Assuming The Insurance Regulator Is Wrong

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Friday, July 26, 2019   / 05:14PM  /  OpEd By Ekerete Gam Ikon*   /   Header Image Credit:


Only a few, and certainly not those holding its operating licence, can dare to openly suggest that the insurance regulator, National Insurance Commission (NAICOM) is assumed to be wrong in its management of the insurance industry in Nigeria. 


This is because, over the years, the insurance industry evolved on the basis of group-thinking with respect to virtually all aspects (agency, broking, education, underwriting, loss adjusting, shareholding and reinsurance) except regulation and legislation for obvious reasons. 


Whenever the industry seeks to do a thing especially that which affects more than two of the aforementioned areas, their actions usually reflect that group-thinking and upon attaining the desired results, they return to their respective positions to continue what they were doing 'before the call'. Sometimes, it is not well organized, which explains why they get half of the expected results and need to come back again too soon.


As groups, these stakeholders have, at different times, caused NAICOM to reverse its decisions on a number of policy issues and regulations that were aimed at strengthening the insurance industry in Nigeria, according to the regulator.


In some critical areas I will mention here, let us assume the regulator is wrong (not saying other stakeholder(s) is right):


Developing the Insurance Industry 


Quite often, many analysts argue that the operators get very innovative that the regulator plays catch up but the story of the insurance industry in Nigeria seems to be the other way round, and to a large extent, operators seemingly wait to hear from the regulator on virtually every issue. 


That operators in Nigeria appear to be waiting for NAICOM is attributable to such group-thinking that has been transferred from the colonial generation of insurance professionals to the present era. There is no significant difference in what happens inside one company from another which holds the same licence given by NAICOM. 


When NAICOM queries or punishes one company, others become concerned or jittery about when the regulator will turn to them; knowing that the one queried or penalised would have mentioned others based on the same group-thinking tradition.


Interestingly, same group-thinking is less strong when unpaid claims are discussed and no known statement has been made by these groups.


To develop the insurance industry, in my view, entails carrying on in a manner that attracts others, especially those outside the industry who need our services and patronage. Who is best suited or positioned to do this?


NAICOM claims its regulatory actions are meant to strengthen and develop the insurance industry but can that be achieved without creating an entry path and protective environment for policyholders (potential and existing)? - A path that should lead to insurance companies and other operators.


When was the last time NAICOM published the list of insurance companies and other stakeholders they gave license to operate so that the public will be sufficiently informed and take informed decisions?


Given the peculiar position of the insuring public, which desire to be educated, should NAICOM not regularly share information with the public on social media or otherwise on the state of the industry, especially in this era of fake news?


If we present the position of operators as those that should develop the insurance industry through innovative products and services, should they not have precise guidelines for product development rather than submit every single request to NAICOM and wait for months which would have been used to test the product or service? Can NAICOM release guidelines or regulations for such ancillary activities? 


Insurance develops and grows by the efficacy of claims management. Debatable as this may sound; neither NAICOM nor the operators have a clear policy position on this. At least with "No Premium, No Cover", every customer knows that insurance is cash and carry so why can we not have "No Settled Claim, No Approval" for insurance operators. Interestingly, a valued Department of the Federal Government applies this rule in determining which company participates in its insurance programme at renewal, and this has helped to drastically reduce outstanding claims in their portfolio.


The group-thinking, like I stated earlier, hardly applies when it comes to claims, which prompt and efficient management remains the single most critical success factor for growth and development of the industry. 


Building Capacity for Retaining More


Despite reported difficulties in the operating economic environment, increasing opportunities exist for insurance underwriting and insurers seem to be rising to the occasion especially in the area of group life business.


However, the concerns for proliferation of rates and terms have challenged, mostly, the capacity of the regulator to stem the professional rot that is eating at the root of the industry. So NAICOM announced a rate for group life business unilaterally and questions abound on the basis on which the new rates was done, especially without a functional national mortality table. 


Why could it not announce minimum rates for other classes of insurance and penalise defaulters? No doubt, this would force operators to justifiably invest in the capacity required to operate at such level rather than keep flying our income opportunities abroad.


If we argue that NAICOM should not fix minimum rates, the operators should be seen to have in place, very efficient system that will respond to policyholders. 


