Insurers yet to get claims reports from flood victims
The flood disaster that ravaged many parts of the country has once again revealed the low level of insurance patronage in the country. The Managing Director Consolidated Hallmark Insurance Plc, Eddie Efekoha, in this interview with Chuks Udo Okonta, said insurers are yet to get claims reports from the flood victims.
How has the insurance industry fared this year?
The year 2012 actually started with a lot of hope, as we all thought that the Federal Government transformation agenda which identified several economic reforms will spill over to insurance in terms of business generation. Government as a major spender could impact on our business if only they will execute the different projects and programmes, of course, the different sectors of the economy including insurance will benefit.
We had thought that things will go upwards, but, l still do not think that will happen given that we are already in October, the 10th month in the year. I do not think that has happened, but suffices to say that the industry has grown as we are still providing immediate service to the general economy as a stabilizer.
We have witnessed key events that have shaken the industry. The first is the Dana air crash; secondly, we are currently experiencing what would have been said will never happen in Nigeria, which is flooding.
We have not identified Nigeria as a natural disaster zone and most insurers look at flood as special risk, whereas this kind of flood is like one coming from a leaking overhead tank, affecting both the high and the low. Even President Goodluck Jonathan’s house in the village was not spared, which means it is not just my house or yours in the village or town that was flooded. This flood is no respecter of anything and the flood risk is the situation we face today, which means that the risk is with us and we must take all the measures to plan for it and to manage it effectively.
Has Consolidated Hallmark Insurance been able to achieve its projections for the year?
Fortunately, for our company, Consolidated Hallmark Insurance plc, l will say that we are happy with where we are, having achieved a very modest growth. The key driver of our business from the start is our people - the staff and the board. We have continued to improve on the hosting of our Annual General Meetings (AGM) by investing so much on the processes. Each year we try to bring forward the time we hold the AGM. Since 2007 we held the AGM in August then July and this year 2012 we before the first half of the year. As we move on, we will continue to improve on the time of the AGM.
The numbers have grown but not as we expected because we are still under the weight of our past in terms of receivables in the industry, which has not helped anybody under a constantly changing regulatory regime. As far as this is concerned you will recall that the consolidation was done on the bases of allowing companies up to N400 million receivables as part of their shareholders fund. That is in determining the N3 billion shareholders funds that is the new capital. Underwriters were allowed N400 million on receivables, meaning that effectively, what was on ground was N2.6 billion. By the time that was over we came up with a regime that allowed receivables up to one year being allowed in their accounts, then we moved on shortly after to have receivables classified into 90 days, 180 days, 270 days and 361 days and we are told that within180 days we may allow 10 to 15 per cent and thereafter, 90, 100 and 180. Before now, you were allowed something and now, we are at the threshold of saying you are not even allowed anything again.
So all of these have taken place within a span of five years. You will appreciate therefore what impact that has on the financial reporting of various companies.
All we have continued to do is to comply as we are in a regulated business. Fortunately, I do not think that we are in any serious breach of regulatory requirements in terms of returns.
We equally realised that this year like every other year, we have greater stake to our stakeholders particularly the policyholders. Just recently, we were involved with Chevron fire. It might look small, but it’s something. We paid a claim of about N60 million to somebody just few months ago even though the major claim has not been concluded. And as we speak, we are about settling claim of about N180 million for a fire that happened in Kano.
For us as a company, we recognise that we are in business to pay claims; therefore, we must operate and ensure we do not fail. When we do that, satisfied clients will recommend themselves and other people to us. So it’s a business that is built on referrals such that existing clients will refer you when you have done this and we will continue to do that in the mist of changing environment.
Of course, you know we moved to our Head Office on Ikorodu Road this year from our Victoria Island Office which now serves as our branch office. In that branch we have our energy and Gas risk. Our movement here has helped us, and that is why at short notice we can still call others and we meet. At Victoria Island, when we have occasion to hold this kind of meeting we find out that one or two persons will be missing. So, we enjoy being here. It has helped our productivity because man-hours that we used to spend on Lagos traffic, not to talk about the closure of 3rd Mainland Bridge have all reduced. Now some of us spend just 30 minutes to get to the office, which was formally taking an average of two to 2 ½ hours. But overall, I will say our numbers have made some movements upward.
As at September, which is the end of third quarter we exceeded what we paid in terms of claims in the whole of 2011. That means that by the time the year runs through we must have paid out quite huge. Last year, we paid N512 million, and this year we have paid about N615 million as at September already. I have said this in to buttress the fact that we value our customers.
We have undertaken a sort of strategy session, which we regard as learning the environment and we will continue to learn by getting people to talk to us at the board and management levels. In the last three years, the board has always held annual retreat where we have consultants talk to us and there is usually that regular interface between the board and the staff in terms of resolutions from both sides.
We also realised that the first in our priority is claims payment, but in doing that we ensure that underwriting must be very solid. All of these can only be achieved if you have the right people, so, we take clues from the UAC’s and Lever Brothers of this world. They have several chief executive officers so; our people are empowered to that level. We have three regions because we sub-divided the market into three.
