Pay claims or lose license

Pay claims or lose license

Claims settlement has taken a new dimension in the insurance industry as the National Insurance Commission (NAICOM) has warned operators to be responsive in claims settlement or be shown the way out of business. CHUKS UDO OKONTA examines the efforts of regulators and operators to facilitate claims payment as well raise public confidence on insurance.

This may not be good times for insurers who collect premiums and renege on claims as the National Insurance Commission (NAICOM) and Nigerian Insurers Association (NIA) are collaborating to weed out claims defaulters out of the industry.

Public acceptance of insurance has been on the low ebb due to the belief that insurers are not committed to their promise on claims settlement. But a report from the NIA said the industry paid over N200billion claims last year.

To persuade the public and boost insurance business NAICOM and NIA set up different complains bureau to address the misgivings of insured whose claims are denied by nefarious insurers.  

Giving a score card on the performance of its bureau, NAICOM said it has settled claims disputes valued about N2.2billion within four years. It noted that the feat was achieved due to the commission’s resolve to commit insurers to their responsibility on claims settlement.

The Commissioner for Insurance Mr Fola Daniel said the bureau has been empowered through the provision of required staff and working tools, which is in line with its policy of zero tolerance of non-payment of claims which now compels most insurance companies to treat claims payment promptly.

He noted that the effort has expedited the complaints resolution processes and enabled the commission to effectively monitor companies’ claims settlement processes excluding NICON Insurance Plc where a lot of complaints relating to pension matters are yet to be resolved.

Daniel noted that operators who consistently fail to settle discharged claims promptly would loss their license, adding that insurers have been mandate to henceforth administer claims in accordance to standard insurance practice and should be considered as a sole responsibility.

He stated that discharged claims should be settled immediately as prescribed by the Insurance Act 2003, adding that failure to do so would attract sanctions as stipulated by section 70 (2) of the Insurance Act 2003

Daniel said: “Failure to settle discharged claims shall attract sanctions as stipulated by Section 7o (2) of the Insurance Act 2003. Consistent failure to settle discharged claims promptly may lead to the withdrawal of the licence of the insurer as stipulated by section 8 (1) (m) of the Insurance Act 2003 and the insurer may be would up by the commission in accordance with the provisions of section8 and 32 (1) (b) of the Insurance Act 2003.

“No foreign loss adjuster shall attend to any claims in Nigeria oil and gas sector without the express permission of the commission on such terms and conditions as may be stipulated in the approval. Similarly, the foreign loss adjuster shall handle the assignment with and in collaboration with at least one loss adjusters of registered under the Insurance Act, 2003.”  

Daniel said NAICOM said the NAICOM views failure or undue delay of claims settlement as an aberration.

He said individuals, corporate bodies or government establishments that have genuine unsettled claims against any insurance company are advised to lay the complaint to NAICOM.

"The consumer protection unit of the commission has been properly positioned to handle such complaints with dispatch. Any defaulting company will be required to pay such claims. Non payment of genuine claims is enough ground to suspend or cancel the operational certificate of a registered insurance company.

"This is why NAICOM advises policy holders to ensure that they obtain their policies from NAICOM-registered insurance companies only. A policy obtained from a fake insurance institution has no liability attached an no compensation can be received if such complaints are made to the commission," Daniel added.

He maintained that the commission considers prompt claims settlement as the best awareness campaign tool.

 "For us at NAICOM, the greatest awareness campaign an insurance company can embark upon is prompt settlement of claims. When an insurance company pays claims promptly, then a lot of Nigerians would begin to have more confidence and people would buy more insurance products.

"Right now, most insurance products are not bought; people refrain from these products owing to the attitude of most insurers. It is said that insurance companies that are dissuading people. But the time, we increase the confidence level of Nigerians; insurance would become a product that Nigerians would buy just as we buy newspapers and clothing materials. This is our dream, we expect that once we increase insurance awareness, people would want to buy insurance," he said.

He noted that quick response to claims by insurers is said to be the best publicity required to boost insurance operations, adding that it is a mandatory responsibility of insurers to settle claims promptly as that is the reason for their operations.

Daniel said NAICOM has adopted measures to ensure that insurers meet their claims responsibilities as specified in the industry’s regulatory guidelines.

