Insurers resort to negotiation over N58.64bn outstanding premium

Chuks Udo Okonta        

Insurance operators are now negotiating and persuading their debtors to pay over N58.64 billion outstanding premiums owed prior to the implementation of the No Premium No Cover policy, Inspen has learnt.

It was gathered that some operators have agreed to let go 50 per cent of the debts provided the clients are willing to pay.

Brokers who spoke on the development were divided on how to recover the debts. While some belief that only last year’s debt should be recovered and past years written off, others said they would continue to persuade their clients to see that they recover parts of what they owe.

A broker told Inspen that the issue is a bit complicated, because the operators cannot take the debtors to court over the outstanding premium, as there is no provision for sale of policy on credit. He noted that operators can only persuade their clients to pay base on relationship.

According to the Nigerian Insurers Association (NIA) 2011 Digest, outstanding premium for general and life insurance operators stood at N58.64 billion as at 2011.

To put a stop to this abnormally,  the insurance regulator, National Insurance Commission (NAICOM),  last year, issued “Guidelines on Insurance Premium Collection and Remittances”, signalling the end of providing insurance covers on credit and guiding insurance brokers and underwriters on how to go about collecting and remitting premium to beneficiaries.
The guidelines stated that “All insurance covers shall only be provided on a strict ‘no premium no cover’ basis. Consequently, only cover for which payments have been recovered directly by the insurer or indirectly through a duly licensed insurance broker shall be recognisable as income in the books of the insurer.

“Any insurer who grants cover without having recovered premium in advance or premium receipt notifications from the relevant insurance broker shall be liable to a penalty on the sum of N500,000 in respect of each cover so granted and in addition, may be a ground for suspension of the license of the insurer.
“Irrespective of the period of insurance, insurers shall ensure that at any point in time, they have received directly or indirectly through the insurance broker, the full premium in advance for the cover bring granted.”

In the same manner, the guidelines provided that insurance brokers, lead underwriters and primary underwriters must notify insurers, co-insurers and reinsurers as the case may be of any premium collected on their behalf within two days of receiving such premium.

“All insurance brokers shall within 48 hours of receiving insurance premium on behalf of any insurer, notify the insurer in writing in each case, of the receipt of such insurance premium. All such notifications shall be accompanied by the broker’s credit notes acknowledging indebtedness to the insurer. An insurance broker who fails to notify the insurer of any premium received on his behalf shall be liable to a penalty of not less than N250,000 in each case of failure to notify,” the commission directed.

“In consonance with the Insurance Act, 2003, there shall be no outstanding premium in the books of any insurer as covers granted on credit are not recognised by the law. In order to protect the interest of policyholders and other stakeholders from the negative consequences of the existing practice, insurance operators are required to comply with the following guidelines with effect of January 1, 2013,” it stated.