium on insurance.
Commissioner for Insurance, Fola Daniel, advised insurance brokers to ensure compliance with the PENCOM Act on Group life, noting that such compliance was a welcome development as it would bring more businesses for the operators and make them socially relevant.
He advised the Council to continue to assist its members in meeting new regulatory challenges like its counterpart, the British Insurance Brokers Association, which has well laid out programmes for assisting its members meet the requirements of the financial services regulations.
Highpoint of the 50th anniversary celebration was the conferment of fellowship awards on Senator Oluremi Tinubu, Governors Rauf Aregbesola and Olusegun Mimiko, governors of Osun and Ondo states respectively, as well as the Commissioner for Insurance, Fola Daniel.
Wednesday 14 November 2012
Unhealthy competition, inadequate data upload stall NIID project
Unhealthy competition, inadequate data upload stall NIID project
Chuks Udo Okonta
The Nigerian Insurance Industry Database (NIID) could not commence due to cut-throat competition and inadequate data upload by underwriters, the former Chairman Nigerian Insurers Association (NIA) Olusola Ladipo-Ajayi, has said.
He told Inspen that the information uploaded so far by operators is inadequate to flag-off the initiative, adding that commencing with the available data would cause embarrassment to motorists who data have not been uploaded by their insurers.
He said unhealthy competition and ignorance have deterred most operators from sending their information to the industry database.
He said: “There is no need carrying gadgets all over the places, when the people you want to monitor are not ready. The level of information uploaded on our database is not enough. The NIA Director General has been conducting checks with the Database, and he has found that the number of vehicles on the database is nothing to write-home-about. So, if we give the gadgets to policemen, they would begin to harass motorists who even have genuine particulars.
“The fault is not from the NIA, but from the practitioners who have failed to recognise the wisdom of uploading their data to the database. I cannot explain why much ignorance runs in the system. I spent two years as the Chairman of the association explaining how to understand business issues to insurance companies, but the industry is blindfolded by stiff competition and cut-throat price war. We need some catastrophic events - market forces to send some parking and keep others.”
He noted that the NIA took six years to prepare for the initiative, adding that the implementation is clogged by fear and personal interest.
According to a report by the Information Technology Committee of the NIA, over 550,000 motor policies had been uploaded by 42 firms, indicating that 18 firms are yet to unload their policy to the platform.
“The NIID project went live on September 8, 2011. Member companies commenced motor insurance policies data upload immediately and over a total of 550,000 motor policies records had been uploaded by 42 members underwriting motor.
Selected members of the committee had been highly instrumental to the development, implementation and test running of the NIID system. Committee members had also been involved in training their companies’ branch officers, having undergone the initial train-the trainer briefing on the aims and objectives of the NIID.”
NIA said the benefits of the project include monitoring and authenticating insurance transactions documents, reducing incidences of fraudulent insurance transactions and policies most especially for motor and marine policies, reducing red tape and corruption by integrating with the vehicle registration system of the FRSC, the police and other relevant agencies and ensuring access to statistical data for effective decision making.
He stated that the project will also help develop capacity in NIA to monitor and authenticate underwriting transactions with the industry and facilitate information sharing on stolen vehicles through technology-driven collaboration between relevant agencies.
Director-General NIA Sunday Thomas said the customised e-reader gadget to be used by security agents to verify vehicle policies will be distributed across the 36 states and the Federal Capital Territory (FCT).
Tuesday 13 November 2012
Lasaco Assurance becomes first ISO certified underwriter
Lasaco Assurance becomes first ISO certified underwriter
.Posts N2.7 b premium income
Chuks udo Okonta
Lasaco Assurance Plc has set a record by becoming the first insurance company in the country to get the International ISO 9001:2008 Quality Management System Certification issued by the Standard Organisation of Nigeria (SON).
Its Chairman Edward Akin Leigh, at the certificate presentation in Lagos, said the company commenced the process in 2010, adding that in the past 18 months the company’s staff at all level, branch-network, business processes procedures and practices, reports and reporting standards, quality policy and management, have been subjected to world class rigorous checks, analyses and various audits both internally and by audits teams from SON.
