2013: Gains, pains of insurance industry

 

Daniel

 

Insurance operators have different tales to talk about year 2013. For some, it was a year of goodies, while others challenging. Chuks Udo Okonta, in this report examines the developments that shaped the industry and the consequences.

 

 

Year 2013 started on a good note for the insurance industry as the National Insurance Commission (NAICOM) began enforcement of the new premium regime tagged No Premium, No Cover, which empowers underwriters to collect premium in advance before issuing out a cover.

 

Though the policy took-off with doubts in some quarters, it gradually gained grounds as operators stood firm, rejecting businesses which premium were not paid. The only reported infraction came from 200 brokers who engaged in deeds that subverted some rules in the policy.

 

Many operators believed the policy has helped repositioned the insurance practise, as it has enhanced the financial base of the industry.

 

Commissioner for Insurance Fola Daniel, said the policy has worked tremendously, adding that the biggest test of the No Premium No cover, was the Nigerian National Petroleum Corporation (NNPC) account, which generated over $70 million (N11.36 billion), and was paid before the renewal date.

He said: “On government accounts, I think there is 100 per cent compliance. The biggest test of the No Premium No cover was the NNPC account, which generated over N70 million dollars, and was paid promptly.

“The effective date for renewal of NNPC’s account was April 1 and the premium was paid on March 30. So I do not know of any government account where somebody will breach the law.”

 

Director-General Nigerian Insurers Association (NIA) Sunday Thomas said the policy has transformed the fortune of the industry, adding that most operators’ financial base has been enlarged.

To ensure compliance, NAICOM warned that any underwriting firm that provides insurance cover without collecting the premium would be liable to a penalty of N500, 000 or lose its license.

The Commission noted that all insurance covers shall only be provided on a strict 'No Premium No Cover' basis. It maintained that only cover for which payment has been received, directly by the insurer or indirectly through a duly licensed insurance broker, shall be recognised as income in the books of the insurer.

NAICOM said any insurer, who grants cover without having premium in advance or premium receipt notification from the relevant insurance broker shall be liable to a penalty 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.

It said irrespective of period of insurance, insurers shall ensure that at any point, they have received directly or indirectly, through the insurance broker the full premium in advance for cover being granted.

International Financial Reporting Standard

The year also heralded the full implementation of the International Financial Reporting Standard (IFRS). Having commenced with partial migration to the IFRS with 2011 accounts, underwriters saw the surprise of the lives as their 2012 accounts were subjected to tough scrutiny by NAICOM. Many of them made frequent visits to the commission’s office in Abuja, as they ran around to answer volumes of queries on their accounts.

NAICOM said only 38 firms’ has been approved as December 20, adding that the firms made the last minute approval are Oceanic Insurance Company Limited; Lasaco Assurance Plc; Crystal Life Insurance; Mutual Benefits Life Assurance Limited; Mutual Benefits Assurance Plc; Nem Insurance Plc; Linkage Assurance Plc and Union Assurance Limited.

 

The commission said as at December 20, Industrial & General Insurance Plc; International Energy Insurance Plc and NICON Insurance lead the category of eight that are yet to submit their accounts. Others in that category are the five firms under NAICOM’s management - Alliance & General; Alliance & General Life Assurance Plc; Goldlink Insurance Plc; Spring Life Assurance Plc and Investment & Allied Assurance Company Limited.

 

Those approved are Mansard Insurnace Plc; ADIC Insurance Ltd; WAPIC Insurance Plc; Consolidated Hallmark Insurance; Oasis Insurance Plc; FBN Life Assurance Ltd; Continental Reinsurance Company Plc; AIICO Insurance Plc; Leadway Assurance Company Ltd; Crusader General Insurance Ltd; Crusader Life Insurance Ltd; UBA Metropolitan Life Ins. Company; Zenith Insurance Company Ltd and Unitrust Insurance Company Ltd.

 

 Others are Unity Kapital Assurance Plc; Standard Allied Life Assurance; Custodian & Allied Ins. Plc; Regency Alliance Company; Royal Exchange Assurance Plc; Sovereign Trust Insurance Plc; Zenith Life Insurance Ltd; Royal Prudential Life Assurance Plc; Sterling Assurance Nigeria Ltd; Law Union & Rock Insurance Company Plc; Cornerstone Insurance Plc; Oceanic Life Assurance Plc (Old Mutual); Prestige Assurance Plc; FIN Insurance Ltd; Niger Insurance Plc and Equity Assurance Plc.

 

Those whose accounts are placed under review are PHB Insurance Plc; Great Nigeria Insurance and Wapic Life Assurance Ltd.