 “The issue of non payment of claims, I think it has to do with perception. I would say that the Federal Government and NAICOM have done a lot to cleanse the industry. You will recollect that, four years ago, we had over 130 insurance players, which had been reduced to 51, these 51 companies are strong and vibrant and the issue of unsettled claims has become a time of the past. Of cause, people still have that perception, unfortunately, perception is not a thing you can kill at a go, but I can tell you that the issue of unsettle claims or delay claim by the insurers in the industry is go with the past. This is because now we have companies saying that reported claims are settled in 48 hour.

“As a regulator, we are very interested in prompt claims settlement, because the public must not be misled. So, we are actually watching to see that these companies are able to deliver on the promises they are making. I am happy to say that most of these are doing very well and the number of claims reported to us is receding and very negligible. And where we have cases of unsettled claims reported to us, we move very swiftly and give the insurance companies the number of days to settle the claims, otherwise, they are sanction.

“In the industry, we do not advertise when we pay our claims, because we believe that settlement of claims is normal in the course of business, but I think we are now going to adopt some strategy where high profile claims are settled, I think we should begin to let Nigerians know that the insurance companies are paying claims. We are also carrying out an acid test on any claim settlement that is publicised by companies. Agin, insurance is about utmost good faith, hence we are not allowed to make claims that are not true.

“The operators are really paying claims and we are proud of that for that is the direction we are going. The best way to advertise insurance product is through payment of claims and settlement of claims means prompt settlement,” he noted.

The former Chairman, NIA, Mr Wole Oshin, said the NIA’s bureau initiative is to complement similar effort by the NAICOM which is poised at building relations between the industry operators and their clients.

Oshin noted that the initiative was inform by the operators need to advance insurance business and serve the public effectively, as the sectors cannot thrive in a state of rancour.

“The bureau core function is to ensure problems between our members and their clients are resolved, the confidence level of the industry improves and quality service delivery is rendered our even growing clientele,” he added.

The Managing Director of Capital Express Assurance Limited, Mr Anthony Aletor, who expressed his misgivings on the celebration of claims by operators, said that the company no longer celebrates payment of claims as it is one of the major reasons why an insurance company exists.

Aletor expressed that it is sometimes embarrassing the way the issue of claims is treated especially with regards to enquiring into whether it is paid or not at a time like this when businesses are challenged globally to operate on standard practices. “Why is the insurance company set up if not to render risk protection services and then pay claims whenever the need arises,” he asks adding that claims should be taken for granted that they will be paid.

“When you are looking at developments in the insurance business, there are other vital areas to look at and not necessarily focusing only on claims because we must pay claims, as that is the essence for which we are in business,” He said.

He disclosed that for Capital Express Assurance, claim is no longer a big issue because it is part of the company’s culture to pay claims and to do so as at when due. He however disclosed that the company used to celebrate payment of claims as achievement by going to the press each time a claim was paid.

“When we were younger, we used to celebrate claims but now we look at it from the angle that we are in this business to respond to issues of claims when they arise so there has been a shift in attitude in this regard while we now focus more on value delivery and customer satisfaction,” he enthused.

 The Director, Finance and Account, NAICOM, Mr Sam Ordu, said the primary objective of NAICOM is to protect policy holders and to maintain a safe, efficient, fair and stable market and to ensure proper level of solvency, risk-based capital and mitigation against systemic and operational risks.

 “The current challenge for NAICOM is therefore the need to further strengthen the regulatory framework in order to minimise the potential effect of contagion risk and promote investors confidence for the long growth of the industry.

“The following steps have been put in place to protect the industry: Introduction of code of corporate governance, the culture of responsible financial reporting including the ability to make economic decisions to invest, divest, diversify portfolio. This is to ensure availability of relevant and reliable financial information.

“Since Nigeria Insurance companies are encouraged to develop globally, NAICOM has in turn put in place appropriate collaboration machinery with international regulators to limit the spread of toxic assets.

“NAICOM has established more concrete measurable regulatory standards with a variety of guidelines, consumer protection and various statutory insurance schemes to ensure ethical performance.

“There is increased oversight on the liquidity position, capital adequacy, profitability, cost profile and compliance with code of corporate governance.

“Since insurance is a risk taking activity, insurers are required to evaluate the risk management and internal control activities in order to ensure operational effectiveness of companies,” he said.