Call it the second missionary journey, you would be right. Insurance operators would this year begin another journey in search of N1 trillion premium income, after their failed attempt which came to halt in 2012. Chuks Udo Okonta, in this report will examine why the previous attempt failed and tonics that will drive the new quest.
Would the efforts of the the Federal Government this time trigger insurance operators to pursue and attain the trillion Naira premium income? This is one question the public seems to be searching for who to answer.
Insurance operators had earlier set the target of hitting the trillion mark through the Market Development and Restructuring Initiative (MDRI), but when the curtain was drawn in 2012, they were far way with about N280 billion.
When the Federal Government at the last hours of 2014, suddenly remembered insurance and quickly called for a summit where the operators were mandated to raise their premium income to N1 trillion in three years, observers were skeptical how the government would lead insurers in the voyage.
One major concern about this new voyage as observed, is whether the operators are ready for the journey, as their body language suggests that they are not prepared for another rounds of exploration.
An operator who was asked if they are prepared for the voyage said. "What can we do when the government has spoken."
Why the first attempt failed
Several factors were considered for the failed attempt. While some school hinged the blame on lack of law enforcement, others put it on the door steps of the regulator and operators.
For the Commissioner for Insurance and helmsman of the National Insurance Commission (NAICOM) Fola Daniel, the industry could not hit the projected target due to the 2008 financial crisis which had a negative impact on the Nigerian Capital Market and a decline in the growth of personal lines as a result of changes in the financial services industry.
Managing Director Riskguard-Africa Nigeria Limited Yemi Soladoye, dropped the blame on operators' inability to harness identified numerous insuring opportunities spelt out in the MDRI.
According to him, the under-utilised opportunities: The Workmen’s Compensation Act 1987 – Sec 40 – we did not touch occupational diseases.
The National Health Insurance Scheme Act 1999 – Sec. 45 – No complimentary coverage
The Abuja Commodity Exchange – 1999 – Agric and Micro Insurance
The Nigeria Agricultural, Cooperative and Rural Development Bank (NACRDB) Recapitalization – 2000 – Agric and Micro Insurance
The Bank of Industries (BOI) Recapitalization of 2000 – Enterprise Properties
The privatization of NICON, NIG RE – government Accounts
The CBN Universal Banking Guidelines – 2001 – Bancassurance
The Small and Medium Enterprises Equity Investment Scheme Guidelines–2002–SME Insurance
The NCRIB Act 2003 –Market Penetration through Partner Broker
The Insurance Act – 2003 –Sections 64, 65, 67, 68 – 85% of MTP and clause C Marine Imports are fake.
- The SMEDAN Initiative – 2004 – Enterprise Property, Credit life and Key man Insurance.
The Pension Reform Act 2004, 2014 - Group Life, Annuity and Gratuity.
The Banking Consolidation Guidelines 2004 – Collaboration and Competition
The Insurance Consolidation Guidelines-2005 – Local Market Development
The Mortgage – backed Securities Initiative-2005 – Mortgage Insurance
The Micro Finance Bank Guidelines – 2007 and the Intervention Funds– Micro Insurance
The Capital Market Crash – 2008 - Insurance as certainty in un-certainty
Soladoye noted that all these insuring opportunities were under-utilized due to the absence of diverse distribution channels.
How the target would be attained
The Federal Government pegged the attainment of the envisaged N1 trillion insurance premium on tackling key challenges observed to have stemmed the growth of the industry.
The Coordinating Minister for the Economy and Minister of Finance, Ngozi Okonjo-Iweala, identified the challenges as lack of consumer trust, fragmentation of the industry, low enforcement of compulsory insurance policies, lack of professionalism by some agents and brokers in the industry, and a general shortage of skilled professionals in the entire industry.
She noted that if the potentials of the industry must be harness, the challenges must be tackled head-on, adding that due to lack of consumer trust, many Nigerians are skeptical and hold a negative perception of the industry.
She said: "Low enforcement of compulsory insurance: I would want to touch on the low levels of enforcement of compulsory insurance in the country. And in this case, the regulator and most of our government agencies have more work to do.
"If you take the case of compulsory motor vehicle insurance (third-party liability), only 1 in 8 Nigerian cars (13 percent) have genuine insurance. Compare this to Ghana, where the compliance rate is reportedly about 60 percent. Or take the case of mandatory group life insurance for large businesses and organizations; again only a few large corporate in the oil and gas sector, the Federal Civil Service and the Police Service are compliant. Many of our CAC-registered businesses do not comply with the law.
"Shortage of skilled professionals. There is also the third problem of a general lack of skilled professionals in the industry – from underwriters, to brokers, to regulators and so on. Am informed by NAICOM that we currently have less than 10 professional actuaries in the country! This is grossly inadequate for the type of insurance industry we want to build in Africa’s largest economy. Lessons from Banking and Pension Reforms.
"A time when our domestic insurers will begin to fully underwrite policies for our oil & gas and heavy infrastructure sectors; when this industry will develop skilled actuaries and underwriters who can meet the highest international standards," she added.
She noted that to develop the potential of the industry, all stakeholders will need to work together to address the several challenges, stating that the Federal Government has an important role to play in this sector and that it will need to get better at enforcing compliance for some compulsory classes of 10 insurance such as for motor vehicle insurance and group life insurance.
She said the government will also need to clarify various regulations, for example on bancassurance and the use of corporate agents. And will need to work on strengthening the supervisory powers of NAICOM.
Commissioner for Insurance said that NAICOM will continue to strike the required balance between regulation and market development goals to drive the growth of the sector.
“On the other hand, we have a section of stakeholders complaining about over- regulation while on the other hand we have those accusing us of weak regulation. Importantly, the nation needs sound and safe insurance companies and an insurance industry that addresses major national challenges such as financial protection, unemployment and relatively low level of foreign investment,” he said.
Challenges
Observers believe one of the challenges that must be tackled, to make the dream a reality is for the stakeholders to be committed to their roles. They believe the government should show genuine commitment especially on enforcing the laws and patronizing insurance and the operators should shun unethical practices, engage on masses education and awareness and live up to their claims responsibilities.
Conclusion.
It is quite true that the target is far below the capacity of the industry going by the insurable opportunities that abound in the nation, especially the huge population. For the target to be met and surpassed, the government, operators and other stakeholders must show high level commitment and ensure that no stone is left unturned.
No comments:
Post a Comment