BY
Sabiu B. Abubakar
Who are Microinsurance Consumers?
Lack access to Insurance services: 52.50% of our Adult Population are living in rural areas and more than 87.9 million of our population are adults
Lack financial literacy: More than 26.5% of the adult population have no any form of education
Saving and Credit Co-operative Organizations (SACCOs)
MFIs/ MFBs
NGOs
Health Service Providers
Self- help Groups
Co-operatives and Friendly societies
Utility and Telecommunication Companies
Self-employed People Associations
Self-employed Women’s Associations
Retailers, Pharmacies and mobile phone operators
Mutual Co-operative and Community based Organization
Insurance Brokers/ Agents
These groups have direct and regular access to low income earners. They can provide various Insurance services in MI Market.
Service Providers Networks
The Roles of Service Providers in MI Market
No Insurer, brokers, or agent can effectively provide insurance to low income earners without use of these groups. Therefore these groups can play the following insurance services in the MI Market:
Distribution or sale of insurance to low income earners
Providing some Insurance services for Microinsurers
Underwriting Microinsurance risks
For these groups to play these roles they need license or authorization from NAICOM
Why Registration
1. Registration is licensing or permit ticket that allows one to enter into Nigeria Insurance market and operate as Insurance operator. Operating without registration is criminal offence because it is breach of section 3 of Insurance Act 2013
2. Licensing establishes and specifies the scope of insurance operation that an operators is permitted to operate in Insurance Market. Thus operating outside the scope is a breach which can lead to sanctions, fines, suspension of operator or even Cancellation of his licenses.
Therefore the purpose of Licensing is to regulate the persons or entities coming into the Insurance market and regulate their conducts of business in the market as well as to ascertain their ability to perform, provide and deliver insurance to consumers
Types of operational License
Insurance Licenses are categorizes base on the nature of Insurance transaction an operator wants to carry out in the Nigerian Insurance Industry. The following are the key categories of typical Insurance operational licenses:
1. Insurance/Reinsurance License
These Licenses are provided to corporate entities to enable the holder to take, underwrite and bear individual and corporate risks or businesses stipulated in the license such as General Insurance/Reinsurance businesses, Life Assurance/Reinsurance businesses or Composite Insurance/Reinsurance.
Holders of these types of licenses are called Insurers/ Reinsurers, Underwriters or Insurance/Reinsurance Companies. Specialized Microinsurance Companies fall into this Category.
2. Insurance Brokering License
This license is provided to corporate entity called Insurance Brokers or Consultants to enable the company to provide a professional intermediate serves between buyers of insurance protection and Insurers or underwriters. They carry out the following key services in insurance transactions:
1. They help Insurance consumers by identifying the risks they are facing and their needs for particular insurance serves. They advice consumers to take insurance and connect them with Insurance Company to provide relevant insurance cover for them.
2. They are independent professional company that provide professional Insurance advices to both the consumers and Insurers and they are liable for their professional negligence.
3. They provide a follow - up services on insurance transactions to both Insurer and consumers
4. They assist in policy administration, claims processing, handling, settlement and recovery.
3. Insurance Agency License
This license is provided to an individual person called Insurance Agent to enable the holder to negotiate Insurance with insurance buyers on behalf his principal Insurance Company. they also play the role of Insurance intermediary like Brokers but not at professional level and they are Agents for their Principal Insurers only. Unlike Brokers they provides few intermediaries services
4. Insurance Loss Adjusting License
This license is provided to corporate entity called Insurance Adjusters to enable the company to provide a professional independent objective insurance loss assessment and adjustment serves to insurance Companies or Insurance Policyholders. In addition to this role they provide the following services in insurance transactions:
Risks survey for proper Insurance Underwriting
Risks Management services etc.
5. Microinsurance Licenses and Authorizations
As earlier mentioned that Service Providers Groups can play the three roles in Insurance Market they need to have the following Licenses or Authorizations from the Commission:
Approval of Service Level Agreement(SLA) to distribute or sale Micrinsurance products to low income earners – here the Service Providers groups are not required to register or obtain License from Commission to sale or be a channel to distribute MI products. Insurance Company will obtain the approval of SLA from NAICOM to enable them play the role.
2. Approval of Service Level Agreement(SLA) also has to be obtained by Insurer where Insurer wants the Service Provider to provide additional service to him such as premium collection from low income earners, premium remittance to the Insurer, collection of underwriting information from Low income earners to Insurer, clients data update, claims notifications and remittance of claim amount to Insurer etc. to carry out these functions no license is required, SLA is sufficient.
Both Insurance Broker and Agent are excepted from going into SLA agreement with Insurer for transaction of Microinsurance. Because they are already registered by NAICOM
3. However, License has to be issued where Service provider wants to Underwrite Microinsurance risks as risks taker - the Service Providers groups can only perform this role when they have Specialized Microinsurance License from NAICOM.
Conventional Insurance and Reinsurance Companies do not need to obtained License from NAICOM to transact Microinsurance business. Their existing Licenses are sufficient. However, they most have approval from NAICOM to sale Microinsurance products
However both Conventional Insurer and Specialized Microinsurer need go into SLA agreement with Service Providers before they transact Microinsurance business.
