Paid-up capital may push microinsurers to conventional underwriting – Experts

Chuks Udo Okonta

The N350 million minimum paid-up share capital for microinsurance business issued by the National Insurance Commission (NAICOM), may push microinsurers to operate   like conventional underwriters experts, have said.

NAICOM in the microinsurance guidelines released last week, pegged the capital at N150 million for life business, N200 million for General business and composite N350 million.
An operator, who spoke with Inspen, said the capital requirement is too high for such a business which is targeted at the low income earners in the society, adding that it may lead to a situation where the underwriters in a bid to meet investors target, would abandon small businesses and focus on conventional businesses to enable them remain afloat.
He said microinsurance business ought not to operate at a national level, as the objective is to reach-out to people at the grassroots. He maintained that NAICOM should have localised the license, by allowing operators to obtain grassroots license with a paid-up capital of N5 million.
He expressed fear over NAICOM’s ability to effectively monitor the operations of would be microinsurers and ensure that they abide with the terms in the guidelines.
Another operator who does not want to be named said his worry is how the microinsurers would stay clear from the temptation of not extending their operations to businesses meant for conventional insurers.
According to NAICOM, any Microinsurer intending to commence a specialised Microinsurance business shall have a minimum paid-up share capital as follows: Life Microinsurance business N150, 000,000 and General Microinsurance business N200, 000,000.

The Commission said it may increase from time to time the amount of minimum paid up share capital, adding that any contravention of the guidelines shall attract appropriate sanction in line with the provisions of the Laws.

It said the license of a Microinsurer may be suspended or cancelled where it has contravened specific provisions of the law.

“The sum insured under a Microinsurance policy (ies) shall not be more than N1, 000,000 per person per insurer.

“Microinsurance policies shall exclude special risks, motor insurance (except tricycles and motorcycles), professional indemnity and other pecuniary risks with sum insured higher than N1, 000,000. All third party liability risks with sum assured above N1, 000,000 are also excluded,” NAICOM said.