Unsettled Claims Now Unsettling Nigeria's Insurance Industry

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Tuesday, December 18, 2018   06.54AM / By Ekerete Ola Gam-Ikon MNIM, CPP


Every insurance company has, at one time or the other, settled a claim in a way that excited the policyholder (claimant), broker/agent and their employees. The big question is: Why cant this be a natural part of the insurance loop and done ALL the time, not once in a while?


This article seeks to look into the situation and offer thoughts on what is possible.


The Beginning


In the mid 1990s, a few insurance companies emerged on the scene with a compelling mission to rid the insurance industry in Nigeria of the pains and hues of policyholders by promising to settle claims within hours. This readily became the unique selling point and many policyholders switched to those insurers that SHOWED PROOF that they were willing and able to pay genuine claims. The number of new converts also increased, and with the Universal Banking regulation allowing banks to invest in insurance, the numbers of insurance transactions were boosted to the level where the insurance industry seemed unprepared for.


Bank-owned insurance companies had competitive edge over others, undertaking risks that were hitherto challenging especially in the oil and gas, marine and aviation sectors, and by the time Central Bank of Nigeria "pulled out" the banks from insurance business, the claims recorded could hardly be paid/honoured by those insurance companies previously owned by banks! Sadly, they were also looking for real investors to replace the banks but such was not enough to put them in a position to honour huge claims, mostly denominated in US dollars. With the arrival of global economic recession, which affected the fortune of stocks in the capital market, the rout of the insurance industry in Nigeria was complete!


These insurance companies settled claims amounting to billions of Naira yet policyholders are not satisfied with them. Why?


Table 1: Extract of Insurance Claims Paid in 2017

1.       AIICO                               - N20.8b

2.      AXA Mansard                 - N15.9b

3.      Cornerstone                   - N7.7b

4.      Law Union & Rock        - N1.4b

5.      Leadway                          - N27.4b

6.      Linkage                            - N1.04b

7.      Mutual Benefits             - N5.15b

8.     NEM                                 - N1.8b

9.      Niger                                - N3.5b

10.  NSIA                                 - N3.04b

11.   Recency Alliance            - N1.9b

12.  Saham Unitrust               - N1.7b

13.  Sovereign Trust               - N1.3b

14.  Wapic                               - N3.23b

15.   Zenith General              - N4.9b

Source: 2017 Audited Financial Statements of respective companies



The Survival


To survive, insurance companies have merely relied on prayers and schemes that the noose of the regulator, NAICOM will not come down thus explaining the recent botched attempt at recapitalization.


Recall that prior to the announcement of the recapitalization process based on tier categories, NAICOM Boss had expressed concern over the weak financial state of insurance companies that had become unable to pay claims and salaries. Therefore, the failed attempt to recapitalize has greatly exposed most insurance companies with respect to unsettled claims and their continued existence is more threatened than at any other time. Not only are they unable to attract new businesses but investors are not ready to put their money into such holes, except consideration is given to the option of converting claims to equity! 


Conversely, the years ahead look brighter for insurance companies that have continued to pay out claims thus justifying their results though they now need to be more innovative about generating premium from opportunities that seem to be shrinking, to retain their positions.


No entity that holds an insurance policy is left out of this ugly season of unsettled claims. Governments, conglomerates and especially, individuals, have not hidden their displeasure and it is unfortunate that the complaints desks at NAICOM and NIA (Nigerian Insurers Association) have been unable to satisfy the claimants, some of whom have had the "promise to pay" advice from insurance companies 8-9 months ago!


The arguments put forward by insurance companies are that claims settlement have been given more attention now and improved a lot more than previous times, due to the strong actions of the regulator, and they have put the blame for isolated cases on the ignoble use of social media by policyholders that have poor understanding of the process for claim settlement.


Survival for most insurers rest on ability to strenuously argue with the policyholders and little wonder such policyholders quickly make the decision to switch whether or not the claims are settled.


The Way Forward


As technology enhances the way we do business and relate with our customers, we are looking for the insurance companies that will launch an easier self-service portal for claimants and dismiss the public belief that they would rather put up innovative blockades to delay or deny claims.


NAICOM, as regulator, must be seen to act more in the interest of policyholders, whose records are submitted by insurance companies periodically. If there could be positive action on premium payment by customers via the "No Premium No Cover" regime, there is no reason why there cannot be positive regulatory action against defaulting insurers to the satisfaction of policyholders. 


Policyholders are increasingly using the access to report their cases to the complaints desks at NAICOM and NIA but only successful resolutions are publicised while dissatisfied ones are left to fester and cause further damage to the poor image of the insurance industry in Nigeria. Or are these defaulting insurers "too big" to be penalized by NAICOM?


The potential for a thriving claims recovery business beckons but insurance brokers that are best positioned to take actions that would compensate their clients, seemingly  have an unwritten alliance with insurance companies which impinge on their professional integrity.


It is unclear to me how the courts of law will address these issues which cause increasing pains to families and embarrassment to the best-of-class executives. When you hear some of their stories, they sound like classical scam where the promoter disappears when you decide to exercise the rights you were given.


Things are surely not looking good for the insurance industry in Nigeria especially as calls for unsettled claims increase. NAICOM can no longer quietly deal with the issues that are already in the public domain, for example, the ill-fated recapitalization process had already exposed the extremely weak position of some insurers and it is foolhardy to attempt to continue hiding them.


The law empowers NAICOM to withdraw the licence of any insurer that fails to honour its obligations over a specified period of time, so this should be considered to alleviate the pains policyholders are put through and save the insurance industry in Nigeria. 


Remember, customers are excited about any product/service that continuously deliver meaningful experiences to them and insurance cannot be different. 


An impressive claims experience is the only proof to policyholders that the insurance policy they bought was a good one. The failure of insurers to understand this and treat claimants like new customers they are soliciting, accounts for the unsettling condition under which they operate today.


It is our hope that 2019 will bring more positive actions on claims by insurers notwithstanding their market position. Sometimes, it is not how much claim you have settled, but how many claimants have had their claims settled and can speak as ambassadors of their insurance companies, that counts!


If your experience is worth sharing, please do so via my Twitter handle @olagamola so we can settle those issues before they unsettle 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 vide telephone on +234-806-648-1111 and +234-802-585-0344 or by e-mail vide olagamola@gmail.com 

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