June 23, 2019 / 03:10PM / By Sahara Reporters / Header Image Credit: iicc.ng
Open Letter To Mr. President On The Urgent Need To Restructure The Nigerian Insurance Industry For Optimal Contribution To The Economic Growth And Development
A brief illustration of the profile of the financial service sector as at December 2018 will show the danger being posed by the Nigerian insurance industry of today under the leadership of the current Commissioner of Insurance, Mr. Mohammed Kari.
We congratulate Mr. President for winning the recently concluded Nigerian general elections and the inauguration for the second four year term. This victory is an indication of the confidence reposed on the leadership of Mr. President in changing the political, social and economic landscape of Nigeria towards greatness and freedom from the bondage of corruption and bad governance. The working class and the common man in Nigerian history have suffered tremendous pain without any form of resilience and motivation until the coming of this government. The simple most basic reason why there is hope for Nigeria to rise to greatness and liberty is the undisputed track record of Mr. President in favoring right over wrong doing without fear or favor and regardless of race or religion.
In the course of your sojourn to turn around Nigeria, you inherited a battered economy and further sunk into recession. What Nigeria requires now is economic resilience and infrastructural expansion. However, economic resilience is only achieved when there are adequate measures for risk mitigation and management. No economy can function and survive without a stable insurance sector. Every sector of the financial service and economic activities are dependent upon prudent insurance service. Today, the Nigerian insurance sector is drifting far away to oblivion due to poor regulation and supervision characterized by the insurance regulator's lack of focus, policy inconsistencies, abuse of discretion, and non-commitment to ideals of the government, coupled with lack of trust of the regulator by the stakeholders and low awareness from the insuring public.
The number one victim of this worrisome condition is the Nigerian economy which in turn relegates any concerted effort of the present administration towards the achievement of the well intentioned objectives and sacrifices to revert Nigeria to its glorious pristine state. It is worthwhile to mention that there is a strong positive correlation between economic growth and insurance growth for any country, the former does not thrive without the latter. This is strongly needed for the creation of the enabling environment for infrastructure development, agriculture and the extractive industries initiatives which is an integral part of the objectives of your government. A brief illustration of the profile of the financial service sector as at December 2018 will show the danger being posed by the Nigerian insurance industry of today under the leadership of the current Commissioner of Insurance, Mr. Mohammed Kari.
As at the December 2018, the total assets of the Nigerian financial sector, consisting of banking, pensions and insurance, stood at USD 110 billion, the share for insurance sector in this figure is contemptibly less than 3%. Similarly, the insurance contribution to the national GDP is less than 1% and insurance penetration is 0.30%, when compared with other jurisdictions like South Africa with insurance penetration rate of 16.99% which was the highest rate in Sub-Saharan Africa, Namibia 6.69%, Zimbabwe 4.28%, Togo 1.98%, and Ghana 1.10% as a percentage of GDP (PwC Market Research Centre Analysis based on Axco, 2017).
With these worrisome indices showing the precarious state of the Nigerian insurance industry, the average foreign investor regards Nigeria as a high risk business clime. This poses a great concern for the world renowned development partners like the World Bank, UK Department for International Development (DFID), German Development Corporation (GIZ), Islamic Development Bank (IDB), African Development Bank (AfDB) et al. due to the fact that insurance business is a business of risk transfer to mitigate future occurrence of loss of the insured. Foreign investors will continue to be skeptical to invest where the insurance support is not effectively and efficiently regulated and supervised as it is presently in Nigeria. Changing this disturbing scenario should begin with the restructuring and strengthening the leadership of insurance regulator.
Unfortunately, the present Commissioner of Insurance Mr. Kari lacks the competency, commitment and sincerity to move the insurance industry forward. Mr. Kari was appointed by former President Goodluck Jonathan government as Deputy Commissioner (Technical) of the National Insurance Commission (NAICOM) and barely a year after his appointment the tenure of the then Commissioner of Insurance, Mr. Fola Daniel, expired on 31st July, 2018.
Presumably, Mr. President’s desire to maintain continuity led to the appointment of Mr. Kari as the Commissioner of Insurance and Chief Executive Officer of NAICOM. One may assume that Mr. Kari, even though not punished for his role in bringing down the Nigeria Airways, might have repented but a check at the NAICOM disclosed more disturbing scenario. Mr. Kari has succeeded in destroying the working culture of that organization and also decimated the Nigerian insurance industry. Notably:
1. NAICOM is currently the only regulator in the financial sector that is not automated, which is deliberate, as the automation of its system and process will curb arbitrariness, abuse of office, loss of revenue, and corruption. A Portal was developed and ready to go-live just before his appointment but he frustrated its go-live. Presently, the Commission does not have a database of the Insurance Industry for proper regulation and supervision which is the core Mandate as a Regulator. Rather than ownership of the database, NAICOM management gave support to Nigeria Insurance Association (NIA) to own and authenticate insurance policies rather than the Commission which may lead to identity fraud and related crimes if the data is exposed.It is during his tenure that NAICOM stayed for over a year without a functional website and also experienced a total collapse of its IT infrastructures.
