By Rosemary Onuoha
SOME insurance companies will soon lose their hold on government businesses as the federal government is putting modalities in place for a policy mandating Ministries, Departments and Agencies, MDAs, to award their insurance contracts to companies with high risk management models.
Before now, some insurance companies have been getting government businesses merely on strength of their network of personal relationships and lobby without the necessary risk management framework in place.
However, Insurance Vanguard findings show that the trend will soon come to an end, as the purpose of the upcoming guideline is to eliminate all unwholesome practices in the underwriting contract for government’s assets.
Commissioner for Insurance, Alhaji Mohammed Kari, who disclosed this to Insurance Vanguard, on the sidelines of an education seminar organised by the Chartered Insurance Institute of Nigeria, CIIN in Ibadan, noted that the anticipated government policy will focus on risk management capacity for underwriting of government assets.
He stated: “The era when government insurances are awarded to an insurance company based on contact will soon come to an end. This is because government will soon come out with a circular to MDAs on how they will place their insurances and I believe it is going to be based on risk management and risk selection concept.”
Kari said that many companies argue that there is no need for capital injection in their business operation because they are comfortable with just doing government business.
He said, “The argument that we don’t need capital doesn’t hold water. Look at any company giving you that argument; you will realize that it is a government insurer. Many companies are just there because they are doing government business. Government does not look at risk management issues to place business; it is just on contact basis. But going forward, it is going to change.”
Kari however said that insurance consumers are beginning to be skeptical about companies that don’t show strong financial standing, adding, “Insurance consumers are now telling some companies that, ‘I will no longer insure with you because your capital is low.’ It is not because consumers are now selective, which is very good, but because they have realized that it is a factor to confidence in such company because they pay divided and their services are visible.
“But most insurance companies are quoted, yet nobody wants to invest in them because they know that dividends are not being paid for a long time. Even when there are no dividends, they would have been happy to have shares that appreciates because they can always sell in the market and make profit. Unfortunately, some insurance shares on the stock market have continued to depreciate.”