Commissioner for Insurance, Mr. Fola Daniel, in this interview with Favour Nnabugwu says that the present day insurance companies’ abilities to settle claims is competitive to rank among the top notch companies in Africa. Daniel says the nation’s insurance sector premium rates are not regulated hence cannot be deregulated.
Claims paying ability of insurers
I feel we have moved away from the ugly perception of the past where it was so pronounced that underwriters were not paying claims. Of course, that was one of the reasons for the reform agenda of the insurance sector – to collapse the fringe players and have very strong companies.
Insurance companies are paying claims without being told by the Commission to do so. Insurance companies have settled significant claims in recent past without any intervention from NAICOM. I can say to you, in 2010 alone the Nigerian Bottling Company was paid a claim of N1 billion from insurance companies and in 2011, we had another major fire claim of N3.6 billion to WAMCO.
The Nigerian National Petroleum Corporation, NNPC was also paid N472.5million. The Nigerian Police Formation got a claim of N399. 8million. In 2010, insurance companies also paid N396million to Compulem and Shongai Nig Ltd got N335.2million. Lagos State was settled N215.6million on death benefit to Lagos State workers. NNPC received N13milion from insurers in 2010.
These are just few of the major claims settled by insurance companies in recent times. There are several other millions of claims paid by underwriters which if l have to mention, we will go on and on. The significance of those ones l mentioned, are huge industries.
If insurance companies refuse to pay those claims, you can imagine what would have happened. There would be stoppage of work and loss of revenue to government. Insurance industry has come of age and they are playing significant role in the development of our economy and NAICOM is quite glad about that. We believe that the industry can always do better. We are poised to ensure that insurance industry in Nigeria is able to deliver on its promises like its counterpart in South Africa, US or Britain.
Claims payment rating
We do believe that the insurance industry has performed far above average, significantly above average. Just recently the Head of Service invited me to witness claims settlement by insurance companies in respect of civil servant that died in active service. Instead of a letter of complaint from the HOS, they are happily inviting me to come and be a witness to performance.
Grounds for repudiation of claims
A claim can be repudiated if there is fraud that is if somebody insures a non existent property and tries to lodge a claim against an insurance company. If we find out that the client does not have any justifiable claim, we write to the client to tell him that we have examined his case and that he has no claims.
That does not stop the client from going to court if he is not satisfied but as far we are concerned the case is settled. There are also few cases where we do not bother to look into a case, if a claimant had already taken an insurer to court before writing to us, we cannot interfere because it will amount to subjudice. But most of the cases that are reported have been fairly treated.
Duplication of claims
A client cannot claim fully from two insurance companies because that will mean that the client is making a gain from the insurance policy which is against the principle of insurance. Insurance indemnity is to put you where you were prior to the claim. It is to restore you and not to prosper you. NAICOM will not compel any insurance company to pay claim on duplication. It is fraud.
Deregulation of Premium rates
Insurance companies cannot be clamouring for deregulation of premium rates because there is no regulation. Is premium rate regulated in this market? The Nigerian Insurers Association, NIA rates is market practice and it has nothing to do with National Insurance Commission, NAICOM, as regulator.
Insurers are members of the NIA and should respect the rules and regulation of the trade body. That has absolutely nothing to do with NAICOM. But generally, there is no regulation of insurance rates. The only one that is close to being regulated is motor tariff.
Am not sure if the motor tariff is even a regulation because the tariff stipulates a maximum of 10 percent a company can charge but it didn’t talk about the minimum. That is part of what is causing market misbehaviour. Which is why companies are charging as low as one percent and we could not punish them because for as long as they did not charge beyond the maximum of 10 percent, they have not committed any offence.
Motor tariff is a regime that is usually introduced when you have compulsory insurance in order to guard the insuring populace from being exploited. That is the reason government put a seal on the maximum to be charged. But for all other classes of insurance, they charge what they deem right.
I want to reiterate that insurance premium rate is not regulated hence there cannot be clamour to deregulate the rates. NIA, Nigerian Council of Registered Insurance Brokers, NCRIB and the Institute of Loss Adjusters, ILAN will always have NAICOM support for as long as they conduct their affairs within the confines of the law.
The premium rate is a business decision which each and every company take but we do expect that the issue of rate competition will soon be a thing of the past because we have released a risk management framework to the market and we expect that respective board of companies will begin to show more interest in the kind of business their companies are bringing to their portfolios and be able to analyze how profitable those businesses are and be able to applaud and rebuke their management either way. It is a decision for insurance companies to take.
The complaint bureau of NAICOM had within the last two years adjudicated on about 400 complains. And we have been able to resolve settlement of over N1 billion amicable. We do allow equity. There are few cases where we found out that insurance companies were not liable and we could force them to settle claims; hence we resolve issues by being factual, just and equitable.
Where we also found out that an insurance company is at fault, we give such a company deadline to pay and they are complying. For Instance, one of the reasons we held against NICON insurance in 2007 was non-settlement of claims though there area still a few complains against NICON insurance but l must say that NICON is progressively getting better.
As a matter of fact NICON now renders returns of claims settled to NAICOM on a monthly basis since we returned the company to them in 2008 and they have been doing that diligently. They provide us with names and amount of claims they have settled.
Local content law
The Nigerian Content Law is one of the windows of opportunities for the insurance industry and l think the industry is appreciative of it. However a law does not automatically confer capacity. The law says 70 per cent of oil and gas be insured locally. Of course what was imputed in that is to say subject to capacity.
We will determine what each and every company can safely take. I must tell you that there are situations where the insurance industry can take 100 per cent of a particular risk and in such situation we do not limit ourselves to 70 per cent because we do insist that we have the capacity to such risk 100 per cent.
But if we have a situation where the value at risk is $10billion for instance, it will be fool hardy to insist on the 70 per cent which the law says as the question of capacity will come in because insurance is about risk transfer and there are different tiers of risk transfer- you have the primary, you have the insurance, reinsurance and the retrocessioners.
If a company takes what is within its capacity, the capacity will include what it can retain and what reinsurance facility it has. Whenever a company wants to take any portion of the risk, they will be doing that within the confines of their capacity.
Anything short of that is speculative and as a regulator we owe an obligation to the insured. So if an insurance company takes a risk that we know it cannot absolve, we have a duty to say ‘hey, you cannot take that much.’ It is not good thinking that once a premium is paid there may be no claim.