YEAR 2017, for the insurance industry has been a challenging and difficult business period given that the economy is still reeling from the spill over of economic recession which lasted till first quarter of the year.
It will be recalled that in 2016, the sector grappled with lack of foreign exchange to re-insure businesses abroad; scarcity of funds by individuals and corporate organisations to buy insurance covers for their assets; preference for short term cover to long term during renewal periods, among others.
These factors were carried over into 2017 thereby slowing down business activities. Implementing some regulatory policies have also been a challenge due to the absence of a substantive board for the National Insurance Commission (NAICOM) to give speedy approval to the policies. With the absence of a statutory board to coordinate the affairs of the sector, some policies that require board approvals are being put on hold.
Other developments in the sector
Approval to operate annuity businesses: In the course of the year, some life companies were re-licensed to carry out annuity business after the National Pension Commission, PenCom, barred all life insurers in 2016 from participating in the business and ordered that all annuity assets be transferred to a Pension Fund Custodian. The development generated controversy between the insurance and pension sectors because annuity is statutorily operated by insurance companies. However, some life companies complied with PenCom directive by transferring their annuity funds to a custodian; hence PenCom gave them approval to continue the business.
Postponement of industry rebranding campaign: The Insurers Committee which had hitherto planned an industry rebranding campaign in the course of the year unceremoniously postponed the project to 2018 due to inadequate fund to kick-off the campaign. The project which is now billed to kick-off first quarter of 2018 is part of efforts to change the negative perception of the insuring public about insurance business in Nigeria.
Release of Bancassurance guidelines: In 2016, NAICOM suspended all Bancassurance partnership deals between insurance companies and banks indefinitely following a dispute with the CBN. NAICOM took the decision after the CBN refused to allow NAICOM issue licences to banks for the provision of bancassurance services to bank customers.
However, in the course of the year, NAICOM released its Bancassurance guideline. The guideline placed a two year limit on bancassurance partnerships between insurance companies and banks, after two years the partnership can be renewed. The regulator also pegged the referral commission to be paid by the insurer to a referral bank at 40 percent.
Adoption of ‘no claims bonus’ policy: In the course of the year, some insurance companies adopted ‘no claims bonus’ policy to retain customers due to the resolve by NAICOM, to sanction operators involved in inappropriate pricing of risks or rate-cutting. Under the ‘no claims bonus’ policy, a percentage of premium paid is returned to a customer in the absence of claims after three or more years of insuring a risk.
Increase of flood rates: Also in the course of the year, due to the flood that ravaged some parts of the country, premium rates for flood risks were jerked up by up to 50 per cent. The increase came on the heels of massive claims that besieged insurance operators especially after the floods in Lekki area of Lagos.
Harmonization of financial accounts: NAICOM and Nigerian Stock Exchange (NSE) agreed to harmonize financial accounts submission procedures for insurance companies. The move was to relief operators from sanctions that could arise due to late submissions of accounts.
Chief Executive Officer of NSE Mr. Oscar Onyema at the meeting with insurance operators said the Exchange and other regulators will continue to harmonise financial reporting systems, as financial reporting is highly essential to investors as it aids their investments decisions.
The way forward: On the way forward, Chairman of NIA, Mr. Eddie Efekoha said, “Insurance business thrives on the back of the economy. A lot of people who naturally will buy insurance will regard it as a secondary issue. The first issue on the minds of people is survival before they begin to consider protecting and providing for tomorrow. So government must strive to improve on economic performance going forward”