NAICOM’s list of insurers with long outstanding claim liabilities 

CHUKWUMA ONONIWU

Chukwuma Ononiwu is a doctoral fellow ICRMP-UK, DR.ICRMP-UK, FCILRM-NG, ACILRM-NG, an alumnus of Abia State University and Pan Atlantic University Lagos Business School, a certified professional insurance broker, and a certified risk management professional. He can be reached through riskswisepro@gmail.com and  +234-903-596-8732 (WhatsApp only).

I must commend NAICOM for the bold step of publishing the list of insurance firms with long outstanding claim liabilities. This will certainly go a long way in fostering: transparency, accountability, credibility, healthy corporate governance and international best standard practice. Going further, it will enhance the trust of the insuring public that the insurance industry regulator is equal to the task of  sanitizing the insurance sector. It will pave the way for the expedient payment of long outstanding genuine claims. According to the data published by NAICOM, IGI plc has the highest number of unresolved claims  totalling 327, followed by African Alliance 282, Standard Alliance 229, A&G Insurance 80, AIICO plc 65. Amongst the insurance firms with the least number of unresolved claims, are Stanbic Insurance 1, Heirs Life Assurance 2, FIN Insurance/Mutual General/Temple General/Sterling Assurance/Tangerine General, each has 4 unresolved claims. Whilst it is true that there is no sector that does not have complaints/ unresolved complaints/infractions/breaches, etc, however, taken into critical consideration the role of insurance in an economy, the abysmal very low penetration of insurance in Nigeria and its below one percent contribution to the GDP, give very, very serious concerns, as it is clear that the insurance sector is barely struggling to survive, in a horrendous situation, where the balance sheet size and the financials of any of the five big banks (First Bank, United Bank for Africa, GTCO, Access Bank, and Zenith Bank) is very far higher than the combined balance sheet size/financials of all the insurance companies in a country with a humongous population, where insurance has been practiced as a profession for several decades, starting with Royal Exchange Assurance plc. Thus, it is imperative to dissect the causes, the implications and the remedies. 

Causes

The dearth of actuaries in insurance firms with the needed professional skills to actuarially assess risks and the consequent premium to pay. Thus, risks are not appropriately charged to cover all the dynamics of risks placements, inclusive but not limited to the portion of the risk premium that should be set aside for reinsurance premium, for payment to risk surveyors, for payment to loss adjusters, for payment to insurance brokers, for investments, for payment to external actuaries for the valuation of life assurance portfolio, for payment to medical doctors who undertake medical examination of prospective clients before a life assurance policy is issued, particularly in individual life assurance policies. 

The introduction of universal banking and consequent issuance of universal banking license brought in a virus in the operations of insurance firms, with the following unhealthy consequences – massive reduction in the premium rates charged for risks placements, premium war and unhealthy competition, connivance of insurance staff with bank staff to the detriment of the risk portfolio, obliteration of needed terms/conditions/clauses, unhealthy competition between the bank-owned insurance firms with enormous risk portfolio holding and the private owned insurance firms. Same for the bank-owned insurance brokerage firms and the private owned insurance brokerage firms. The culmination of the above fall outs of universal banking led to deleterious consequences, even to the unfortunate extent that the insurance sector is unfortunately to a larger extent, practicing gambling, as rates /terms/conditions/clauses are not in sync with actuaries/risk management/estimated probable loss/long term sustainability of the insurance firms and the insurance brokerage firms. 

Going further, what has been practiced and what is still being practiced are – premium benchmarking, benchmarking of terms/conditions/clauses without insurance firms taking into significant cognizance their risk portfolio performance of each class of risk, outstanding claims payment purchase from a defaulting insurer, e.t.c. Little wonder why insurance shares are penny stocks on the Nigerian Exchange. The ultimate beneficiary are the clients; unlike in the days of UNIC,  CRUSADER, LION OF AFRICA, amongst others, when rates/terms/conditions/clauses were firm.

Implications

Certainly, the implications are grave. I have stated for the umpteenth time that if we are not very, very careful, the insurance profession in nigeria will become a dinosaur as the globe is very much embracing — other  alternative risks transfer, the institutionalisation of hedge funds to take care of risks exposures, securitisation of risks, e.t.c. 

On the tech end, the introduction of electric motors  and driverless motors will impact heavily on the future procurement of motor comprehensive insurance policies. Presently in Nigeria, individuals, corporates and the government, most of  the time, procure insurance because it is compulsory by law. On the special risks of dollar denominated  oil/gas/energy risks, aviation hull risks insurance, marine hull risks insurance, e.t.c., most of the underwriters are agents of foreign financial-laden/technical capacity-laden underwriters, thus leading to capital flight, emanating from technical skills gap.

Remedies 

• Robust strengthening of NAICOM’s inspectorate department; technical department; compliance department; public complaints department; and zonal offices, which the present executive management of the commission is assiduously working on. 

• The insurance firms with large chunks of long outstanding genuine claims payments should be SANCTIONED with a verifiable fine/penalty payment to NAICOM.

• They should be made to forward to NAICOM a quarterly report on the payment of verifiable outstanding claims; 
• They should have a NAICOM appointed OVERSEER; 
• They should have a NAICOM appointed senior technical management staff on their boards; also, a NAICOM appointed  senior  technical management staff in the  senior management team of the insurer;
• They should be given a maximum timeline of 18 months effective 1st of April 2025 to pay all long outstanding genuine claims and, equally, simultaneously, given a maximum timeline of 18 months effective 1st April 2025 to turn around their business.
• They should be compelled to forward to NAICOM evidence of payment of reinsurance  premium;
• They should be given a financial compliance reasonable timeline to shore up their paid up capital with verifiable evidence of compliance;
• They should be made to comply, along with other underwriters, with NAICOM’s recently issued directive on employment of actuaries. 

Where all of the above remedies fail or are not substantially complied to, NAICOM should revoke the license of the particular insurance firm. Where more than one insurance firm, the licenses should be revoked.

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