Truly, insurance is very challenging particularly in the light of very strong regulatory demands, but we thank God we are coping.
What impact has the recent flood on insurance market?
There is no gainsaying the obvious that our market will be threatened by these events. We have had this flooding incident and no doubt some of them have been insured. However, it depends on how long the flood remains with us. May be, insurance may not be taken up on them anymore or for a long time to come. Then you will expect that premium to the industry will reduce. As we speak, there are a lot of temporary camps for many of our brothers, sisters and friends in affected areas, and this is a major challenge for Market Development and Restructuring Initiative (MDRI) when we look at growing the retail market. Now, if these are the people we are focusing on, small peasant farmers and rural population and they are battling for survival, insurance will be the last thing that will be in their priority list.
MDRI might suffer some little setbacks because these people will need to be re established to get a decent accommodation and guarantee survival before insurance is looked into. By and large, I believe the flood will impact on the level of premium being expected into the industry.
How prepared is the industry to mitigate the challenge thrown up by the recent flood in part of the country?
Flooding is part of what we regard as special peril and is part of the fire policy. But whether the current flooding is what we anticipated becomes another issue because natural peril is difficult to cover and that is why government is regarded as an insurer in case of natural perils. But as far as this one is concerned, a lot of the places that were affected are not major buyers of insurance yet because each time l go out l ask - Do you have any flooding claims so far reported? And many have said they do not have, because most of the affected areas (villages) are still yet to see much development.
But for a true flood, like the rain we had in Lagos some time, insurance came to the rescue – we all recall the claim from Friesland WAPCO. It is flooding but as a result of rainfall. But the current flooding is not rainfall, but as a result of other issues. So to that extent, flood is part of what we cover in insurance and each case like we say will be looked at on its own merit.
Those who are affected by flood and whose properties have been destroyed by this recent case and have insurance should put up their claims and the respective insurance companies will look at it within the ambit of the policy they have issued.
What are operators doing to enhance insurance education and awareness?
The industry is doing everything to create insurance awareness. We have Professional Insurance Ladies Association (PILA) that has continued to do awareness programme for the young ones and they have sustained the programme for these four years. The programme continued to push insurance to children who are leaders of tomorrow.
From the institute, the College of Insurance is about to take off, the Agency scheme is also on and we are encouraging more people to take up Chartered Insurance Institute of Nigeria (CIIN) exams. If you go to the centers these days the number of participating candidates have been on the increase. At some point the institute has targeted 5, 000 new entrants, be it graduates or as agents, but we have not achieved that yet. However, it is important to set our targets and we will continue to work towards that.
When we hold the seminars and conferences these days, we try to bring up issues that affects our country and as practitioners. At the last education conference in Abuja we talked about climatic change and we had Nigerian Meteorological Agency (NIMET) we also talked about insecurity at a time the Boko Haram was yet to assume this level.
And if we had taken all the presentations seriously, perhaps we would have been better protected today. The Institute is preparing for educational seminar in Port Harcourt and we think of making insurance count. We agreed that insurance is not counting in a lot of our corporate and personal budgets. We are engaging government as well because we cannot remove government from this.
Even in the school curriculum, we are trying to bring insurance to a lower level to make it part of the syllabus for secondary schools. If you have insurance today as a subject at WASC level, then many students will pick interest in it, know about it gradually it assumes greater proportion and before you know it, it will begin to create value for society.
Are we expecting changes in the market following the new NAICOM guideline on premium receivables?
The circular will take effect from January1, 2013. So the effect will be felt then. It is hoped that it will resolve part of the problem we have with receivables in the industry. But whether it will totally eliminate that problem or not will be discussed by stakeholders later.
Is claims negotiation a process in the business of insurance?
Claims in insurance are premised on the understanding that premiums are paid and put in a pool where the unfortunate members of the pool are compensated in the event of loss. Everybody is contributing to it; therefore, the fund must be judiciously applied or used. When claims are made on that pool, they are not just paid but must be negotiated. If somebody experiences a situation of negotiation, l thinks it is normal. However, in negotiating, several conditions might prevail and the conditions may be that the premiums could have been paid after the risk has matured. In that case, somebody is saying is not responsible but because we know you have suffered loss, so we will give you 30 per cent. If you like it you take it, if you don’t you can go to NAICOM or NIA Complaint Bureau to make your case.
It happened with one of our clients. A ‘tokumbo’ vehicle was insured for N8 million while the market value was about N2.6 million. It was overvalued to get insurance policy. The client contributes between N5 million and N10 million premium yearly to the company. But when the vehicle got burnt and it was priced, it was then discovered that the market value was N2.6 million and we insisted on buying a new vehicle or paying the equivalent in cash, but the client insisted on the N8 million, but we refused. In our final notice we made it clear to the client that if she does not like a new vehicle or equivalent in cash she can go to NAICOM or NIA Complaint Bureau.
So, if such a client comes to you as a Journalist, you may not really understand the issues concerning the “negotiation” because each case is looked at on merit. No insurance company in this market under the current regulatory regime will refuse to pay claims. If it does, it is either the license or the person will go.