He noted that the certification conferred on the company a unique competitive advantage and position-of-strength as it pursues growth and profitability growth.
Director General SON Joseph Odomodu, said getting ISO certification is the only thing that can change Nigerian business practice, adding that the more company are certified, the better would be the economy. He noted that SON has decided that even the small and medium enterprises should benefit from been certified to boost their operations.
He said: “It is more interesting that insurance companies are getting certified and I really want to congratulate Lasaco for been a premier among others. Their certification indicates that we are coming up. Other insurance companies should follow the step of Lasaco for with the certification, the company’s result would soon begin to show that something has changed, for the system is structured in such a way that it would help them to offer better services and once that happens, people would flock to where better results are been posted. ISO certification is simply ensuring that things are done properly.”
The Managing Director Olusola Ladipo-Ajayi, said the company would live up to expectation, to enable it retain the certification, adding that the company decided to raise the standard in the insurance industry by applying for the certification. He noted that the company is repositioning to remain top in special risks, adding that the firm led a consortium last year to underwriter Nigerian satellite, a feat which was uncommon in time past.
“What we are trying to do is to carve a niche for ourselves in the special risks, without loosing sight of the everyday insurance. Special risks are the type of risks that are denominated in dollars. They are international business; they give you a window into the international realm of insurance. You have an idea of best international practices. The major problems that Nigerian insurers face does not exist in special risk and that is prompt ensures payment of premium.
“In special risk, underwriters are empowered, and have the enabling environment to meet their obligations. Most of the problems of insurance companies of not been able to pay claims in Nigeria emanates from the fact that the premiums are not paid on time. But when you go to the realms of special risks, premiums are paid quickly; every obligation is met quickly, so when it is your turn, there is no excuse for you to drag your feet,” he said.
Lasaco’s gross premium income for last year stood at N2.7 billion as against N2.1 billion in 2010, the profit after tax was N213 million as against N249 million, while profit before tax was N478.91 million as against N249.65 million and paid claims of N157.733 million.
Monday 12 November 2012
Dana crash: Insurers pay N373m to 79 relatives
Dana crash: Insurers pay N373m to 79 relatives
by NIKE POPOOLA
The payment of insurance claims to the relatives of the victims of Dana plane crash in Lagos on June 3, 2012 has not progressed as swiftly as expected. NIKE POPOOLA writes on the journey so far and why the foreign reinsurers are finding it difficult to pay upFive months after a Dana Air plane crashed in Lagos and left 153 passengers and crew members dead, the airline’s insurers have paid $2.37m (N373.04m) claims to relatives of the deceased.
The Managing Director, Prestige Assurance, Mr. Anand Mittal, disclosed this to our correspondent in Lagos on Friday.
Prestige Assurance led six other local insurance firms to insure 30 per cent of the airline’s risk locally, while the remaining 70 per cent was reinsured abroad. The coinsurers are Nem Insurance Plc, Aiico Insurance Plc, Continental Reinsurance Plc, Leadway Assurance Company Limited, Sterling Assurance Limited and Standard Alliance Insurance.
"We have paid $30,000, which is about 30 per cent of the total claims of each of the 79 applicants, who have completed their documentation so far. No other relatives have submitted their completed documents," Mittal said,
He said the aircraft’s foreign reinsurers had demanded for some documents to enable them commence the settlement of their own part of the claims.
According to him, the relatives are required to present letters of administration of the estate of the deceased and death certificates, which none of them have been able to get so far.
He said relatives of those who died on the ground and those who lost their properties to the crash, would also be compensated. He, however, said they had not yet been paid because the amount due to each of them had not been ascertained.
"The parties are dealing with that; when they finalise on the amount, we will pay them. We do not know how much that is going to be for now because that is being done by their solicitors," Mittal said,
The Deputy Director, Administration and Policy, National Insurance Commission, Mr. Leo Akah, had said the local underwriters had commenced the payment of about 30 per cent of what the relatives of the victims were entitled to.
He, however, said the foreign reinsurers, who took 70 per cent of the risk, had not commenced payment because the relatives of the victims were yet to produce the needed documents.
