The new regulation in insurance industry demanding that companies must report to the market regulator, the National Insurance Commission (NAICOM), all outstanding premiums in their quarterly and full year results has succeeded in bringing down outstanding premiums levels.
Currently, companies have witnessed huge payments from the brokers who incidentally would not want to be mentioned to the commission or bring embarrassment to their clients. As it intends to eliminate issues of premium debt which has already become a problem for the industry, NAICOM by the regulation, wants to know the debtor clients, brokers or if such debts carried in the books of companies were as result of insider abuses. BusinessDay investigations revealed that a number of brokers have paid up their premium debts to underwriters who, it is gathered, are mounting heavy pressure on them.
According to our source, the level would drop as much as 40 percent by the time companies complete submission of their returns by May end. While the underwriters’ efforts are geared at presenting a clean report to the commission and also its shareholders, they also want to avoid a situation where they would use their profit to provide for outstanding premiums. For instance, the regulation provides that all outstanding premiums that have stayed longer than six months would be written off 50 percent while any that is more than one year is to be written off 100 percent at the end of that financial year.
As one managing director who confirmed the huge inflow put it, “we had to put pressure on the brokers because shareholders would not want to hear that the whole profit made during the year was used to provide for outstanding premium not remitted by brokers.” Fola Daniel, commissioner for insurance, said all insurers and reinsurers shall disclose in their audited annual returns to the commission, the sum outstanding as unsettled claims as at the end of the year. Also to be provided, according to Daniel, is the details of brokers whose individual indebtedness is more than N500,000 as at the end of the report period.
He said this has become necessary to check companies with outstanding premiums which are making them illiquid and unable to meet claims obligation. “We have decided to take this issue more seriously, otherwise it would get to a time when some companies would not be able to meet their obligation as result of premium debt. How would you continue to provide cover for an entity after two years of non payment of premium? That is no business”, the commissioner said. Daniel said the commission has tightened the age analysis for outstanding premium such that companies would know the length of time of debt to allow their customers or brokers and promised not to spare any broker in the habit of not remitting premiums to underwriters.
Before the new regulation was released by NAICOM early this year, some brokers had alleged that underwriting companies were padding their books with false premium figures and heaping the blame on non remittance by the brokers.Like Dede Ijere, managing director, Dinta Insurance Brokers, put it certain underwriters deliberately pad their books with false premium figures to deceive the market regulator, while the outstandings were actually collected but not remitted by the brokers.
Ijere noted that this practice is not only a cheap blackmail but unacceptable. Laide Osijo, a broker and vice president of the Nigerian Council of Registered Insurance Brokers (NCRIB) who sees the issue of outstanding premium as an insider abuse of underwriters said she supports the plan by NAICOM to stop sitting insurance companies managing directors from owning or patronising their broking firms. Osijo said this is one of the key factors contributing to the huge unpaid premiums in the industry, which has continually been heaped on brokers head.
“This is an insider abuse that should not be tolerated by the regulator, as players must be transparent in their dealings and exhibit good corporate governance and practice”.