The capacity required by both the regulator and operators to manage financially weak companies are not available to us in Nigeria so, like Central Bank of Nigeria does with weak banks, such insurers should be de-licensed and ownership transferred to capable investors, in line with its law.


Operators often struggle to attract professionals from other backgrounds (legal, accounting, engineering, human resources, technology, medicine, planning) and retain them under the leadership of insurance professionals that are unable to win their trust and confidence. Then the policyholders and shareholders suffer unfounded and avoidable losses year on year.


Friendly laws enacted by the Federal Government of Nigeria to assist the insurance industry grow, build capacity and develop have remained points of discussion and plea without concrete concepts.


A conscious effort by any single operator to build and have needed capacity that distinguishes it, would usually be perceived, or received, as trying to break away from the group. Little surprise, insurers or brokers that have initiated new partnerships, sometimes, earn the envy of others and in a short while the wind goes out of their sail.


In times past, there were entities in which insurers pooled resources together to build strong capacities to retain businesses but poor management and professional misconduct by members eroded the vision. It has become easier to dash into London and get appropriate cover than to find solution in the local market.


Sometimes, the question has been asked "Is insurance in Nigeria a profession or business?" The common answer is: It is a professional business! My view however has been that the capacity required today to run a professional business like insurance goes beyond having the professional certificate of the Insurance Institute. Working with or leading other professionals requires executive leadership professionals, if I may put it that way.


Again, NAICOM needs to view this strategically, especially as professionals of insurance are losing their jobs on account of not having the capacity to function effectively in the C-suite. This also explains why most companies seem to have "a one-man show" type of leadership.


Protecting Policyholders


It is no longer news that in some African countries, the insurance regulatory authorities have promoted the establishment of Policyholders Protection Funds to protect the policyholders against insolvency of insurance companies. Nigeria needs to be one of such countries as we face increasing cases of outstanding and unsettled claims.


Over the years, NAICOM has worked through its Public Complaints Bureau to assist policyholders get their claims settled but there are far too many unsettled cases that have run for years at companies with valid licences of NAICOM eroding the confidence of the public in the insurance industry. 


I think it is about time that NAICOM supports the establishment of such independent entity that might be partly funded by the Federal Government and insurance companies to serve as response unit that would help launder the image of the industry rather than maintain the complaints desk that is gradually  bringing disrepute to the regulator.


More Nigerians will willingly buy insurance contracts when they know that in the event of a genuine claim, they will be indemnified without rancour and misgivings. 


As more insurers broadcast their claims settlement, not a few Nigerians know that they have helped to sustain economic growth, retain and create jobs, ensure secured environment and boost investors' confidence. The corollary of this can only be imagined. For example, a contracting firm with annual turnover of N3b lost the opportunity to renew its contract because of a claim that an insurer refused to settle and enable it continue business despite the intervention of NAICOM. 


Expected Corrections


Operators have to leave their comfort zones attributable to the group-thinking culture and embark on both strategic and pragmatic approaches that will put them in the faces and minds of the public. 


Notwithstanding that most people (individuals) know insurance for the wrong reasons and sad memories, if the unsettled genuine claims receive prompt attention and payments are made within the next 60 days, the discussion around insurance will surely change and people will begin to seek the connection.


Furthermore, let the applications for new and repackaged products that have been awaiting approval from NAICOM go out as it will, hopefully, enable customers find something for themselves in these new products.


Let NAICOM, as regulator publicise the list of insurance companies and their current capital status based on requirements announced recently. The usual fears that the public will be disturbed and the confidence in the insurance sector threatened are no longer tenable because allowing incorrect reports swell on social media platforms worsens the case.


Lastly, NAICOM itself must come clean by publishing its financial statements and the industry's statistical reports on its website like other financial regulators.


Let us see an insurance industry that truly seeks to democratize insurance within the disciplined environment managed by NAICOM.


We look forward to a rejuvenated insurance industry in Nigeria!


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About The Author

*Ekerete Olawoye Gam-Ikon, MNIM, CPP is a management consultant with specialization in Strategy and Insurance. He can be reached vide telephone on +234-806-648-1111 and +234-802-585-0344 or by e-mail vide



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