The National Insurance Commission (NAICOM) said on Sunday that insurance companies would be given six months to clear their outstanding premium.
The Commissioner for Insurance, Mr Fola Daniel, made this known in an interview with the News Agency of Nigeria (NAN) in Abuja.
He said that the huge outstanding premium was a problem self inflicted on the industry by practitioners.
â€œThis huge outstanding premium is a problem that is self inflicted by practitioners. If we continue to hold them and they continue to hatch them, one day, some insurance entities will not be able to pay a claim of N1 million. So we donâ€™t have a choice. In fact, allowing 12 months outstanding premium is unnecessary indulgence.
If we continue as a regulator, we will be culpable and it will collapse because you cannot pay claims with debt, but cash. So for 2010, they will not have the luxury of 12 months, it will be six months,â€™â€™ he said.
He said that insurance companies should ensure that they operate according to the dictates of the law as the commission would ensure sanction on any misconduct.
He said that countries like Kenya and India that practiced â€œno premium no coverâ€ never witnessed huge outstanding premium.
Daniel said that while analysing some of the audited account of insurance companies, it was observed that more than what they had as premium was outstanding premium.
â€œIn 2008, analysing the 2007 account, we saw that in many insurance audited account of about N2bn premium, one out of the two billion supposedly written was outstanding premium. In fact, there is one company which we are looking into seriously now; their 2007 account of more than 85 per cent was outstanding premium.
Daniel said that efforts were on the way to ensure that the industry attained its goals and contributed effectively to the growth of the economy, pointing out that there was no need for insurance brokers to panic over the issue of capital base.
â€œI have read that brokers are told to have a capital base of N1bn, even the brokers said that to me. I was part of the body that reviewed the Insurance Act and all that has been done is an administrative proposal, it is not into law yet, so the hype of N100m is unfortunate and premature. There isnâ€™t a law to that effect what we have is an administrative proposal,â€™â€™ he said.
According to him, the proposal has not been studied by the minister.
â€œIf they study it when the panel sits, they will not take everything hook, line and sinker, they will look at the merit and demerit and take informed decision. The proposal is still in the ministry, they have not set a panel to review and come out with a white paper,â€™â€™ he added.
Daniel added that even if the ministry accepts the proposal, it would still go to the Ministry of Justice to ensure that it works according to the dictates of the Constitution.
He added that due process would be followed to ensure that the right thing was done. â€œSo I think the issue of N100 million or not is unnecessary because there will be due process.
â€œIt is not a military period where when you send a proposal to the supreme council then it becomes a law the next day.
â€œI think the minister is not denying, but what he is saying is that he has the proposal but has not gone through it yet,â€™â€™ he said.ï»¿