 

The accounts of Lasaco Life Assurance; Nigeria Reinsurance Corporation; The Universal Insurance Company Ltd; Capital Express; Staco Insurance Plc; African Alliance Insurance; Anchor Insurance and Standard Alliance Insurance Plc were queried and the commission is awaiting their responses.

 

Those of Nigerian Agricultural Insurance Corporation; Unic Insurance Plc and Guinea Insurance Plc are being reviewed.

 

 

 

  TAKAFUL

NAICOM also in the year released the guidelines on Takaful Insurance which it said is in line with the provisions of the 1997 Insurance Act, and the need to complement the current drive for Financial Inclusion to increase insurance penetration in Nigeria.

The commission noted that with the guidelines, all intending applicants seeking license to transact takaful-insurance business in Nigeria must possess the followings: Certificate of Registration as a full-fledge takaful-insurance company in accordance with International best practice, adding that such a company must have, as part of its name, words or terminologies that connote takaful operations.

It said the company must maintain a minimum deposit in a non-interest financial institution at all times and that the provision for the establishment of an Advisory Council of Experts (ACE) must be made in the articles of the Company and there should be establishment of investment policy for the participants’ Risk Fund.

Takaful means joint guarantee or share responsibility in Arabic, it operates in according to Islamic laws, the products are designed to carter for Muslims and non- Muslims. The products are meant to encourage saving culture and build capital, over a period of time to meet personal or business needs.

Under takaful plan, people can save regularly for a fixed period that is convenient for them. The accumulated targeted amount can be used to fund obligations such as purchase of land, house, marriage or hajj.  It could also be used to meet other long term financial objectives, such as retirement, children education, travelling expenses as well as expected commitment

Few months after the guidelines were released, operators stampeded NAICOM with applications.

It was gathered that applications have been received from many operators, but at the close of the no license has been issued.

 

MICROINSURANCE

 

NAICOM later released the guidelines on microinsurance and pegged the capital at N150 million for life business and N200 million for general business.

The commission in a paper entitled: Registration Requirements for Microinsurance Operatoration in Nigeria, presented at A-2 Day Takaful and Microinsurance Stakeholders said anybody seeking to float a microinsurance firm must obtain application form from it and should be completed and submitted to the Commission along with the following: A non-refundable registration fee which is yet to be decided and a certification fee also to be decided.

 

It said service providers groups can only play a role in insurance market, when they are licensed or authorized by the commission. Stressing that the authorization, provides Service Level Agreement (SLA), to enable an operator distribute or sale Microinsurance products to low income earners.

It noted that insurance companies will obtain the approval of SLA from NAICOM to enable them play their role, adding that approval of service level agreement, also has to be obtained by an insurer where the 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 and more.

 

             It said insurance broker and agent are exempted from going into SLA agreement with an insurer for transaction of microinsurance, because they are already registered by NAICOM,

 

 

               CONSULTATION COMMITTTE

 

The industry inaugurated the Insurance Industry Consultation Committed (IICC) which is headed by the President, Chartered Insurance Institute of Nigeria (CIIN) Fatai Lawl. The committee was charged with the responsibility to speak for the industry and help resolve all issues among operators from the different arms of the industry.

 

APPOINTMENTS

The Nigerian Council of Registered Insurance Brokers (NCRIB) and CIIN installed new presidents. While Fatai Lawal was installed at the president of the CIIN, Ayodapo Shoderu, was given the mantle to lead the NCRIB.

 

MERGER

 

The industry witnessed only one successful merger which was consummated by Crusader Insurance Plc and Custodian and Allied Insurance Plc.

In the merger Custodian and Allied Insurance Plc, now Custodian Group took over Crusader. Though the merger process had some issues, most of them have been resolved.

Custodian said the merger has resulted to integration of skills, Information Technology (IT) and back office processes that will be to the advantage of the customers of the company.
“Our merger has created invaluable integration of skills, information technology and back office processes. Now customers can take advantage of our increased spread, improved operational efficiencies and expanded product portfolio.

“The merger between Custodian & Allied Insurance Plc and Crusader (Nigeria) Plc leverages on 79 combined years of insurance and financial services experience,” it said.

The firm said it has greatly expanded its scope of services with the merger with Crusader, he added.

 

DEATH

The industry was not able to escape the harmer of death, which took away some prominent personalities.

NAICOM’s Commissioner Technical, Ibrahim Hassan, was stolen by death, the Chairman, LASACO Akin leign was also taken away and some others who were also captured by the cold hands of death.

Conclusion

In spite the challenges faced by the operators, they are hopeful that the year 2014 will come with goodies that would enable them recover their lost grounds.