Paper presented at the 2012 edition of CIIN professional forum
Historical Background
Modern insurance was introduced by the European traders and trading companies who established trading posts in Nigeria. They placed their businesses with insurers in the London market. Companies appointed agents to represent their interests. Later branch offices were established. In 1921 the first branch office of Royal exchange was set up. Thereafter many other companies established agencies, branch offices and full fledged offices. Brokering, agency and loss adjusting companies were subsequently established.
Our institute was established on 25th August 1959. Three years ago we celebrated our Golden Jubilee. The Institute commenced conducting our local examination in 1989. The Act changing our status to a Charter was signed on the 26th February 1993. The National Insurance Supervisory Board (NISB) transformed to National Insurance Commission (NAICOM) in 1997. The institute of Loss adjusters was established over two decades. They are conducting their examinations under the supervision of the Chartered Insurance Institute of Nigeria.
The Market
The market today has 49 insurers, 2 reinsurers, about 500 brokers and 20,000 agents (6,000 registered) and 49 Loss Adjusting firms. The market ranked 60th in the world insurance market in terms of premium volume for 2011. The industry is made of insurance , reinsurance companies, agents and brokering companies as intermediaries representative, loss adjusters and surveyors. The Chartered Insurance Institute and other training institutions, The regulator-the National Insurance Commission (NAICOM) and consumers of our insurance products and services.
What shall we appraise
In an attempt to appraise the Insurance industry and the professional, we shall examine where we are presently and benchmark ourselves against other markets. We shall also examine the industry contribution to national development and the economy. We shall review some of our industry codes of practices and guidelines and evaluate our respective performance. In the last few years, NAICOM has issued various guidelines and initiatives to upgrade our practice in line with international best practices. Various legislations were passed to improve regulation and supervision to enhance the growth of the business. These various initiatives will be the subject of our discussion in this presentation.
It is not practicable to examine every aspect of the industry so this discourse would be limited to some areas like impact of the various legislation on our business, industry performance, market agreements, some codes like the code of good corporate governance and code of ethics, penetration and perception, quality of our professionals.
The insurance professional is hereby represented by all who have been certified as a professional by examination and election. We are all familiar with the steps to take before being elected. Our role in the development of the insurance industry is key to the future of the industry and its survival.
Therefore let us see ourselves as the engine of change and growth. It is commonly said that the level of development of the insurance industry is a measure of the state of the economy. Our contribution to the nation’s economic development cannot be over emphasized.
Insurance Industry and the Economy
The insurance industry is a mobiliser of funds and therefore key to economic development through various investment portfolio.
The performance of the industry for the period 2007 – 2010 is shown below:
Table I
Gross Premium income (Life & General)
(000,000)
|
% Increase
|
World Premium growth
| |
2007
|
104,742
| ||
2008
|
155,815.18
|
+ 48%
| |
2009
|
190,310.31
|
+ 22%
|
-1.1%
|
2010
|
201,284.36
|
+ 5%
|
+ 2.7%
|
2011
|
Estimated
|
-0.8%
|
Source: NAICOM
Table II
Gross Premium Income (Life Business)
(000,000)
|
% Increase
|
World Premium growth
| |
2007
|
15,637.61
| ||
2008
|
29,411.56
|
93%
| |
2009
|
36,833.33
|
25%
|
-2%
|
2010
|
52,242.14
|
41%
|
-3.2%
|
2011
|
Estimated
|
-2.7%
|
An analysis of table I show that there had been a decline in premium growth from 48% in 2008 to 5% in 2010. However, when compared with the world premium growth we can say we are above average.
