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‘Insurers must charge appropriate rates to remain in business’


Following the avalench of claims that has beset the insurance sector in recent time, Managing Director of Crystalife Assurance Plc, Mrs. Oluseyi Ifaturoti is of the opinion that any organisation that wants to remain in business must do what is professionally ethical by charging appropriate rate for risks.

Highlights of first half of 2012

The first half of the year started a bit slow because of the way the economy started. And you know that a lot of things in Nigeria are dependent on the budget being signed and it was not signed until after the first quarter of the year. So the entire year started on a very slow motion.

But in the private sector activities were going on, everybody tried to renew their policies. But you know in all intent and purposes, the government contributes about 50 per cent of our business, so if the government is not spending, we feel it and if the government has not renewed their businesses, we feel it.

For us in Crystalife, a lot of the government businesses did not get renewed effectively and so it didn’t look too good. Hopefully before the half year is concluded, we believe that most of them will renew their policy. With all the claims occurring now, for instance the Dana air crash, a lot of victims belong to one government sector or the other.

For some of them their policies have been renewed, for some their policies have not been renewed but lives have been lost. Ideally people should just ensure that their insurance policies are up and running because nobody knows when disaster will come or may happen.

Also, we had a lot of friendly interaction with our own regulator, the National Insurance Commission, NAICOM, on the issue of the International Financial Reporting Standard, IFRS, about the things that we need to do to ensure that we are complying inline with best practices.  2012 marks the beginning of accounting under IFRS.

In 2011, we were supposed to give year end balances and convert to IFRS so every operator has been trying to work along that line. We are doing so many things, we are trying to put together the ERM platform which is a requirement  even without it being the requirement, every body is trying to work in line with best practices, because it sometime that we are all trying to ensure that we put on ground.

A lot of other institutions are undergoing changes as there has been some consolidation, buy-overs in the industry, majority shareholding in some companies and some that are bank related have had new shareholders coming on. It’s been okay all in all, every body has been up and doing.

One thing about our industry is that we are always up and doing because you can not afford not to comply, mobilize business or not to ensure that your premiums are collected   because you need to have the premium to enable you pay your claims.

And of course a lot of organisations are tiding up their year end, some have done their AGMs, some are in the process of doing it. So basically that has been it and by the end of the month we should be having the Nigerian Insurers Association, NIA, AGM where it is expected that we will usher in a new chairman for NIA.

But yes, there have been heavy claims for us in the first half of the year. The claims have been huge and everybody has been complaining. That brings us back to what we need to do as operators because how much you charge is also a function of your experience.

When the 9/11  happened, insurers in so many parts of the world edged up their rates because when there is a huge disaster, the effect of that is that rates would be rationalized again and reviewed  and it would go up for the insurance industry to be in a position to continue to pay claims.

One thing that we have experienced in the Nigerian insurance sector is huge claims because a lot of us cover the police and they have been in the forefront of the Boko Haram attacks. Some even die and there was an accidental crash of a helicopter.

Dana is another huge claim on this industry, there is property damage, loss of human lives and of course we have nothing less than 20 lives of those that are insured by virtue of them being part of one government organisati
on or the other. We don’t want to call it a gloomy picture but it has not been a fantastic first half of the year for us but we have been living up to the settlement of claims which is our core priority.

In the first half also, we try to put up the retail end which is one that has been foot-dragging and we have been doing a lot of research and we have been trying to enhance the visibility of our organisation to concisely put the idea of insurance in the minds of the people on the import of taking one form of insurance policy or the other.

How do you explain it, a man sitting in his own house, did not go to the airport, did not go to Abuja, did not plan to enter an aircraft but he suffered loss as a result of an air crash. So it just goes to show that you cannot sit down and totally imagine where a disaster can happen from.

We believe that we are a praying nation, and we will continue to pray, however, we should also make sure that we have the adequate insurance at least to take care of the financial stress even if you cannot handle the emotional aspect. And when the financial stress is taken care of it also reduces the emotional stress.

Conversion to IFRS

Conversion to the International Financial Reporting Standard, IFRS, may be expensive but it is good because it is tending towards best practice, towards good exposure, towards a lot of integrity and transparency. And it will grant comfort and confident to foreign investors or anybody.

Any nation will be happy to have direct foreign investment here but one of the things that will stand in the way is interpretation of financial results when they are not sure. Because what IFRS does is to put every financial result on the same page anywhere you go in this world.

This is a standard, if for any reason you are saying this is this, you will explain and give the reason why it is that. So it leaves nothing to imagination. And for us, yes it may be a bitter pill to swallow but it is good. The public will be confident, your shareholders, policyholders are comfortable because they can read and know that it is the truth and the issue of creative accounting is gone for good with that.

Everything is brought to book and you have to give explanations for the whole load of things and those standards are there to ensure transparency and full disclosure of the issue as they are. So Nigeria has done well to fall in into the list.

For us at CrystaLife, we have finished our conversion; we have started sending our report to NIACOM. Our first quarter report was sent in line with IFRS. So we are at home. A regulator will not just come out with anything, they have seen that it is the best for the market and those of you that embrace it will enjoy.

All of the things that we are enjoying in Crystalife today are because we have done things well. When they said raise capital, we raised real capital and we are happy for it. When the capital market came and swallowed people up we still had things to fall back on and by the special grace of God, we are still running our business.

We have written off some diminution because of the loss in the market but we are still over and above the minimum capital and we are better and stronger. Everything we say we are is what we are. We are comfortable and confident.

When a foundation is faulty issues will be there, when the claims come, there will be issues. But here when the claims come we pay. The only thing we need to do now, from experience is to review the rates that we are charging on some of the policies because the claims have been immense.

If we do not review and charge according to the risk in Nigeria because everywhere has suddenly gone riskier, the life has suddenly gone riskier, property everything has suddenly become riskier so the rates we charge have got to be reviewed according to our experience on all of the risk that we are writing.

Appropriate pricing of risk

With the incidence of claims that we are experiencing, any organisation now that wants to remain in business must do what is professionally ethical. You must charge appropriately. We are underwriters, we are not meant to charge premium and go to be praying that claims will not happen.

We should charge according to the risk that we are carrying. After assessing the risk, we should determine the appropriate premium commensurate with the risk that we are carrying. Claims are real; you need to do something about it so that your bottom-line will remain active because the percentage of claims to what you write is a percentage of underwriting.

Your underwriting result at the end of the day is a function of how well you underwrite. What is the job of a prudent underwriter? It is to evaluate a risk and to determine whether to take it or not. And if you will take it, at what price will you charge?  And that price depends on the severity of that risk when it occurs and the possibility as well as the frequency in which it will occur, those are the things that the underwriter should take into consideration.

In Crystalife, we are reviewing and that is it. A lot of risks come and we look at it and if the person is insisting that this is not it, we let it be. Some of them have come back to say, ok you can have it at your rate, some have gone but we are still here. We wouldn’t take things that will wipe us off the economic landscape of Nigeria or wipe us off the corporate landscape of Nigeria.


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