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How official corruption frustrates insurance business

By Patience Saghana
The National Insurance Commission (NAICOM) last month wielded the big stick against UTIB Insurance Br

Fola Daniel
Fola Daniel

okers. The broker was suspended for six months over what regulatory body described as unethical practices involving N314 million premium.

The suspension order was contained in a letter dated August 31, 2009 titled: Suspension of UTIB Insurance Brokers Limited.  The  letter signed by the Deputy Commissioner for Insurance (Technical), Mallam Muhammed Husseini, and sent to all insurance companies in the country through the Nigerian Insurers Association (NIA) states,  “In accordance with the power conferred on the Commission by the provisions of sections 39 and 41 of the Insurance Act 2003, UTIB Insurance Brokers Limited has been suspended from operating and practising insurance broking for the period of six (6) months effective from August 20, 2009.

“This is sequel to the report of an investigation which confirmed that the broker engaged in conduct that is inconsistent with sound insurance practice as indicated hereunder: “As the lead broker for 2008/2009 insurance programme for National Identity Management Commission, the broker received premium for the cover and failed to disburse the amount in whole to the underwriters within 30 days as required by the provision of Section 41 of Insurance Act’ The broker granted rebate/discount on commission due to it and led other brokers and the underwriting co-insurers to forgo outstanding premium due to them on the insurance programme.

“The broker also failed to effectively disseminate information about the changes in the period of cover to other participating brokers and the co-insurers”.

At this juncture, the Commission warned insurance companies against doing business with the broker in the next six months saying: “You are advised to avoid engaging in any transactions with the broker during the period of suspension”.

Vanguard investigation has, however, revealed that the position of NAICOM did not reveal all that transpired concerning the business. It was gathered that the misfortune of the broking firm was due to official corruption, a factor which over the years, has made government insurance business frustrating to insurance operators.

Though the Commission said the broker was guilty of withholding the premium due to it thus delayed premium due to the 11 insurance companies on the account.

Vanguard investigation revealed that  about half of the N314 million premium collected by UTIB was spent on  “Public Relations” i.e.  To gratify  government officials involved in the transaction, a term which refers to money given to government officials to facilitate access to government business. But in order to save top government functionaries from being embarrassed, NAICOM decided to ignore the other side of the deal thus trying to protect the integrity of the government of which he is an employee and the honour of insurance industry that the commission is entrust to protect.

This development, according to insurance operators,  reflect the challenge of official corruption to insurance business in the country.  They said  that besides the  problem of negative image and other problems besetting the growth of the industry, official corruption is a major impediment to the growth of the sector. There is so much corruption in government institutions that you can’t do business without doing “Public Relations” that is giving gratification. If you do not do it, you would lose the business to other operators who are willing to do it.

The issue of ethics in public sector (and in private sector) covers a broad range, including a strain on the obedience to authority, on the obligation of logic in moral reasoning, and on the necessity of putting moral judgment into practice. Unfortunately, many officeholders in Nigeria, appointed or elected, do not have clear conceptions of the ethical demands of their position. Even as corrupt practices are going off the roof, little attention, if any, is being given to Codes of Ethics and Good Corporate Governance.

Vanguard investigation further revealed that the prevalence of rate cutting and discounting in the insurance industry is occasioned by the challenge of official corruption. The reduction in rate or the discount given represents money given to government official as “Public Relations.” This practice is aggravated by the little or no commitment to ethical practice in the industry thus exposing insurance companies and their chief executives to the sledge hammer of NAICOM.

The fact that corruption has received an extensive attention in business communities, perhaps, due to the fact that it has been over-flogged in the business circles, makes it almost a legal tender if any company must get business from government agencies and sensing that corruption or corrupt behaviour involves the violation of established rules for personal gain and profit, insurance companies are left at the liberty of those bureaucracy which encompasses all ranks and files in government institutions
Mr. Fola Daniel, Commissioner for Insurance and the NAICOM boss blamed unethical practices for the under performance of the industry vis-a-vis annual premium generated by insurance companies. He said: “The insurance industry should generate five times the premium they recorded in 2008. With a market capitalisation of over N500 billion, the industry should generate five times the premium of the capital but we are not doing that.”

“The 2007 figure available to us indicated that insurance industry generated N120 billion premium from N500 billion which is a huge deficit. It is an indication that we are under utilizing the capital made available to us. One would have expected that there should be huge enhancement in the industry’s premium income from the 51 companies.”

Insurance industry premium income grew from N21.39 billion in 1999 to N27.67 billion in 2000; rose to N33.12 billion in 2001 to N44.5 billion in 2002. The industry in 2003 recorded a gross premium income of N55.94 billion which again increased to N69.41 billion in 2004 and to N76.32 billion in 2005. In 2006, insurance companies operating in this country announced a gross income of N82.29 billion to N100.62 billion in 2007 and N164.51 billion in 2008.

Operators however told Vanguard that the sector would have done far greater if not for rate cutting and other sweeten terminologies to cover the expenses on the cankerworms of corruption otherwise known as public relation.

But the Commissioner had warned that the regulatory body would not spare any company that is reported to him on unethical grounds. He confessed, “The relevance of ethic and integrity to insurance business cannot be emphasised.

Where they exist, it breeds trust, confidence and creates a boost in business generation. The non-existence of these virtues amongst some practitioners has helped in giving the industry a negative image. We cannot continue in this path any longer. There must be a change of attitude and behaviour amongst practitioners. We cannot continue to do the same thing all the time and expect a different result”

Insurance Commissioner at the 2009 Professionals Forum of the Chartered Insurance Institute of Nigeria (CIIN) held at Ijebu-Ode said, “In all these, operators must key in to discipline and professionalism. The Nigerian populace are looking up to insurance industry as an important bastion of security in the face of collapse being witnessed in other financial services sector. We must not be an harbinger of corruption and improper dealings”.

He emphasised, “For those who will continue to relate as if anything and everything is possible, let me warn that NAICOM will deal decisively with aberration and will also collaborate actively with regulatory and security agencies to curb market misbehaviour”.


Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.