When we analyse the breakdown between Life and General business, we see that more premium is generated on the general business in Nigeria while in South Africa the bulk of their premium is from the Life sector. The world economy and in particular Nigerian national economy is experiencing positive growth. We expect that with the transformation agenda of the government, we hope that the premium would grow exponentially. Using other perimeters like premium volume, density and penetration, Nigerian market compared to other countries needs a lot to be done. The sigma publication for the world insurance for the period 2009 – 2011 is attached as an appendix. . The sigma report is based on the assessment of 147 insurance markets including Nigeria. By ranking Nigeria is 60th in gross premium and 62 for life business in2011. In terms of population (167m) and in size, we are one of the biggest in the continent but this has not reflected in our premium volume. Therefore, the challenge for us as professionals is how can we harness our potentials to grow the business. The number of professionals and in particular the number of intermediaries must be increased. The industry must engage in massive recruitment and training.
Insurance penetration in Nigeria (i.e. contribution to GDP) is about 1% for 2011 compared to 16% for South Africa.
The industry target for the year 2012 by NIACOM is for the market to achieve at least 3% (1% for 2011) contribution to GDP and creation of additional 250,000 new jobs, a gross premium of N1.10 trillion (2011 premium not available) and per capita of N7500. As at 2010 and the projected estimates for 2011, the targets are far from being achieved. The challenge we have as professionals is how can we meet these targets to make the insurance sector more relevant to the economy.
However, we can advance reasons for the shortfall due to the stagnation of the economy, poor infrastructural deficit, insecurity which has in no little way affected businesses in certain sectors of the country and also increased claims, low level of insurance penetration etc. may have contributed to our inability to grow our business to meet the target. We as professionals would have to challenge ourselves to evolve strategies to enable us achieve the set target. This requires leadership with a purposeful vision and strategies on the way forward. This is where we can make a difference. What this implies is that we have to double our efforts and evolve strategies and new skills and competences as professionals to grow our respective businesses to enable the market meet the trillion target before 2015. We must design and innovate our products and services to enable us grow our business in order to meet the target of 1.1 trillion premium for 2012 and 3% contribution to GDP.
Stock Exchange Listing
Looking through the Nigerian Stock Exchange daily listing and stock market reports, insurance industry is not very active. The dividend payments and capital appreciation have not been encouraging.
This is a reflection of the performance of the industry.
Insurance Industry and Legislations
We have had 13 legislations which were intended to address contemporary insurance issues and challenges. They were enacted to correct apparent inadequacies of existing insurance laws.
Some of the legislations regulating insurance industry and practice are listed below:
· NAICOM Act 1997
· Insurance Act 2003
· NCRIB Act 2003
· CIIN Act 1993
How have the various enactments impacted on the industry and the professional.
The insurance Act 2003 created opportunities for the growth of insurance business with the sections regarding to compulsory insurances.
The effort of NIACOM through the initiative of MDRI is commendable. Sensitisation and effective launch were carried out nationwide. Extensive Advertisement Supported by NAICOM and the market is ongoing. There are observed deficiencies and limitations necessitating a review of the NAICOM Act and other insurance legislations. A Committee was inaugurated by the government in 2009. Regrettably 3 years after the inauguration, the new law is still at the Executive stage. The other legislations that we need to take advantage of to grow our businesses are:
· The Road Traffic Act 1945 which made compulsory 3rd Party Motor Vehicle Insurance.
· The Pension Reform Act 2004 on Compulsory Group Life and Life Annuity
· Nigerian Oil & Gas Industry Content Development Act 2010 provides an opportunity for the industry and professionals to grow our business.
However, the Employees Compensation Act 2010 led to the loss of a major class of business.
Oil & Gas insurance
The challenge for us as an industry is to improve our capacity and retention levels to reduce capital flight and the individual professional must develop underwriting and claims management skills. We need professionals to organize in-depth courses and colleagues to write books on this complex area of our practice.
The number of professionals with knowledge and skills in this area is grossly inadequate and employers should expose professionals to overseas training and possibly attachment with foreign reinsurers.
The question we must ask ourselves is how much has the industry benefited from these various legislations.
have we maximally taken advantage to grow our business in terms of knowledge and skills.
do we have enough professionals.
