Stories by Nkiruka Nnorom
Shareholders in the nation’s capital market have decried poor return-on-investment from insurance companies and called on the National Insurance Commission (NAICOM) to implement changes that will guaranty them better returns.
They also decried low level insurance penetration in the country and its contribution to the Gross Domestic Product (GDP), which is reflected in the prices of the shares of insurance stocks listed on the Nigerian Stock Exchange (NSE).
The shareholders under the aegis of Progressive Shareholders Association of Nigeria (PSAN) called on NAICOM to desist from over-regulating the sector, but rather focus on implementing aggressive expansionary policies that would increase the sector’s penetration.
In a document titled: “Shareholders Concerns on Growth and Insurance Penetration and its Regulation by NAICOM” signed by the association’s president, Mr. Boniface Okezie, they pointed out that the amended company income tax act 2007 is punitive to insurance companies, saying that provision for unexpired risks (Section14(8)(9) ‘and provision for other reserves, claims and outgoings, section 14(8)(b) are restricted.
Okezie said: “While we agree that sanity is required, it shall not be at the expense of growth. The reality is growth comes at a risk. The key objective in regulation is to understand these risks and manage them. It also means developing policies to allow insurers to meet the needs of various customer groups.
“We believe in effective enforcement policies, policies to stop rate-cutting, policies to allow various payment frequencies. For instance, monthly premium payment, stricter enforcement of the law on no premium no cover for brokers. NAICOM should stop the levying long term business and look for other ways to generate healthy income.” Declaring that the shareholders require return-on-investment and performance, Okezie charged the new leadership of NAICOM to change some ridiculous rules that are not friendly to the shareholders in the industry.
Citing examples of some of the rules, he said: “Despite the insignificance of profit before tax (PBT) of insurance companies in comparison to the banks, the minimum tax payable by both is comparable. In reality, it shows lack of understanding of insurance business.
“The company income tax (CIT) limits unearned premium reserve. Claims paid are management expenses, all of which are reasonably incurred in the insurance ordinary course of business. Therefore, insurance companies are penalized when paying claims. Ordinarily, these expenses should be considered as cost of sales and treated as allowable expenses.”