By Patience Saghana
The nationâ€™s insurance industry wrote off a whopping N 1.1 trillion in the last three years as provision for bad debts. A breakdown of the N1.1trillion revealed that the 51 insurance and reinsurance companies certified by the National Insurance Commission (NAICOM) wrote of N465 billion in 2007, N356 billion in 2008 and N282 billion by September 2009 amounting to N1.103trillion
Though the 2007 and 2008 figures included the diminution in the loss of financial assets as a result of the global financial meltdown by the 2009 figure was largely heaped by bad debts. Vanguard investigation revealed insurance companies provision for bad debt alone ranged from N 52 million to N 1.5 billion excluding the losses incurred in the wave of the economic crisis which adversely affected the capital market.
Provision for bad debts is an effort to allowance for possible losses because of bad debts, though, there is no specific definition of a bad debt, it can be generally categorized as either a not collectable debt or one that is uneconomical to pursue.
National Insurance Commission (NAICOM) guideline on provisions for bad and doubtful debts states that any debt that is not performing for upward of three to six months should attracts 25 per cent write off, six to nine months – 50 per cent and nine to 12 months 75 per cent and above and one year 100 per cent.
The guidelines stipulate that bad debts must be written off to the profit and loss account when the extent of the loss has been determined.Mr Fola Daniel, Commissioner for Insurance in an interview with Vanguard in Abuja recently said that t