I must commend NAICOM for all her efforts in sensitizing the insuring public and various government agencies. The MDRI initiative has deepened insurance penetration and created awareness particularly within government agencies and in all the states of the federation.
With full implementation of the various laws, I have no doubt that we can achieve that trillion Naira premium income before 2015.
Enforcement Initiatives, Market Agreement/Discipline
The recent Nigerian Insurers association ( NIA) initiative to stem the activities of fake and dubious persons who hang around licensing offices and issue cover notes and certificates to unsuspecting innocent members of the public. We need to collaborate with the fire services and physical planning units in various States/LGA to enforce the compulsory fire insurance in buildings under construction and public building.
The NIA agreement on consult the lead. I believe it is well intended but regrettable not all members are committed to it. The time has come that the industry must speak and act with one united voice in order to protect the market. A situation where a customer will effect insurance and cancel after 6months without payment of premium and subsequently transfer his risk to a new underwriter without the new insurer consulting the previous insurer should be addressed.
Insured’s will take advantage and continue to transfer their business from one insurer to another without payment of the premium leading to loss of premium to the market. We need to collaborate to reduce incidences of this nature.
The market must show commitment to the principle of consult the lead. This will have the beneficial effect of premium growth.
On the issue of the Market Agreement, insurers under the auspices of NIA signed to a market agreement in 2009 as a code of standard practice and effective service delivery. Experience shows that this agreement is not being adhered to in the market. There is no commitment from the members and there has been instances where members in breach of the agreement have signed on to some businesses at very ridiculous rates and terms. This will not help for market growth and therefore I wish to appeal to all insurance companies and professionals to adhere to the spirit of the agreement as moral suasion alone will not yield the desired results rather sanctions should be imposed as a way to ensure full implementation of that agreement.
Code of Good Corporate Governance
NAICOM launched the code of Good Corporate Governance for the insurance industry in Nigeria. It became effective on 1st March 2009. To what extent has the code been implemented in the industry.
The introduction of the code of good corporate governance was part of the reform initiatives of the commission following the economic downturn. It became imperative to introduce measures that will enhance Accountability, Transparency and Shareholders value. The industry and professionals are expected to operate within the framework of the code. The commission had in the past embarked on seminars to educate stakeholders and directors. Companies had also trained directors in this direction. To a large extent, insurance companies are coping but the challenge is in the direction of insurance brokers and loss adjusters. How have they faired in implementing this code.
By the size of many broking firms and loss adjusting firms, compliance is observed to be a challenge. A review of sections of the code may be necessary. For example the number of board committees can be reduced to a maximum of 3 committees. We may need some amendments in the code that will enhance compliance by brokers and loss adjusting firms. For example sections 6.0, listed five committees namely;
I. Finance and General purpose Committee
II. Investment Committee.
III. Enterprise Risk Management Committee.
IV. Audit and Compliance Committee
V. Establishment and Government Committee.
The average board size of most brokerage/loss adjusting firms is five (5). To have all these 5 committees would become a challenge.
Section 9 requires the internal audit unit to be headed by a qualified Accountant not below the rank of AGM.
The question now is how many brokerage and loss adjusting firms can comply with these sections. Hence the need to review the code as it relates to broking and loss adjusting firm is advocated.
Our role as professionals is to ensure that our respective management enforce and comply with the code of good corporate governance. The management is part of the stakeholders. Others are the Board and shareholders. To a large extent there is a lot of enthusiasm about this code. It is a welcome development that places our market in line with international best practice.
Insurance Penetration and Public Perception
NAICOM in 2009 launched the Market Development and Restructuring Initiative (MDRI) which focused mainly on enforcement of compulsory insurance products, increase awareness, reduction in the incidence of fake insurance and agency reform,
I wish to commend the effort as the market is already reaping the positive results.