According to him, the foreign reinsurers are requesting for death certificates and letters of administration, which the relatives have not been able to produce.
Though the process of getting a letter of administration might be cumbersome, Akah said it was not an insurmountable challenge.
"The relatives are supposed to be paid an initial payment within the first 30 days, but again, there are issues; we have to identify the rightful beneficiaries; right now, there are multiple claimants showing up," he said.
The NAICOM official, who said different people had been coming forward as relatives of the victims, added that this had slowed down the pace of payment.
According to him, the relatives of each victim are entitled to $100,000 each, which is the internationally acceptable standard.
Akah said the balance of $70,000 would be paid after the presentation of the death certificate and letter of administration.
The African Insurance Brokers Association, a body of the African insurance organisations, however, said the crash of the Dana aircraft might lower the position of the continent’s aviation insurance sector in terms of global rating.
"The position of the African aviation insurance sector to the global market may dip further in the current year, following the volume of claims that will be coming from the recent crash in Lagos of the Dana aircraft that caused the death of many people," the association stated.
AIBA said analysis had indicated low level of risk management practice across different sectors in the African business environment if the comments of technical error from the Dana crash were anything to go by.
According to AIBA, Africa has less than 10 per cent of the world’s civil aviation traffic, but with over 40 per cent of the total accident rate, which makes it to be completely disproportionate to the amount of flights.
The association had highlighted the issues of aircraft in the region operating with ill-trained crews in poorly regulated environment.
AIBA noted that in 2011, aviation claims from Africa stood at about $65m due to the crash of two Congo Democratic’s civilian planes, leading to the death of 109 people; and Moroccan Hercules Air Force plane, Dolon, which caused the death of 80 people on board.
According to AIBA, in 2011, the global industry had the lowest aviation claims since1995, despite the fact that the loss figures stood at $1.13m, from $2.09m in 2010.
It said that the African aviation insurance pool’s premium dropped by 32.4 per cent from $5.8m in 2010 to $3.9m in 2011.
Despite the drop in premium, AIBA said the pool recorded $824,720 in 2011, from a lower record in 2010.
Source Punch
by NIKE POPOOLA
The payment of insurance claims to the relatives of the victims of Dana plane crash in Lagos on June 3, 2012 has not progressed as swiftly as expected. NIKE POPOOLA writes on the journey so far and why the foreign reinsurers are finding it difficult to pay upFive months after a Dana Air plane crashed in Lagos and left 153 passengers and crew members dead, the airline’s insurers have paid $2.37m (N373.04m) claims to relatives of the deceased.
The Managing Director, Prestige Assurance, Mr. Anand Mittal, disclosed this to our correspondent in Lagos on Friday.
Prestige Assurance led six other local insurance firms to insure 30 per cent of the airline’s risk locally, while the remaining 70 per cent was reinsured abroad. The coinsurers are Nem Insurance Plc, Aiico Insurance Plc, Continental Reinsurance Plc, Leadway Assurance Company Limited, Sterling Assurance Limited and Standard Alliance Insurance.
"We have paid $30,000, which is about 30 per cent of the total claims of each of the 79 applicants, who have completed their documentation so far. No other relatives have submitted their completed documents," Mittal said,
He said the aircraft’s foreign reinsurers had demanded for some documents to enable them commence the settlement of their own part of the claims.
According to him, the relatives are required to present letters of administration of the estate of the deceased and death certificates, which none of them have been able to get so far.
He said relatives of those who died on the ground and those who lost their properties to the crash, would also be compensated. He, however, said they had not yet been paid because the amount due to each of them had not been ascertained.
"The parties are dealing with that; when they finalise on the amount, we will pay them. We do not know how much that is going to be for now because that is being done by their solicitors," Mittal said,
The Deputy Director, Administration and Policy, National Insurance Commission, Mr. Leo Akah, had said the local underwriters had commenced the payment of about 30 per cent of what the relatives of the victims were entitled to.
He, however, said the foreign reinsurers, who took 70 per cent of the risk, had not commenced payment because the relatives of the victims were yet to produce the needed documents.
