Why N1tr insurance premium target failed, by NAICOM

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The N1 trillion premium income projected target for the industry has not been successful because insurance operators failed to behave rationally, Deputy Commissioner for Insurance, Technical, Sunday Thomas has said.

Thomas, who spoke at a forum in Lagos, stated that the commission proposed N1 trillion for the market, under certain circumstances and with a lot of assumptions, stressing that part of the assumptions was the effective enforcement of compulsory insurances, assuming that operators would behave rationally.

He said the operators aborted the target through reduction of statutory premium.

He reiterated the issue of some insurance companies selling third party motor insurance of N5000 for as low as N1000, leading to the market producing N200 million premium income.

He accused operators of violating laws to hurt their business, as against their counterparts in the banking sector that would do same to promote their business.

He said: “If they decide to charge N5000, what is the market likely to produce? I am just telling you why we are not at N1 trillion. I did a comparative analysis between the banking sector and the insurance sector. The Central Bank of Nigeria will put a cap on interest rate for certain sector. The banks would violate this rate, not by reducing the rate, but by increasing the rate, using other terminology like administrative fee. If CBN for instance says the rate should not be more than nine per cent, the banks would charge 12 per cent.

“There was a time that CBN also gave a directive to the banks to have branches, even at rural areas. The banks would violate such directive and pay the penalties for not having branches in those areas because they consider these areas as not being viable.

“In my industry, we also commit the same offence by violating the law. But rather than do it to their own advantage, the operators would reduce it, I just don’t get it. There was a point in this market when 10 per cent for comprehensive insurance was sacrosanct, but later, it came down to five per cent and that became the standard. But you and I also know that there was a point that some operators were charging as low as 1 per cent,” he said.

He noted that there is no way the regulator can go after all operators, stressing that it beats his imagination why anyone would want to cut himself, whilst doing his business.

He said NAICOM is committed to taking the industry to lofty heights, adding that the commission has always reminded government agencies that if they want insurance operators to pay their claims, they need to pay the right premium.

He added that on their part at the commission, they have been ensuring that the Federal Government comply with industry rates and others.

“The Federal Government through the office of Head of Service reach out to the commission. They told us to be considerate, that the budget has been passed, we insisted that we will not change our position and that is why you find today that government pay the rate the commission has stated,” he added.

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