2. His disposition for arbitrariness and corrupt exploration has led to various suits against the Commission by insurance stakeholders. A quick check into the Commission will reveal that there are various suit instituted against the Commission by some insurance companies, insurance brokers, insurance shareholders and insurance policyholders. All these suits were instituted as a result of abuse of office perpetrated by Mr. Kari. This is not only limited to external stakeholders but also Mr. Kari instituted a suit against the entire middle management staff of the Commission. The relationship with staff, industry, peer regulators, supervising ministry and other stakeholders is very poor under his leadership
3. The contributions of insurance to GDP has gone down due to his refusal to pursue the Market Development and Restructuring Initiative, which the first phase had reached advanced stage before his appointment.A study shows that the performance of the insurance sector started to nose dive further from the ending of year 2015 till date (under his leadership). According to the 4th Africa Insurance Barometer, which is a research commissioned by the African Insurance Organisation (AIO) on African insurance industry which was launched at its 46thConference & General Assembly held in June 2019 in Johannesburg, South Africa; African countries were able to generate $67.7 billion insurance premium in 2017 as against $59.4 billion in 2016. The report, however, shows that in Africa’s largest insurance markets, total real premium growth was positive in Egypt (+9.8 per cent), Namibia (+7.8 per cent) and Morocco (+3.0 per cent), stagnant in South Africa (+0.1 per cent) and negative in Nigeria (-10.5 per cent).
4. The Commissioner has failed in his duty to enforce the compulsory insurances, Motor Third Party Insurance, Group Life Insurance, Building under construction, Insurance of Public Building, Health Care professional Indemnity as specified by various laws guiding Insurance. This has contributed to the reasons why the Insurance sector is a dead wood in contributing meaningfully to GDP of the Country. He has also failed to authorize the conduct of routine inspection of all Insurance Institutions in Nigeria once every 2 years as required by the NAICOM Act 1997 Section 31 (1a) which is meant to check the operation and confirm the compliance level of the regulated entities as observed in the report of the 8thHouse of Representative Committee on Insurance and Actuarial Services.
5. His lack of understanding of the regulatory function led to the release of many guidelines and circulars which were not thought through and which have negative consequences on the Nigerian insurance sector. Some of such guidelines were reversed after various litigation which apart from cost, has created an uncertainty in regulation which tends to drive away investors. Notably are the Tier Base Minimum Solvency Policy Circular which tends to see insurance business like money deposit agencies such as banks, and the State Insurance Producers Guidelines which was intended to incapacitate targeted insurance Brokers were reversed. While the insurance companies are presently underutilizing their capital he is bent on requiring more capital with sole personal objective of killing some companies rather than solving the problem. It is worthy of note that this recapitalization policy was not supported by the management team of the Commission.
6. His pursuit and actions are substantially anti-government. This has been noted by his actions or inactions which led the former past minister of Finance, Mrs Kemi Adeosun to write to Mr. President recommending for his removal for embarrassing Nigerian government for causing the grounding of Arik Air in 2016 due to his refusal to approve its insurance until after the direct intervention of the then Honorable Minister of Finance.
7. In the history of NAICOM there was never a staff strike until his tenure and the commission was shutdown 4 times with consequential credibility erosion as a result of his obnoxious anti-workers policies and disregard of government policies, circulars and other extant rules.
8. In his tenure as the Commissioner of Insurance, budget implementation, with exception of personnel cost has never exceeded 5% and this has tremendously affected the working of NAICOM resulting to low productivity due to absence of working tools.
9. His fondness for travel is harmfully affecting the delivery of the mandate of the commission. Often the travels are made against the extant rules as they are in most cases embarked on without necessary prior approvals from approving authorities.
10. No clear project that is supportive of the present administration. Fss2020 and the GIZ report described the Commission as the weakest link in the financial sector.
Mr. President, the attitude of Mr. Kari may not be surprising because:
i. He played a role in the collapsed of the Nigeria Airways. The issue of his appointment became subject of public discuss when the then Honorable Minister of Finance, Zainab Ahmed, proudly announced that 'Over 2000 former workers of the defunct Nigeria Airways have received payment alert of the 50 percent of their pension'. This is indeed a giant stride by the Federal Government which deserved a big applause. This achievement might have contributed in prompting the machinery of investigative journalism of the Premium Times which led to its special report titled 'The Men who Embezzled Nigeria Airways to death'. The publication called for the punishing of the perpetrators of the heinous crime. One of the key figures that was involved in the embezzlement is Mr. Kari who was then the Managing Director and Chief Executive Officer of NICON Insurance. The Hon. Justice Obiora Nwozota led Judicial Panel of Inquiry indicted Mr. Kari and found him to have colluded in diverting the sum of $13,935,966.20 to a phony company Alexander Services Limited in the Channel Island, an offshore tax haven and recommended that Mr. Kari should refund the $13,935,966.20 and also be banned from holding government appointment.
ii.He focuses on personal vendetta to deal with perceived enemies who he believed had offended him when he was an industry player. This led to evolving policies by the Commission which are specifically targeted to particular insurance operators. The policies, because of the ill motives, are often not well thought and most cases violate the existing laws of the land.
iii. He is currently being investigated by the Code of Conduct Bureau for non-declaration of asset as required by law.
Mr. President as your government has creditably started paying pension liabilities of the former employees; those indicted like him should not be holding office under government having zero tolerance for corruption. As his tenure comes to an end on the 31st July, 2019, we, therefore, call for the appointment of a competent and season professional to replace Mohammed Kari as the Commissioner of Insurance and Chief Executive of NAICOM to save the image of the Government and protect NAICOM and the Insurance Industry.