According to him, the foreign reinsurers are requesting for death certificates and letters of administration, which the relatives have not been able to produce.
Though the process of getting a letter of administration might be cumbersome, Akah said it was not an insurmountable challenge.
"The relatives are supposed to be paid an initial payment within the first 30 days, but again, there are issues; we have to identify the rightful beneficiaries; right now, there are multiple claimants showing up," he said.
The NAICOM official, who said different people had been coming forward as relatives of the victims, added that this had slowed down the pace of payment.
According to him, the relatives of each victim are entitled to $100,000 each, which is the internationally acceptable standard.
Akah said the balance of $70,000 would be paid after the presentation of the death certificate and letter of administration.
The African Insurance Brokers Association, a body of the African insurance organisations, however, said the crash of the Dana aircraft might lower the position of the continent’s aviation insurance sector in terms of global rating.
"The position of the African aviation insurance sector to the global market may dip further in the current year, following the volume of claims that will be coming from the recent crash in Lagos of the Dana aircraft that caused the death of many people," the association stated.
AIBA said analysis had indicated low level of risk management practice across different sectors in the African business environment if the comments of technical error from the Dana crash were anything to go by.
According to AIBA, Africa has less than 10 per cent of the world’s civil aviation traffic, but with over 40 per cent of the total accident rate, which makes it to be completely disproportionate to the amount of flights.
The association had highlighted the issues of aircraft in the region operating with ill-trained crews in poorly regulated environment.
AIBA noted that in 2011, aviation claims from Africa stood at about $65m due to the crash of two Congo Democratic’s civilian planes, leading to the death of 109 people; and Moroccan Hercules Air Force plane, Dolon, which caused the death of 80 people on board.
According to AIBA, in 2011, the global industry had the lowest aviation claims since1995, despite the fact that the loss figures stood at $1.13m, from $2.09m in 2010.
It said that the African aviation insurance pool’s premium dropped by 32.4 per cent from $5.8m in 2010 to $3.9m in 2011.
Despite the drop in premium, AIBA said the pool recorded $824,720 in 2011, from a lower record in 2010.
Source Punch
Sunday 11 November 2012
Pension Funds and Long Term Financing: The CPS and Economic Development in Nigeria
Pension Funds and Long Term Financing: The CPS and Economic Development in Nigeria
By M. K. Ahmad Director GeneralNational Pension Commission
……ensuring your comfort after retirement
Outline
Pension Reform: The Journey So Far
Global Overview
Importance of Long Term Assets
Impact of Long Term Assets on Economic Development
Challenges
Ways Forward
Conclusion
Pension Reform: The Journey So Far
• Regulatory
o Established Legal and Institutional Framework
• Established Supervisory Framework
o Risk Based Supervision
o Daily and monthly review of investment valuation reports
• 20 Pension Fund Administrators (PFAs), 7 Closed Pension Fund Administrators (CPFAs) and 4 Pension Fund Custodians (PFCs)
• 5.32million registered contributors from 180,586 employers as at October 2012
• 55,904 retirees, currently receiving their monthly pensions as and when due
The Journey So Far: Comparative Analysis
Global Overview
Global trend in shift to funded pension systems
Defined Benefits had remained expensive and unsustainable due to aging population and lower support ratio
Pension assets of OECD 34 countries in 2010 amounted to US$19.24trillion, with USA having about US$10.59trillion
Pension Assets as % of GDP in 2010: Nigeria (7%), Chile (67%), Mexico (13%), Russia (3%), Brazil (0.1%), Netherlands (135%), UK (89%), USA (73%)
Importance of Long Term Assets
• Promotes and sustains Social Safety Net (disability benefits, retirements and death benefits)
• Ensures efficient allocation of resources to productive sectors
• Broadens the scope of economic activities, development of infrastructure, SMEs that ensures sustainable growth
• Promotes capital formation
• Promotes better corporate governance
Impact of investment of Long Term Assets on Economic Development
• Increase in domestic savings and investments
• Development of the Capital Market
o Increase in volume of intermediated funds, new products
o Increase in level of trading, modernization of the market
o Deepening of the capital market
o Reduction in cost of capital
o New Institutions
o Facilitate the development of yield curve within the fixed income segment of the market