There is improvement in the perception of our industry. The response of the market to the recent Dana plane crash by making prompt payment of passenger legal liabilities has further reinforced the confidence of the public. We must act fast in claims payment and possibly give it some publicity with the increase attendant effect on the minds of the public. The perception of the industry has improved compared to times past when the public wrongly believed that we only collect premium without paying claims. The institute in its own little way addressed the perception issue through its various initiatives like the radio broadcast, career talks, print and other electronic media.
Insurance penetration is still very low compared to our sisters in South Africa and North Africa where they have developed their long term and General businesses. See Sigma report on world insurance. The introduction of affordable life products particularly within the low income as the target will enhance our penetration and deepen the market. Our population is put at 167million. This is a major advantage which we must leverage upon to grow our business. The introduction of microinsurance backed with legislative friendly environment will deepen the penetration. The challenge for us as professionals is to develop these aspects of the business as a growth sector.
The individual life business needs to be developed using an aggressive agency network to reach every nook and cranny. At the moment less than 5% of our population has anything to do with life insurance. When compared with Japan where they have achieved 90% life assured.
We need to sustain the various initiatives that will deepen the penetration of insurance in our market.
Human Capital Development
In the area of oil and gas, organizations must invest in human capital development as the local content Act seems to be in our favour. I enjoin every professional to show interest in this area and embark on self-education to complement our employers effect to develop our skills and knowledge. The number of the intermediaries serving our population in my opinion is grossly in adequate and therefore we need to train and attract new entrants to this sector.
NAICOM had set a target of 250,000 new entrants into the industry for the period 2009-2012.
How have we faired with the size of our market.
We have in the institute Register 2,436 Associates, 188 Fellows and 16,000 students in the insurance industry. This in my opinion is grossly inadequate. India has 32,000 Associates and 14,000 fellows. Their institute trained 1.2 million agents in 2010. Chartered insurance institute London has 5,000 Fellows, 17,898 Associates and 110,000 students. ICAN our contemporary has over 40,000 Associates and a student population 181,000.
The Indian institute in 2010 trained 1.2million new agents. In Nigeria we have approximately 20,000 agents servicing the whole market. When we do a ratio analysis of professionals compared to the size of our market you will see that the number of professionals to service each company is grossly inadequate compared to the size of the market.
We need to recruit and train more personnel to enable us improve our performance. This is where we have to face the challenges as professional.
We need to modernize our mode of operation by deployment of state of the art technology in particular in communication with our clients as a way to improve our perception looking at the size of our industry and the ratio of professionals to the market it appears that a lot has to be done to upscale our membership.
Mentorship
Mentorship is the art of growing a subordinate /younger colleague leading him through the path we had passed /walked and availing him the opportunity for growth. In times past we were encouraged by senior colleagues who guided us in the course of preparation for examinations through tutorials and a one to one learning method.
The professional of today is challenged to assist the institute in at least mentoring the younger colleagues and set targets for at a least mentoring 2 or 3 younger persons so that our operation 5000 project can be achievable.
The Industry Code of Ethics
The introduction of the code of ethics and practice for the insurance industry states that the code applies to all insurance companies and Practitioners in Nigeria including all the members of CIIN, NIA, NCRIB, ILAN. Every member of each of these bodies shall adhere to this code, use his best endeavors to ensure observance and comply with the disciplinary procedure and sanctions contained their in.
Ethics relates to a way of life, morals or principle generally adhered or adopted by a group of people. The behavior or conduct of the group form the standard for measuring adherence or compliance. Any infractions are usually sanctioned.
In the market, we hear of unethical behavior of our members both at the corporate and individual levels. Some of the examples of infractions include inadequate rating, claim compromise, falsification of returns, conflict of interests etc. Regrettably we are not courageous to make formal report of our members regarding any of these infractions to the institute. I cannot recall any case of disciplinary measure taken against any member of the institute on unethical behaviors.
I would suggest we set up a committee to review the present code of ethics for the industry and make it more functional.
