How insurance can achieve trillion premium by 2012
By Fola Daniel
IN 2006, the total capital base of the 100 insurance companies was about N30 billion whilst the gross premium was N82 billion. The post-capitalisation total capital base grew to about N400 billion while the gross premium was N117 billion as at December 2007.
The Commission is committed to growing the premium income to N1trillion within five years in the first phase. Thus, we have commenced action to vigorously enforce all statutes requiring mandatory insurance cover, starting from the Federal Government that enacted the laws. We worked behind the scenes to ensure that the group life cover for public servants took off last year after three previously failed attempts and over N12 billion was returned to chest due to non-commencement of the scheme.
Compulsory Insurances
Last year, we launched the compulsory insurance of public buildings and buildings under construction. The public launching had earlier been preceded by a directive to all Federal Government Ministries, Department and Agencies to insure all government assets in their custody.
The NHIS at the instance of NAICOM has also directed all hospitals to take mandatory insurance covers. The Nigeria Customs Service has agreed to accept insurance bonds once again after a six-year break. We have also, recently licensed some annuity products signifying the commencement of a new business opportunity deriving from the Pension Reform Act.
NAICOM will also champion the enactment of new legislation that will create new income opportunities for the industry. Presently, these include the Nigerian Local Content Development Act and a new Motor Third Party Insurance Act.
In addition, NAICOM will partner with relevant committees of both chambers of the National Assembly to ensure that from the 2009 budget year, adequate allocation is made for insurance premium by all Federal Ministries., Agencies and Departments. We also encourage oversight activities targeted at budget performance with respect to insurance premium to ensure that agencies pay their premium once allocations are released.
NAICOM has met with the Bureau of Public Procurement to explain the peculiar nature of insurance to them and formulate appropriate policy on procurement of insurance protection, without deviating from the intention of the Public Procurement Act.
The Commission commenced discussion with the Federal Inland Revenue Service (FIRS) on the recent tax law as applicable to the insurance sector. This is being followed up for necessary amendments.
However, whilst all these efforts are on-going, I will like to note that federal government’s insurance purchases alone should not be sole focus of the industry.
The reason for this is simple, the total premium budget for the Federal Government in 2008, excluding, that of the NNPC and the NLNG is just about N10billion. The Commission intends to carry the message to state governments as we are empowered to do so, since constitutionally, insurance is under the Exclusive Legislative List, but much of the new income will come from the private sector.
But, inspite of these initiatives which are really to ensure that government demonstrates its commitment to enthroning the rule of law and creating insurance awareness among the citizenry, much of the work has to be done by insurance practitioners.
Repositioning NAICOM
As you must have heard, we have effected some staff changes which are part of our Human Resource Review exercise to reposition NAICOM to the level of other regulators in the Financial Services both in Nigeria and elsewhere. This will create opportunity to inject new capacity required to achieve the new vision of the Commission,
This exercise on completion, will upscale the manpower capacity of the Commission to meet the challenges of a fast growing industry. It will also build the capacity to develop an interactive IT platform that will ease exchange of information, fast track processing of documents and requests. All this will aid planning and development both for government and the industry itself.
We are also changing the organisational structure of the Commission to enable us establish a virile regulator that will be ahead of the industry and not reacting to new developments ‘after infractions have been committed. The Operations Department has now been changed to Authorisation and Policy Department. Its functions will include;
—Licensing
—Policy and Regulation
—Mergers and Acquisition
—Corporate Governance Issues
The  existing  Inspectorate  Department  has  its  functions expanded to include
—Actuarial Services
—Security Fund Management —Examinations — Interventions
Similarly, the functions of the Supervision Department has been expanded to include Financial Analysis of Companies’ report. A new department, Research and Statistics has now been created. This,,department has responsibility for IT, library Research and Publications.
Our mode of regulation and supervision is also to change to risk-based as is the practice in other jurisdictions worldwide.
