By Ekerete Gam-Ikon*
The time has come for the insurance sub-sector in Nigeria to be brutally honest with herself in order to gain the needed capacity to connect, collaborate and communicate more effectively with the citizenry; especially other economic actors/stakeholders.
Without TRUST returning to this important financial services sector, it will be challenging to justify the requirement for recapitalization led and managed by the regulator, National Insurance Commission (NAICOM).
Last May, the Commission announced about 400% increase in minimum share capital for Life (N2b-8b), General (N3b-10b) and Composite (N5b-18b) insurers with June 2020 deadline.
By late September, NAICOM announced that it had received and reviewed the recapitalization plans of 47 insurers and 2 reinsurers, of which 26 were given “No Objection” to proceed, 17 were advised to re-submit, 4 did not have their 2018 Financial Statements, ONLY ONE (1) COMPANY’S SUBMISSION WAS NOTED TO HAVE MET NECESSARY REQUIREMENTS, while 3 were yet to submit their plans, as at that time.
Today, we know that there are still 58 insurance companies including 2 reinsurers licensed by NAICOM to operate in Nigeria. While 6 are under NAICOM Management, there exists a number of others that are in some state of regulatory restraint that the public does not know and yet have policyholders that are hopeful that their policies are in order until claims (the unexpected) happen.
If the current recapitalization process is meant to enhance the capacity of insurers to undertake more risks, as NAICOM expressed, and by implication, put insurers in a better position to honour their obligations to policyholders, then NAICOM needs to be much more transparent in its handling of the process.
See Related link: Rebuilding Trust In Insurance Relationships
Such transparency should entail the listing of the insurance companies that have scaled the process and the reasons are not far-fetched. Let us examine the Four (4) reasons considered most critical at this time :
1. Winning back the trust of policyholders and confidence of the public
An unstructured survey of policyholders reveal that most individuals are having horrifying experiences with many insurers involved in the current recapitalization process. Unsettled claims remain the knotty issue and the Complaints Bureau of NAICOM seems overwhelmed thus creating an impression that the regulator is unwilling to penalize erring operators.
Like it is often said ‘bad news spreads faster’, the efforts of the more responsive insurers to claims continue to be eroded by the poor actions of others.
Interestingly, amongst policy makers and public office holders, insurance does not enjoy necessary level of confidence to make it an item on the agendas of meetings.
May be NAICOM needs to be reminded that in this era of social media engagements, the aggrieved policyholders are sharing their grievances with the rest of the public in what may be termed “hate speeches” against the entire insurance industry in Nigeria.
When the public discourse become more specific to listed insurers by NAICOM, the industry will most likely be understood by the public and NAICOM will also be relieved from the burden of managing “failing or failed businesses”.
If the public cannot be systematically educated and enlightened about insurance, let the ones that agreed to be used as “guinea pigs” not be made to regret their positive responses to agents or representatives of insurance companies.
2. Becoming a key strategic growth partner for our national development
Alternative (Non-oil) sources of revenue, social investment, job creation and most recently, financial inclusion are the points of discussion amongst local and international analysts of our national economy yet with little or no mention of insurance despite the role they all know insurance can play in those areas.
A transparent handling of the recapitalization process will, in my view, reveal the genuine gaps that exist in the insurance industry and attract other economic actors with solutions. For example, information and data on the number and quality of persons employed by the respective insurance companies would enable us know whether they have the right people to manage the new minimum capital base for greater results. High performing executives in other sectors may then appreciate that their skills and expertise are required in the industry.
Too often, it has been observed that insurance companies are hesitant to engage and commit to the opportunities that have emerged or created by some policies of government, and it is not because insurers lack what to contribute but they continuously wait to be invited, in a season where you are required to be openly aggressive to win.
As NAICOM has updates on the recapitalization process, the critical arms of governance – Presidency, National Assembly and Sub-nationals need to be engaged publicly to ensure space is created for the insurance sub-sector.
How many more incidents of collapsed buildings and fire should happen before we consider adding the insurance industry to our emergency management structure? Too many have happened in the last three months, yet the insurers that have to bear the burden of claims settlement are also pursuing the recapitalization deadline and the public is unaware.
Transparency breeds trust and the insurance industry in Nigeria is in an excellent position to earn it.
3. Sustaining investors’ confidence in a greener Nigeria
As investors at home and abroad analyse the opportunities Nigeria offers, the most critical concern continues to be managing the increasing risks. While technology has addressed most in rather predictive and preventive manner, we are yet unable to respond well when the unexpected occurs.
This is why the Federal Government of Nigeria through NAICOM decided to increase the minimum share capital of insurance companies. Therefore, a transparent process where interested investors can visit your website or through your social media accounts know the status becomes imperative. Unfortunately, NAICOM does nothing about this as its website and social media accounts are less active especially in this regard.
Elsewhere, there are conversations on the growth achieved in non-oil sectors like agriculture and infrastructure but insurance seems quite slow in getting into those discussions.
The era of waiting to be invited to give a quote for insurance of assets is disappearing, no thanks to technology.
With other sectors (new and old) also seeking for funds from investors, the place of data in reliable form cannot be overstated.
4. Erasing the “Weakest Link” status in financial regulation in Nigeria
The NAICOM Act 1997 and Insurance Act 2003 empowers the regulator to publicize industry statistics periodically but NAICOM remains hesitant to ensure the insurance industry in Nigeria is safe; and my usual question has been: Is the industry safe now?
If NAICOM should avail the public such detailed information regarding the recapitalization on its website today in addition to its Annual Statistical Report and Financial Statement, no one will refer to it as the weakest link in financial regulation in Nigeria.
Sometimes, you need to be brutally frank with yourself to get on the path you ought to be. This is such moment for the insurance sub-sector in Nigeria.
Interestingly, weaker economies in Africa are getting it right both in terms of regulation and operation especially as investments in insurtech comes along. It promotes transparency too.
We have a golden opportunity to leapfrog some sub-sectors within the financial services sector, will we do it?
The days are ahead of us, we cannot afford to “play the ostrich” anymore.
About the Author
Ekerete Olawoye Gam-Ikon, MNIM, CPP is a management consultant with specialization in Strategy and Insurance. He can be reached via telephone on +234-806-648-1111 and +234-802-585-0344 or by e-mail vide email@example.com