The Commissioner for Insurance, Mr. Fola Daniel, at the Annual Insurance Professionals Forum
Wednesday, 15 to Saturday, 18 September, 2010
It is reassuring to note that the world economy has almost recovered from the unique event of credit crises and the consequent economic downturn that we experienced in the last two years. Although the insurance industry is less affected than the banking industry, it nevertheless suffered substantially on both the asset and liability side. Insurers are among the largest institutional investors on the capital market hence negative development regarding asset value is almost inevitable.
While we believe that the insurance industry is generally in a good position that will improve in the coming years, especially compared to other financial services providers, we note that not all insurance market participants have followed a prudent strategy, the lesson being that there is room for improvement in the insurance industry anywhere.
Surviving the post crises era will mean that the insurance industry in Nigeria should be prepared to address the obvious gaps in our risk management and supervision. I therefore agree completely with the general theme of this forum- “After the Gloom, Matters Arising”.
In an effort to address the gaps in our risk management and supervision, the Commission has programmed to migrate from compliance-based supervision to rules-based supervision. In the course of designing the road-map for the transition, it became clear to the Commission that the current CIIN curriculum for training of professionals may no longer be adequate to cater for the new and emerging issues in Enterprise risk management, corporate governance and internal controls.
It is therefore necessary for CIIN to seek cooperation with relevant Insurance training institutions in advanced jurisdictions like United Kingdom and Canada with a view to designing and incorporating the subjects into its curriculum. It will also require running certificate programme for qualified professionals to bring them in tune with current trends in Insurance risk management and supervision.
Aware that the issue of corporate governance is at the core of supervision, the Commission has continued to implement the provisions of the Code of good corporate governance for the industry. In this connection, to ensure independence of the Board members, the Commission recently began to enforce the provision of the Code relating to directors’ independence. Accordingly, dual board membership is no longer allowed. Companies with dual board membership have been directed to immediately restructure their boards.
I will like to seize the opportunity afforded by this gathering to chronicle some of the disturbing malpractices in the market:
With respect to market conduct, there is an urgent need to address the challenges posed by improper conduct. Unarguably our products are underpriced and serious undercutting by operators that reached its climax with the recent Federal Government’s Group life cover.
Much more serious acts of indiscipline were displayed with respect to the Group life cover. Right from the response to the invitation for bids, a lot of our members could not demonstrate good corporate citizenship as they were unable to produce published accounts or valid tax clearance certificates. Some brokers even applied without valid licenses, while others attempted to trade with only the CAC registration, but for the vigilance of the commission.
As if this tendency to criminality was not enough, some of our colleagues did all they could to get appointed, their incapacities notwithstanding as if the Public Procurement Act should not be followed or did not apply to insurance contract in any way.
When that failed, some resorted to blackmail soliciting the help of politicians to frustrate government policy. They wrote spurious petitions to intimidate government into appointing them to participate in the scheme. As if Newspaper publications were not enough, they got the legislature to conduct unnecessary public hearings in attempt to intimidate the executive branch of government.
Suffice to say the cost of these misbehaviours to us is enormous – loss of business, diminished goodwill and confidence of the insuring public.
Brokers were not left out of these ignoble acts. Those participating in the consortium of brokers for portfolios acrimoniously sought to increase their share to the detriment of other members, a subsisting appointment notwithstanding. The Commission was compelled to intervene on a number of occasions in what ordinarily should be a business practice, to restore sanity.
The violation of a market agreement reached by all insurance companies following the Ijebu Ode retreat is saddening as it resulted in the abortion of an excellent attempt to self regulation and discipline by the operators.
We cannot continue in this path any longer. There must be a change of attitude and behavior amongst practitioners. We cannot continue to do the same thing all the time and expect a different result. The future is bright for the industry if only we could be more professional in our approach to the business.
In order to stem this depravity, the Commission will upscale strict enforcement of the provisions of the Insurance and NAICOM Acts 2003 and 1997 respectively relating to market behavior.
Determined to ensure that the industry take proper advantage of The Nigerian Oil and Gas Industry Content Development Act 2010, upon coming into effect of the Act, the Commission organized an industry - wide workshop which culminated in the setting up of a committee for drafting the guidelines for the industry. An exposure draft is already in circulation to enable stakeholders make contributions towards a final document that would serve the industry effectively.
We were able to halt, at least temporarily, the attempt to excise the Workmen’s Compensation business from the insurance industry through some expertly designed subterfuge by the Nigeria Social Insurance Trust Fund (NSITF). Whilst our apparent tardiness made this a small business in Nigeria, the size of the business in other developing countries is a pointer to what we stand to lose if we do not prevent the Employee Compensation Bill of the NSITF from being enacted into law.
For instance, whereas in 2008, some developing countries such as Singapore generated a premium of $189.8m; Hong Kong, $388.4m, Malaysia, $44.4m and Kenya, $31.1m, Nigeria with a population of over 60 million workers was only able to generate a premium of $6.1m in the same year from workmen compensation business. But this goes to show the great potentials for growth in that class of business. This is the more reason we must unite and do everything legal to prevent the NSITF from taking the mandatory workmen compensation away from us.
In concert with the National Pension Commission, the Commission launched the guidelines for annuity business. We expect to generate good business from this in the coming years. With the increased enforcement drive by the National Pension Commission, we will have increased income from group life insurance.
The Commission launched the MDRI project to facilitate the reduction of Insurance Gap from 95% to 30%, protect policyholders, and growth that will make Nigeria the 15th country in the world in terms of premium income by 2020 and generate employment.
In conclusion, I want to invite the industry to continue to support the Market Development and Restructuring Initiatives (MDRI) of the Commission, especially as it relate to the agency reform, given
that agents have great capacity for marketing individual life insurance and other personal lines of business.
It is based on the belief that if the provision in the existing laws for compulsory insurance are rigorously enforced, a focused insurance awareness creation programme is effectively deployed and the insurance agency systems of insurance marketing is reformed, the ideals implicit in relevant FSS 2020 initiatives will be realized.
The programme has been launched in some cities in Nigeria while efforts are ongoing to launch in other cities of the country to create the necessary awareness and ease of enforcement.
It is heartwarming that even though we are yet to launch the programme in Lagos State, the governor,
Mr. Raji Babatunde Fashola, recently signed into law the Building Control Bill, which is a variant of the Builders’ Liability Insurance, one of the compulsory products under the MDRI. We believe as more awareness is generated about the programme, more state governments would emulate the example of Lagos State.
I therefore enjoin operators to adhere to the tenets/ethics of our profession and enable general harmony needed for effective delivery of better insurance service and its penetration to our teeming populace.