Training
An analysis of the statement of accounts of many companies in the industry reveals that we expend less than 1% of expenses on training. The international best practice is about 5%. This may account for the poor quality of our personnel in recent times as we do not invest enough capital in our human resource.
We see training as a favour to our staff and worst still a favour to the consulting firms.
The quality of any output is dependent on the input, therefore we need to develop our personnel. Very few companies have well established training departments and even engage in overseas training of our staff. Few offices also have well equipped up to date libraries.
Patronage at our institute’s programmes including seminars, conferences and courses is very low and therefore we need to change our attitude. We need to show commitment to our profession. My observation is that we are loyal to arms of our industry instead of seeing ourselves as professionals with a common stake i.e brokers are loyal to NCRIB, underwriting staff to NIA, Adjusters to ILAN. We must shed this coat and put up a united front as one profession. Self-development is advocated for the individual and companies should reward the staff adequately when they acquire higher qualifications.
When last did our members attend a technical programme to update our skills and knowledge. When specific seminars designed to address specific areas of our businesses are organized, we hardly find professionals in attendance. We need to have a change of heart in this regard.
MCPD initiative.
The Institute at our professional forum in 1998, resolved that we adopt the Mandatory continuous professional development. The MCPD comes into effect after we are qualified and elected as Associates. The objective of the MCPD is to ensure we do not relent but regularly update our knowledge and skills in order to respond to changes in the business environment and also meet the challenging needs of our clients.
This Professional forum is part of the Institute’s effort to keep us updated. The other reason for the MCPD is to encourage insurance professionals to acquire new technical knowledge and skills for improving their current effectiveness and in monitoring professional excellence at all times. The MCPD will enable professionals be aware of global economic challenges and the impact on our insurance practice.
The Institute has set some scoring guides and in fact, any professional who fails to attain a 40 points score consecutively for three (3) years will have his/her certificate withdrawn by the institute. The question now is how many professionals have met this standard.
How many certificates had the institute withdrawn due to default in meeting the set standard to retain our diplomas.
I believe the time for the Institute has come for us to appraise the impact of the MCPD. A review of the scores of members shows that only a minority had complied. The secretariat needs to notify all professionals of the status of their respective scores and persuasively encourage those members in default to make up for any deficiencies. The institute should apply the sanctions in order to ensure that every member of the institute is aware of the importance and need to continuously update our records and particularly engage in MCPD scoring activities.
Quality of our Professionals
One of the key objectives of our institute is in determining what standards of knowledge and skill are to be attained by persons seeking to become registered members of the profession and reviewing those standards from time to time.
What can we do to increase the number of professionals. We need to encourage our colleagues to study for our examinations and also to show commitment. Employers should make it mandatory for all staff in the technical/marketing division to acquire various levels of certification within a set period for example within the next 3years.
The process of recruiting new entrants should be competitive in other to attract the brightest brains and encourage them by offering competitive remunerations and conditions of service to guarantee their retention within the industry.
We need to adopt the CII London Aldermanbury declaration making it compulsory for at least 50% of all technical and marketing staff to be professionally qualified by end of 2013. In order to sustain and improve on the quality of our professionals, our syllabus had been reviewed twice since we commenced conducting the examinations locally in 1989.
In 2010 two new subjects 735 – Life Insurance and 745 – Principles of Property & Pecuniary Insurance were made compulsory at the Advanced diploma stage. The essence was to ensure that all Associates have a fair knowledge of all aspects of the practice. The two subjects were made compulsory in response to the market needs.
Today, many technical staff exhibit shallow knowledge due to lack of indepth studies. The issue of low quality is becoming a challenge even in other professions and in the university products. There is an urgent need for all professional bodies to address the issue of quality and falling standards.
The CII London on 10th March 2010 as part of their effort to address this subject of quality and standard in their market published the report of the insurance profession task force. The report was code named the Aldermanbury declaration. The declaration requires that firms sign up to commit to meet common frame work for professional standards covering:
ü Commitment to excellence
ü Training and development
ü Professionalism within insurers
ü Professionalism within brokers
ü Broking, underwriting, claims and management standard.
