…Brokers legal team appraises policy

THERE are indications that the State Insurance Producers, SIP, initiative billed to commence from January next year, could face stiff opposition as insurance operators, especially brokers, said the scheme could edge them out of business in the states.

A SIP is a state government agency licensed by the National Insurance Commission, NAICOM, to provide intermediary insurance services in a particular state.

Although NAICOM, said the SIP business model will bring about 200 to 300 percent insurance penetration in two years, the operators argue that the initiative will increase the revenue base of state governments to the detriment of the insurance brokers.

The industry operators argue that many states have insurance brokers, however, if the initiative is implemented, the states could replace the brokers with the SIPs.

They also argue the states could even go further to compel their parastatals and agencies to do business with only the state SIP.

The SIP: NAICOM released the guidelines for State Insurance Producer (SIP) business which is expected to commence January 1, 2019. The SIP, according to NAICOM, is an alternative channel for insurance distribution.

Commissioner for Insurance, Mohammed Kari, explained that SIPs would be agencies of state governments licensed by NAICOM to provide intermediary services as defined by the guideline issued by the Commission and also be remunerated by the provisions of the operational guideline.

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Power to penalise


Kari stated: “The key responsibilities of the SIP include: facilitating the sale of the compulsory classes of insurance within the state jurisdiction and all classes for its principal’s insurances (state government); exercising on defaulters the power to penalise them according to the laws of the states; maintaining proper records of individuals and organisations bound by the requirements of the compulsory classes of insurance and monitoring the compliance.

‘‘Once licensed to operate by the Commission, the SIP shall enter into a Memorandum of Understanding as may be sanctioned by NAICOM, with approved insurance companies in its jurisdiction for purposes of placement and management of insurance business within the state’’.

NAICOM, in the guidelines stated that there will be an undertaken signed by an officer of the state government not below the rank of a Permanent Secretary that the state undertakes and agree that the sum N2,000,000.00 shall be deducted from accrued commission to be earned by the Licensed State Insurance Producer (SIP) before payment of commission is made to the coffers of the government.

NAICOM added that SIPs shall maintain a separate insurance unit or department for proper monitoring of the activities of the agency with the Insurance Officer reporting directly to the Chief Executive Officer of the licensed agency.

“The State Insurance Producer shall only transact insurance business with these approved insurers, which list shall be approved from time to time by the Commission,” it said.



An insurance practitioner that spoke on condition of anonymity said that the law allows NAICOM to license individuals or corporate outfits and not state governments to carry out insurance intermediation.

He said, “You cannot rise up one day and give license to state governments to act as insurance intermediary. The law allows individuals and corporates. The state is not listed under the Insurance Act 2003 that they can do so. NAICOM has no legal backing to register SIP.

“Recall that section 49 (1) of NAICOM Act 1997, states that ‘In addition to any of its powers under this Decree, the Commission may, (a) require any person having access thereto, at all reasonable times, to supply, in such forms as the Commission may, from time to time, direct information relating to or touching or concerning matters affecting the insurance industry in Nigeria; and (b) issue guidelines to insurance institutions.

“Section 34 (1) of the Insurance Act 2003 also states that, ‘No person shall transact business as an insurance agent unless he – (a) possesses a certificate of proficiency issued in the name of the individual applicant by the Chartered Insurance Institute of Nigeria; (b) is duly appointed by an insurer and licensed in that behalf under this Act.

“(2) An application for a license as an insurance agent shall be made to the Commission in the prescribed form and be accompanied by the prescribed fee and such other documents as prescribed, from time to time. (3) If the Commission is satisfied that the applicant has satisfied the requirements of this section or such other requirements as may be prescribed, it shall licence the applicant as an insurance agent.



“In essence, according to insurance laws, NAICOM can fast-track deepening of insurance penetration in Nigeria by encouraging state governments to commence enforcement of compulsory insurances, however, they cannot make them insurance agents.

“State government is not an individual that can go to the Chartered Insurance Institute for proficiency course. They are not corporate entities like insurance brokers that have insurance qualifications and are duly registered under the Nigerian Council of Registered Insurance Brokers, NCRIB, Act. The CIIN and the NCRIB are the two arms of agency that the law recognizes.

“The states are supposed to be enablers and NAICOM as a regulator is supposed to use all their powers to make sure compulsory insurances are enforced. They have no right to issue them with license.

“NAICOM said that the SIP shall maintain a separate insurance unit or department with an insurance officer, but the question is, will the SIP be registered in the insurance officer’s name or under the state government? As long as it will be registered under the state government, it is null and void. NAICOM cannot do that because there is no provision for it under the Insurance Act.

“If the states do what NAICOM is proposing under the SIP, it will fall under internally generated revenue of state governments. As time goes on, the states could compel all parastatals and agencies in their domain to insure with them.

They could even mandate individuals in the state to carry out all insurance transactions with the SIP before they can have access to state services. They could insist that individuals must insure their cars through the SIP. So in the long run, they will not concentrate on compulsory insurances alone, but will extend it further and you know what that means to professionals.”



Also speaking on the development, Managing Director of Boof Insurance Brokers, Mr. Olumide Fatogun, said that NAICOM should create policies that are favourable to all.

He stated: “NAICOM needs to sit down with operators on issues like this. They need to get the views of stakeholders before they come up with a policy that looks draconian.”

Fatogun said that states have been dealing with insurance brokers without having an intermediary agency. “A lot of states deal with insurance brokers in the past, but they don’t have insurance intermediaries.

“Government has no business in business. If the environment is very conducive, people will embrace compulsory insurance. You can’t legislate for example that a state should have a bank because you want people to do banking.  That is what NAICOM is trying to do by legislating that the state should run an insurance agency. Should NAICOM legislate it? A situation where some states have not even paid salary how are they going to do insurance? How many of them have done pension? Most of them have no pension plan as they have not joined the pension scheme. And now you legislate that they can have SIP for insurance penetration, how can that be?

“For insurance penetration to increase there should be enabling environment for businesses to thrive and for people to be able to embrace it. A lot of some states that take up insurance don’t even pay premium. And now you want them to get involved in getting people to take up insurance’’?

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legal team

An inside source in the Nigerian Council of Registered Insurance Brokers, NCRIB, told Insurance Vanguard that the Management Committee of the Council held an emergency meeting last Wednesday to discuss the SIP guideline as well as other issues and the Legal Committee was subsequently mandated to study the guideline and come up with recommendations.

Consequently, attempts to get the Executives of the NCRIB to comment on the position of the body on SIP failed as they insisted that Vanguard Insurance should wait until a common position of the body is formed which would be made public as soon as the Committee finishes work on the guideline.


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