Cynthia Ezekwe
The news of the Nigerian Police Force’s (NPF) intent to enter the insurance market through the establishment of an insurance company has generated unease among industry stakeholders. The proposal has brought about fears that the NPF’s entry into the market could disrupt the stability of the industry, raise concerns about regulatory compliance, and have broader implications for the industry as a whole.
In response to the NPF’s proposal, Mohammed Kari, former commissioner/CEO of the National Insurance Commission (NAICOM), wrote an open letter addressed to prominent figures in the industry, including the minister of finance, the chairman of NAICOM, and key leaders of the Senate and House committees on insurance, expressing his apprehension about the establishment of a police-run insurance company.
Kari noted that the core functions of the Nigeria Police Force centres around law enforcement and maintaining public order, and that engaging in commercial activities is a deviation from this primary mandate.
Kari expounded on his concerns by noting that allowing the police to operate as an insurance provider could result in conflicts of interest and dilute their focus from their primary mission. He stated that the Police, as a regulatory body, should not also be in the business of providing insurance, as this could lead to situations where they may be tempted to force motorists to insure with their company, creating an unfair advantage and potentially compromising their ability to enforce laws relating to compulsory insurance.
Kari pointed out that the proposed police-owned insurance company falls short of meeting the structure and ownership requirements set forth by Nigerian insurance laws and the Financial Reporting Council (FRC). He emphasised that the current board of directors nominated for the proposed insurer, as well as the police force, lack the necessary expertise and experience to effectively run an insurance company.
He also warned that the entry of the NPF into the insurance industry could disrupt the established ecosystem, leading to inefficiencies and potential loss of data that could damage the overall insurance sector.
“The Nigeria Police Force Investments have a history of mismanagement, as evidenced by the numerous issues surrounding the Nigeria Police Pension Scheme. This history raises significant doubts about the ability of the Police to effectively manage an insurance company, which requires a high level of expertise and know-how,’’ he noted.
In addition to his concerns about market fragmentation, Kari warned that licensing the NPF Insurance company could lead to the loss of valuable data and revenue for the industry, as the NPF lacks the specialised knowledge required to independently attract and retain business. This, he said, could potentially result in the mismanagement of public funds and lead to unnecessary losses for the Nigerian government.
“The command-and-control nature of the Police force would make them take offence of a caution by a regulator. I don’t see how the Police can operate under someone’s regulation, for they would not accept commercial directive, and neither would they observe regulatory control.
“It would compromise the authority of the regulator if one company is seen to ignore regulatory control or out rightly disregard them, the regulator would lose his authority to regulate the market,” he pointed out.
Drawing on his wealth of experience in the Nigerian insurance industry, which spanned from 1979 to 2023, Kari implored NAICOM to reject the registration of the Nigeria Police Insurance Company Limited. He further stressed the critical importance of maintaining the focus of the police on their core duties of law enforcement and public order, while also ensuring that the insurance sector remains managed by entities with the appropriate expertise and independence.
“Approving this application could set a concerning precedent. It may encourage other government agencies, such as the Federal Road Safety Corps, Nigeria Customs Service, Nigerian Army, Navy, Air Force, Nigeria Civil Defence Corps, Office of the Head of Service of the Federation and others, to seek similar licences. (And why not?) The Commission can therefore not refuse them.
“This proliferation of government-run insurance companies could undermine the integrity and stability of the insurance sector and reverse the government policy of divesting from business, which as you remember was the reason for the creation of the Bureau for Public Enterprises (BPE). I suggest you seek the opinion of the Bureau as you continue with your consideration,’’ he said.
Preceding Kari’s statement, Fola Daniel, another former CEO of NAICOM, had already voiced his objections to granting the NPF an insurance licence, expressing fears about the potential impact of this move on regulatory compliance, market stability, and the specialised nature of the insurance industry.
Building on his extensive experience as NAICOM’s CEO from 2007 to 2015, Daniel articulated his concerns about the potential conflicts of interest and regulatory complications that could arise if the NPF, a government entity, were allowed to operate as an insurance company. He warned that the dual roles of regulator and insurance provider could lead to a blurring of lines and diminished regulatory oversight, negatively impacting the industry’s stability and integrity.
Daniel was particularly concerned about the potential disruption to the competitive landscape of the insurance market if the NPF were to be granted an insurance licence. He stressed that existing insurance companies have operated for years under stringent regulations and intense competition, cultivating their reputations and client bases through consistent, dedicated service.
Allowing a government entity like the NPF to enter the market, Daniel argued, could upset the equilibrium, creating an uneven playing field and potentially undermining the efforts of these established insurers.
The former NAICOM boss stressed the need for deep expertise in risk management and financial solvency, areas where the NPF might lack the necessary experience, stating that mismanagement within such a critical sector could have far-reaching consequences.
Daniel warned that the entry of a government entity into the insurance industry could have a detrimental impact on public trust, the backbone of the sector. He emphasised that the perception of unfair advantage or a lack of transparency could undermine the public’s confidence in the industry, stressing the vital importance of maintaining transparency and avoiding any appearance of undue influence.
In light of these, he proposed that the NPF collaborate with existing insurance companies to develop specialised products, rather than establishing a new insurance entity.
“Such collaborations can deliver the necessary coverage while maintaining market integrity and avoiding unnecessary competition,’’ he advised.