What is Service Level Agreement(SLA)
It is a documented undertaking, signed and sealed between Service Provider and Insurance Company or Microinsurance Company containing terms and conditions of a partnership contract to deliver insurance or provide certain insurance services by the Service Provider for the Insurer.
Content of SLA
A Microinsurer shall prior to appointing a Service Provider execute a Service Level Agreement which shall contain the following minimum standards:
Right and obligation of either parties
Premium collection notification clause
Claim administration and settlement clause
Commission payment and or other deduction
Record management
Any other requirements as the Commission may from time to time prescribe
Licensing of Specialized Microinsurance Company Section 2.1 of MI Guideline
1. Must be a Limited Liability Company registered under the Companies and Allied Matters Act (CAMA1990).
2. The applicant shall choice to underwrite the following businesses:
- Life Microassurance
- General Microinsurance
- Composite Microinsurance
3. Depending on the type business the applicant has chosen, the following are provisional minimum paid-up share capital requirements for each business:
- Life Microinsurance business N150,000,000
General Microinsurance business N200,000,000
Composite Microinsurance business N350, 000,000
- The applicant has to obtain application form from the Commission which shall be completed and submitted to the Commission along with the following:
A non-refundable Registration Fee of ‘x’ and a Certification Fee of ‘x’ to be paid to the Commission when Application is being considered as successful
Certificate of incorporation in the Company’s name from CAC
Particulars of directors (form C07)
Particulars of share holders (form C02)
Registered address ( form C06)
Memorandum and Article of Association (MEMART)
- Evidence of payment of minimum deposit with the Central Bank of Nigeria ( i.e. 50% of paid up share capital)
- applicant shall submit its business plan and feasibility study of Microinsurance to be transacted within the next 5 years and it shall contain :
- Introduction/background of the Company- Brief background about the organization, including past experience of the sponsors/promoters, CVs of the proposed directors and Management who are anticipated to carry on the proposed Microinsurance insurance business in Nigeria, along with its pattern of shareholding.
Vision Statement – should define the purpose of the organization.
Mission Statement – The mission statement should guide the actions of the organization, spell out its overall goal, provide a path, and guide decision‐making.
Targeted Low Income earners Market and Service providers
Targeted Volume of Business
In case of Life MI a singed statement of Actuary on premium rates and benefits, terms and condition of proposed products to be offered.
Nature and basis of Premium Rating and Procedures
In case of Life business, method of distributing profits between policyholders and shareholders
Organizational Structure of the Company
- Initial Estimated Set up Cost of the Company
Use of IT and its relevance to the business
- Propose Products to be sold which most reflect microinsurance nature
A specimen copies of Proposal forms, Policy document, Cover notes, Certificate, and Claim forms to be submitted to NAICOM
Evidence of adequate and valid reinsurance treaty
In case of Life business, table of premium rates and their basis – -Promotion & Publicity ( Advertisement)
- Submission of operational Manuals on Underwriting, Claims, Reinsurance, Commission, Investment, Accounting, MIS reporting etc.
Evidence that the directors have attended the promoter’s interview and are adjudged suitable and are not disqualified by the provision of Insurance Act 2003
Details Employment career history of the proposed CEO, senior management team and Secretary of the Company
Copy of the CEO’s appointment letter and his acceptance letter
Evidence of resignation or formal disengagement of the proposed CEO from his previous employment and acceptance of his resignation by previous employer
A declaration by the CEO and a director who signed the application form that the business shall be transacted in accordance with sound Microinsurance principles
Proposed list of Executive Directors and their comprehensive resumes
The CEO shall have a minimum of 7 years post qualification working experience as associate member of CIIN or its equivalent
For non-associate member of CIIN, a minimum of 10 years working experience in the Technical Department of Insurance Institution is sufficient
Head of Technical Department shall have a 5 years post qualification as associate member of CIIN otherwise 7 years working experience in Technical Department of an Insurance Institution is sufficient
Details of individual or group of related individual having substantial share holding in the Company
A declaration signed by at least two Directors that the business shall be transacted in accordance with sound Microinsurance insurance principles.
-A sworn affidavit by each Director, manager and secretary that he/she is not disqualified under the provisions of section 12(1) of the insurance Act 2003 from being a director, Chief Executive, Manager or Secretary (details to be stated in the affidavit) together with a recent passport photograph of the Directors, Chief Executive, Managers and secretary.
Completed Personal History Statement (PHS) form containing names, addresses and employment history including directorship of other companies of the Chief Executive and all other Directors of the Company for the past Ten (10) years.
Names, qualifications, experience and addresses of each of the proposed heads of Departments and Executive Directors. Evidencing expertise must be provided including formal practical training in Microinsurance Business and other related business.
All these information are to be reviewed by NAICOM and if applicant is found suitable a license is given to the Company to operate as a Specialized Microinsurance Company to underwrite Microinsurance businesses only.
Thank You.
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