Sunday, January 26,
2020 / 09:57PM / By Ekerete Ola
Gam-Ikon / Header Image Credit: thegeneralist
When the chequered history of insurance in Nigeria is updated and the real reason for its survival is noted, I do consider that the enforcement of "No Premium, No Cover" captured in Section 50 of the Insurance Act 2003 will be more relevant than that of recapitalization.
To get the insurance industry in Nigeria on the "thriving mode", we have to decisively address the issues of unsettled claims, delayed claims and fraudulent claims!
It is in this context that I consider the need to affirm who is on that "Road Called Recapitalization", why it is necessary to rejig and reposition the Public Complaints Unit of the National Insurance Commission (NAICOM) and immediately pursue the enforcement of the provision of the Act with regards to claims.
Amongst the Nigerians who are aware of Insurance (not necessarily active policyholders), the larger percentage desire that the generational stories about the failure of insurers to settle claims should be ADDRESSED before or as the trip on the "Road Called Recapitalization" commenced.
Who is on That Road?
Recently, NAICOM reaffirmed the cancellation of the operating licences of Investment and Allied Assurance Plc and Spring Life Assurance Company Limited, leaving the "Road Called Recapitalization" with Fifty-three (53) licensees. The breakdown shows Thirteen (13) Composite Insurers, Twenty-seven (27) General Insurers and Thirteen (13) Life Insurers. According to available information, Fifteen (15) of these companies have foreign content and have expressed strong intentions to retain their licences while the discussions on mergers and acquisitions are relatively remote as reported by NAICOM weeks ago.
While many more insurers are involved in the horrifying stories of unsettled claims (attributable to poor financial position and failure to make reserves), delayed claims (attributed to incomplete documentation) are even more rampant amongst insurers and fraudulent claims increasingly dominate discussions of insurance industry executives.
The chances that most funds generated from the recapitalization process, especially by financially weak companies, might be used to settle claims have been the huge concern of investors and shareholders, who remain "respected visitors" to the "Road Called Recapitalization"!
Like insurance brokers whom insurers woo and dot over when discussing new accounts or renewals of existing ones, shareholders and investors are presented with opportunities that promise benefits after investment have been made. This is not so for the insurers with foreign content that have a track record of good dividend payments over the years in Nigeria or where they came from.
It is very important for existing and potential customers to be well informed about the characteristics of the insurance licensees on the "Road Called Recapitalization" as it equally has Insurers under NAICOM Management, Insurers under Regulatory Order and Insurers that have not received regulatory approval of their Financial Statements for Two or more years!
The "Road Called Recapitalization" needs licensees that can attend to emergent digital customers and give them excellent insurance experiences that would positively change the narratives of the insurance industry in Nigeria. This is also the commitment that NAICOM has expressed and we are eager to see the completion of its work in this regard.
Settling claims on that Road
Globally, claims handling in insurance have largely accounted for the maturity (hard or soft) of markets. When a market experiences claims of high magnitude and severity, insurers review rates upwards, often based on the insistence of reinsurers, and subsequently, it becomes easier for claims to be settled, and promptly.
Unfortunately, in Nigeria, rates have continued to go downwards, no thanks to unhealthy and crass competition amongst insurers. Since the last recapitalization exercise of 2007, only in January 2018 did we have an upward review of rates, and that was for Group Life from Three percent per mille to Six percent per mille announced by NAICOM.
On the "Road Called Recapitalization", poor and baseless rates have been responsible for failure to settle claims, without delay. This is besides the fact that the discounts that makes the rates seem explainable actually takes away the premium income due to the insurers and erode value that ought to go to shareholders.
The damning effects of these actions are mostly felt at the point of claims settlement.
While the regulator has watched the rates slide to incredibly unprofessional level though conscious of the negative impact on claims, it has also not convinced customers why it has not penalized defaulting insurers in line with Section 70 of the Insurance Act 2003. Genuine cases of claims where Discharge Vouchers had been executed and yet unsettled Nine Months after (not 90 Days as the Law states) abound in the Public Complaints Unit of NAICOM.
This new "Road Called Recapitalization" being completed with dateline of 31st December 2020 should not have such insurers. To achieve this, the regulator should review its criteria and threshold for the claims that are referred to it for resolution.
If premiums are paid immediately by customers, claims should be paid immediately after the processes are concluded. Digitization offers the best opportunities for such new experiences in this regard.
The confidence and trust of existing policyholders and hope of potential ones are seriously needed to make the "Road Called Recapitalization" smooth and enjoyable by other stakeholders including governments at all levels seeking to address the issues of revenue generation and creation of jobs.
End of the Road?
In the minds of the many stakeholders in the Nigerian insurance industry, there is a common end that the "Road Called Recapitalization" is expected to have - the point where policyholders, shareholders and "trustholders" (insurers, brokers and agents) will be excited!
The mixed feelings we have today could not be without accusations and counter-accusations of respective stakeholders yet we know that we can have better experiences if the process of claims settlement is half as open as that of premium payment.
It is time to address the issues that are most urgent and important to policyholders especially claimants, as aggressively as the issue of raising funds on the "Road Called Recapitalization".
A new insurance industry beckons!