Impact of investment of Long Term Assets on Economic Development…cont’d
• Promotion of Strong Corporate Governance
o Brought improved disclosure & protection of minority shareholders’ interests
o Provide informed counterbalance to controlling shareholders in order to safeguard against the company’s Board and Management
o Emergence of legal reforms & improvement of oversight on companies
o Promote appointment of independent Directors on Boards of companies
o Established conflict of interest redress mechanisms
o Improved professionalization of financial intermediation
Impact of investment of Long Term Assets on Economic Development…cont’d
Pension funds act as intermediaries into a lot of financial assets, including corporate equities, government bonds, etc
Provide long term financial intermediation to the real sector through corporate debt instruments and through investment funds
In some jurisdictions, pension funds acquire long-term money market instruments issued by banks, allowing the banks to issue loans to the corporate clients with varying maturities
Impact of investment of Long Term Assets on Economic Development – Challenges
• Lack of appreciation of the opportunity provided by the pension industry
• Lack of adequate engagement of the business community
• Lack of public awareness and low financial literacy
• Relatively high transaction costs/charges coupled with longer approval processes for issuances
• Sustaining stable macroeconomic environment in terms of inflation, interest and exchange rates
• Short term investment horizon leading to higher allocation to high turnover vehicles resulting from aggressive return expectations from investors
• The banking sector dominates the financial system
Impact of investment of Long Term Assets on Economic Development – Challenges
• Dominating influence of Government Bonds, which are having a crowding out effect on non-government bonds, based on their relatively higher yields
• Paucity of supporting instruments/products and alternative assets
o Although 35% of AUM has been allocated to Corporate Debts, only about 3% is currently placed
o REITs is in its infancy – less that 7% of AUM is invested in real estate
o No infrastructure bonds and Funds yet
o Private Equity Funds, though in existence for long, but the market remains weak
Impact of investment of Long Term Assets on Economic Development – Challenges
• Institutional Investors are less active in promoting good corporate governance
• Barriers to Pension Fund Investment in Infrastructure:
o Lack of clarity on investment opportunities
o Non-availability of investment instruments
o Negative perception of risks in infrastructure investments
o Lack of expertise in the infrastructure sector
o Short-termism of investors
o Lack of clear valuation of infrastructure projects
o Lack of clear benchmarks
Ways Forward
General awareness campaigns particularly for the business community
Enhance regulatory and supervisory framework
Simplify and streamline processes for corporate debt issuance and approval
Fast track the enactment of the law to back securitization of assets
Provide sustainable and reasonable concessions on a holistic basis for infrastructure projects and investment funds
Ways Forward
Increased private sector participation in the key sectors of the economy through:
- Full implementation of all necessary and critical reforms e.g. fiscal policy reform, financial sector reforms, tax reform, power reform, etc
- Putting appropriate legal, regulatory and supervisory frameworks in place to support these reforms
Use carrot and stick approach to get some large corporate listed on the NSE
Institutional Investors should be active in promoting better corporate governance
Continuous capacity building
Conclusion
The banking sector is yet to effectively & efficiently finance the real sector of the economy, bridge the infrastructural gaps and provide affordable housing in Africa, due to the short term nature of its deposit liabilities and cost of funds
Stable, long term and relatively cheaper funds for sustainable economic development can only be effectively mobilized through the reforms in pension & capital market, supported by a healthy banking system
The Pension Reform has positively impacted on the Nigerian economy, and would continue to do so considering the rapid accumulation of funds
However, all stakeholders must:
- Ensure the sustainability of the reform
- Hold PenCom & Operators accountable
- Promote wider compliance with the Pension Reform Act
Thank You
National Pension Commission
174 Adetokumbo Ademola Crescent
Wuse II – Abuja
www.pencom.gov.ng
info@pencom.gov.ng
+ 234 9 4610466 - 8
National Pension Commission
174 Adetokumbo Ademola Crescent
Wuse II – Abuja
www.pencom.gov.ng
info@pencom.gov.ng
+ 234 9 4610466 - 8
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