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2019 - The Year Of More Insurance

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Tuesday, December 17, 2019 / 07:58 AM / OpEd By Ekerete Ola Gam-Ikon* / Header Image Credit: Toppr

Does it not seem to you, as it has to many, that insurance had become more discussed this year than it had been in the last 10 years?

While the reason may primarily be deemed to be the ongoing regulatory-induced recapitalization by nearly 400% for the different categories of licences, there are other tenable reasons that can be adduced depending on the position from which one had been viewing the insurance industry especially in Nigeria.

For a better appreciation of this, I thought we should consider this from the respective stakeholders' positions.

1. Policyholders

In this year, policyholders have shown that they are more aware of their rights in the contracts of insurance they have had with insurers either through their brokers/agents or directly.

Whether due to the demand by insurers on policyholders to read their policy documents and/or enlightenment efforts by social media users and insurance executives, these policyholders knew how to approach their insurers to ensure settlement of their claims and acceptance of liabilities unlike in previous years. Some economic analysts have attributed the rise in policyholders' activities to the harsh operating environment we are experiencing however it has been interesting to have more insurance actions from policyholders, which have forced many insurers to critically review their operating models.

Quite recently, potential and existing policyholders have been discussing the need for insurers to adopt digital solutions to achieve speed and convenience in their insurance experiences. They have boldly told the regulator, National Insurance Commission, that the insurance industry needs to quickly embrace digitization to deepen insurance penetration which has remained at 0.3 percent and compares poorly with South Africa, Egypt and Kenya.

However, the downside of the more insurance we have had this year is the failure of the Federal Government as a policyholder to renew one of the largest insurance portfolios in Nigeria, the Group Life policy for federal civil servants administered by the Office of the Head of Civil Service of the Federation. The discussions around this has given other policyholders better understanding of the insurance laws especially the efficacy of the "No Premium No Cover" regime. If the Federal Government of Nigeria cannot get insurance cover on credit, then no other policyholder can.

2. Shareholders and Investors

For these ones, the year started on a high note as they were recovering from the scare of Tier-Based Minimum Capital pronounced by NAICOM which necessitated getting a court injunction to stop the process. However, they seem to be in a more challenging position hence the more insurance discussions and actions we have had from them.

While insurance stocks remain one of the poorest performing in the capital market, the leadership of the Nigerian Stock Exchange (NSE) have expressed hope during a recent outing, that the insurance sub-sector will likely receive about N200b during this season of recapitalization. This position is, sadly, not quite the same for selected market analysts who opine that the insurance sub-sector is underperforming and unlikely to make positive returns to shareholders and investors.

We have seen even more insurance actions from foreign investors and their advisors into the insurance sub-sector and it is in line with the recapitalization agenda that seeks to have highly capitalized insurance companies that can participate and retain greater share of risks presently taken abroad due to low capacity of local insurers.

So far, the shareholders seem to be gasping for breath as the June 2020 deadline approaches. They are required to inject more funds if they wish to retain their operating licences but we have already observed that "very complex and difficult" mergers and acquisitions will have to happen for most of them to remain happy shareholders.

3. Insurers and other Operators

Sometimes, in the course of the year, the discussions amongst insurers, brokers, agents, loss adjusters, marine superintendents and reinsurers, the question has been: "What more can we do to make it better in this industry?"

From the pressures by NAICOM to the increase in claims payable while government patronage dipped, a few insurers have created new ways of surviving as most simply chose to follow the plans of the regulator and stay safe from public radar.

By their recapitalization plans assessed by NAICOM last September, the fears that many insurers will not remain as we currently know them became evident. It is expected that as the June 2020 deadline approaches, insurers will seek for the intervention of the Presidency on the recapitalization issue and this might be the opportunity to appropriately consider the amendments to the near obsolete insurance laws.

More discussions have taken place within those insurance companies that have FAILED to pay claims and meet other obligations to stakeholders yet retain their operating statuses, no thanks to NAICOM thereby eroding the confidence of policyholders, quite speedily.

Like in the case of others catching cold when one sneezes, the other arms of the insurance industry in Nigeria are less active as the insurers struggle. Brokers and loss adjusters complained about outstanding commissions and fees respectively while agents continue to wait for due recognition of their contributions to premium generation.

The few good insurers are equally under pressure as changing to adapt new customer behaviour remain a herculean task hence the hope that microinsurance and takaful operators will be able to step up and provide the experiences expected by today's policyholders.

One glorious moment came when Nigeria got the slot of Vice President of African Insurance Organization and the right to host its 2020 Annual Conference in early June, and we have to ensure the recapitalization deadline shall not affect the level of hospitality we will show to delegates from over 50 countries!

4. Regulators

NAICOM did not only move away from "hosting protesters" but also survived the court cases and threats to keep its respectful place amongst financial services regulators.

Recapitalization, the "banana peel" of the insurance industry in Nigeria appeared to have failed to help the former Commissioner for Insurance get tenure renewal and more discussions regarding NAICOM have bordered on when the President will announce his appointees into the vacant positions of Deputy Commissioners for Technical and Finance.

To think that since July when the Acting Commissioner for Insurance was elevated from the position of Deputy Commissioner Technical, the regulatory body has been without substantive Management Team saddled with the recapitalization project has made the discussions on insurance even more challenging.

Other self-regulatory bodies that work with NAICOM have had shared challenges of how best to engage the public in 2019 when we saw assets worth hundreds of billions of Naira lost to collapsed buildings, fire incidents, reprisal attacks and natural causes.

There are public expectations that the regulatory bodies in insurance in collaboration with other regulatory agencies would provide better insurance experience to indeed ensure that we feel and live safer in Nigeria.

5. The Rest of Us

Who knows what will happen in the insurance industry in Nigeria by 2020? Hard to say, however, the regulator, NAICOM will have to do more to protect policyholders. Just go digital!

Going digital will be the way of the new decade for the insurance industry in Nigeria.

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 olagamola@gmail.com