As we all know, insurance is an international profession and business. This change will also aid our companies in their drive to expand beyond the shores of Nigeria.   These changes are to be backed by a comprehensive review of the main legislative instruments of our industry —the NAICOM Act 1997 and the Insurance Act 2003. Both legislation need urgent review to enable us effectively manage a modern industry of our vision where regulation is both forward looking and effective but without stifling competition and the entrepreneurial spirit of operators.
Challenges
I have enumerated efforts made by NAICOM in the last one year to grow the insurance industry and ensure it increases its contribution to the national GDP. We can only create the environment for operators to thrive, we cannot do the business for you. In the past year we have also considered the limitations of our industry in achieving the growth targets we have set. This forum is considered the best place to discuss and find solutions to these limitations. The CIIN itself as a professional organisation also need to restructure for the challenges ahead.
Professionalism
Our qualifications separate us from non professionals and outsiders. New developments arise every day to challenge what we knew and the way we have been doing things in the past. I recognise the adoption of the initiative of the UK CII to deal with this issue and keep practitioners current professionally. That institute has introduced various measures, sectoral groupings and new appellations to keep members’ interest in its activities up. I want to encourage the CIIN to study these and adapt as suitable.
However, my area of worry is in the status of manpower the institute is producing in this day and age. The level at the point of entry is intertwined with the perception of ranking when fully qualified.
In the 60’s it was okay to obtain the CII diploma and return home to replace expatriates at the highest level. Subsequent to that period in the 80’s and 90’s, possession of the CII diploma was required for entry into managerial level in our industry. Even then, the CII itself, realising the need to upgrade the quality of its professionals, introduced fellowship by examination at a time and progressed to presentation of research papers and continuous development.
In a country where over 200,000 first degree/HND graduates are produced every year, should our entry qualification remain 5 O’Level passes/credits? This question is not for CIIN alone, it concerns the West African Insurance Institute also. We need to realise that Insurance is not like banking, where the CIBN certificate has never being a major requirement.
Any CIIN graduate with O’level as a basic academic qualification today is not significantly better than an OND graduate. Why then should any one posses a first degree and then come and sit for CIIN examination? Or what really should be the training focus of the CIIN today — to produce management trainees or superintendents?
I suggest that we immediately consider a change in our entry qualifications. The CIIN should also begin discussions with the NUC to redesign the syllabus so that more universities can offer degrees in insurance. We may also need to commit funds to the project in order to train lecturers and fund research programmes
Image
Much has been said about the need to change the image of the industry such that it does not need repeating here. My comment is not so much on an image committee and so on but the need to rebrand both as an industry and more importantly on the individual corporate level.
Although, I have noticed, with delight, that with the completion of recapitalisation, our corporate profiles and adverts have improved, but except in very few cases, our technical stationery is still poor, in terms of content, clarity and presentation. There are some memorabilia you keep not for their value, but for the quality of their presentation.
There is a general need for corporate rebranding to improve our presentations. Image is everything now.
Market organisations should also not be left behind in this rebranding. We need to increase our visibility beyond serving our members only. Are we reaching out to the critical groups that can grow our business _ for instance the NIA can organise a retreat for all state finance commissioners where speakers can be brought from other countries to share experience on the insurance of assets of government.
In the case of insurance of public buildings, is it not possible for the NCRIB to bring together town planners, architects and builders to discuss common implementation strategies? Can we not institute an action against insured truck owners to enforce our clients’ subrogation rights?
On the part of NAICOM, we have just commenced the broadcasting of a radio awareness programme as our contribution to image building and increased insurance awareness. The goal of growing the market require more visibility on our part and a drastically different approach to publicity.
Products Pricing
NAICOM does not want to encourage tariffs or cartels but I must say we are not happy about reports of rate cutting or unreasonable discounts to secure accounts. Service, not pricing should be our selling points if we are to deliver value to customers and shareholders.
Why should we retain the motor tariff if operators themselves are offering 75% discount? Why is provision of spare car not standard on all motor policies rather than unsustainable discounts? Is price the only selling point we can offer clients, knowing that once the premium is paid most people forget how cheap the product is but will demand for premium service?