The task force set the target date for full implementation as 31st December 2013 for companies to comply with the intent of the declaration. Let me reproduce a summary of the report with its intent.
1. Commitment to excellence.
All firms should operate policies towards;
· Customer service
· Ethical conduct
· Qualifications
· Continuing professional development
Comment; These will demonstrate their commitment to the highest levels of standard and behavior.
2. Training and development
Employers should ensure that people in the profession participate in formalized training and development programmes.
Comments; such programs should lead wherever relevant to a professional qualification under pin career development and increased professional standard, support the development of knowledge and skills.
3. Professionalism within insurer.
Insurers should meet the criteria for corporate chartered insurer status within relevant business divisions as a demonstration of their commitment to excellence
4. Professionalism within Brokers – Insurance intermediaries should meet the criteria for chartered insurance brokers status as a demonstration of their commitment to excellence.
5. Brokering standards – Insurance intermediaries should ensure that at least half (50%) of their operational management team is qualified to Advanced diploma (ACII). Other relevant technical qualifications should be encouraged.
6. Underwriting standards – Insurers should ensure that at least half (50%) of the people in the senior underwriting management team are qualified to Advanced Diploma (ACII) and all authorized underwriting agencies to Advanced Diploma (ACII). Other relevant technical qualifications should be encouraged.
7. Claims standards – Insurers should ensure that at least half (50%) of the people in the senior claims management team are qualified to Advance Diploma (ACII). other relevant technical qualifications should be encouraged.
8. Management standards – Insurers should ensure those people in key leadership and management positions for example broker relationship positions and risk managers are members of an appropriate professional body and hold relevant professional qualifications.
Lessons from this Aldermenbury declaration is that we need to set our own local standards to repackage our commitment to this our noble profession in raising the standard and quality of our future professionals.
A situation whereby 50% of management staff are qualified professionals will definitely raise the standard and quality of work. The net effect is that we shall have more confident and trusted professionals and improved standard of risk management which will translate to overall improvement in the performance of the industry in general.
Conclusion
I have attempted to appraise the industry and the professional. There are many areas for improvement and in particular in the area of number of professionals in the market. The industry must take definite steps to improve our contribution to GDP and make it more attractive for new entrants into the industry. The idea of introducing graduates into the industry has paid off handsomely. We need to be consistent and ensure that the process is open to all after a competitive selection process to ensure that only the best brains are recruited.
The need for change of our attitude and total commitment to our profession can note be over emphasized. Integrity and transparency should at all times be our guide. We must refrain from unethical conduct and any infractions should be reported to the institute for disciplinary action to detarr others and improve our perception. We should encourage others through mentorship to attain their professional qualifications in addition to other higher academic qualifications to achieve multidisciplinary skills. Total support for the institute educational programmes and ensure that we achieve the minimum yearly MCPD scores in order to retain our diplomas.
As professionals and leaders of our industry we need to imbibe leadership qualities that will enable us to distinguish ourselves and companies. We must seek out for new opportunities, new areas and innovate our products and services to meet the challenges of a highly sophisticated society and environment. The use of technology to drive our businesses should be considered as a critical success factor. May I commend the initiative of NIA in deploying technology to eradicate fake motor insurance certificates.
I also wish to commend NAICOM for their various initiatives including the introduction of the Code of Good Corporate governance.
All professionals are leaders in our own right and therefore we must exhibit the skills and knowledge that will place our industry and the profession as one of the noblest of all professions and thereby begin to attract a new generation of school leavers into the industry. We have majority of our members aging and there is an urgent need to replace those aging with more vibrant young professionals that are intellectually active.
On a scale of 1 – 5, I will say we are just fair both in our contribution to the economy and commitment to our profession. We need to move up to good and excellent grades by a joint determination by all professionals to move to the next level that will transform our industry.
I thank you for your attention.
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