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Group life: Private sector earnings sustain insurers as public sector fails

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…Revenue up by 47% as private sector reawakens to insurance

By Rosemary Onuoha

FOLLOWING the failure of public sector group life business segment in their income portfolio, insurance companies may have created a bigger income stream in their group life policy in the private sector.

Reports of some companies that have so far submitted their 2019 half year, H1’19, results to the Nigerian Stock Exchange, NSE, show that Gross Premium Written, GPW, grew by 24.1 percent to N115.2 billion against N92.8 billion recorded in the corresponding period of last year.

Cornerstone Insurance records N11.5 bn Gross Written Premium in 2018(Opens in a new browser tab)

Group life insurance on the other hand, went up by 47.7 percent to N31.6 billion from N21.4 billion of the corresponding period of last year.

This came against the backdrop of the Federal Government’s refusal to renew the group life cover for civil servants in the last two years. But the development also gives credence to the premium regime ordered by the  National Insurance Commission, NAICOM, last year which increased the rates charged by insurers for group life cover.

Industry players told Financial Vanguard that despite the Federal Government’s indifference towards insurance, there is a gradual reawakening on the importance of insurance on the part of the private sector.

They argue that if insurance companies can charge appropriate rates for all insurance products, especially motor insurance, the industry will witness astronomical increase in GPW in the next two years.

According to the industry operators, the sector is witnessing increased turnover from the private sector after NAICOM increased the premium rate for group life in 2018, which has now become visible in their H1’19 bottomline.

It will be recalled that as part of efforts to curb the increasing challenge of rating in the sector, NAICOM in 2018 issued a circular on rates and directed that insurance companies must adhere to the rates henceforth. Companies were forced to comply particularly with the group life rating after years of arbitrary and indiscriminate pricing, and defaulters were heavily sanctioned by the regulator.

Although insurance operators initially protested the move, demanding that NAICOM should give operators some time to sensitize the public on the new rates, NAICOM insisted on immediate implementation.

While advocating for extension of time, former President of the Nigerian Council of Registered Insurance Brokers, NCRIB, Mrs. Laide Osijo, said that the new rates will benefit the industry but added, however, that implementation should be deferred so that the customers will be adequately sensitized.

Osijo said: “Most Federal Government agencies, parastatals, and even corporate organisations have already made their budget for the year. Hence it could be difficult, especially for government, to pay the new rates.”

Acting Commissioner for Insurance, Mr. Sunday Thomas, said that while the protest lasted, some companies in their ingenuity, fashioned ways of giving out discounts for group life covers, but the regulator detected all of that and such companies were sanctioned accordingly.

Operators’ performance

Analysis of top industry players in the sector shows that Lasaco Assurance recorded the highest margin in group life income, skyrocketing by a whopping 114.3 percent to N4.5 billion from N2.1 billion. However, GPW grew by 11.3 percent to N6.9 billion against N6.2 billion.

Cornerstone Insurance group life business jumped by  91.7 percent to N2.3 billion against N1.2 billion while GPW climbed by 8.5 percent to N7.7 billion against N7.1 billion.

Axa Mansard Insurance group life business increased by 63.3 percent to N4.9 billion against N3.0 billion while GPW went up by 20 percent to N20.4 billion against N17 billion.

AIICO Insurance group life business climbed by 26.5 percent to N14.8 billion against N11.7 billion, while GPW went up by 31.6 percent to N25.4 billion against N19.3 billion.

Mutual Benefits Assurance group life business increased by 23.5 percent to N4.2 billion against N3.4 billion while GPW went up by 9.1 percent to N9.6 billion against N8.8 billion.

Operators, regulators react

Adequate premium pricing, according to operators, will not only boost premium income in the sector but will deepen capacity of insurers to retain and underwrite high ticket risks.

Speaking on the development recently, Chairman of Cornerstone Insurance, Mr. Segun Adebanji said: “Our entire life insurance portfolio recorded an impressive growth and this growth was driven by regulatory changes to group life insurance pricing limits.”

Also, Managing Director of AIICO Insurance Plc, Mr. Babatunde Fajemirokun said: “The increase in rates instituted by NAICOM is beginning to flow through in most life insurance departments. There is a lot of improvement on our group life portfolio as at half year 2019.”

Meanwhile, Acting Commissioner for Insurance, Sunday Thomas, stated that the act of granting indiscriminate discounts on premium rate by some companies is part of the reason why the sector is still crawling.

Thomas stated: “A lot of companies are weak because they gave out outrageous premium discounts over the years, hence recapitalization is the only way to salvage the industry.” He  lamented that players in other sectors of the economy cut corners to enhance profit but insurance operators cut corners to the detriment of their income.

He added: “Banks and insurance companies are guilty of flaunting laws sometimes. However, the banks flaunt laws to increase their portfolio, but in our case, we flaunt it to decrease our portfolio. The two are offences but one commits offence to enhance revenue, the other commits offence to reduce revenue and you start to wonder, ‘does it make any sense?’”

Meanwhile, Managing Director of Consolidated Hallmark Insurance, Mr. Eddie Efekoha, blamed the practice of giving ridiculous discounts on the lack of cooperation amongst underwriters in the insurance industry, adding that this has been the bane of the sector for long.

He stated: “The insurance industry lacks cooperation. It is a winner takes it all type of industry and that is what we promote. That is why you will see companies’ reducing premium by 50 percent in order for them to carry the risk 100 percent. Meanwhile they could as well have charged the old premium, which is higher, and take like 50 percent of the risk and let other companies’ share 50 percent.

Recapitalisation: NAICOM vows to checkmate injection of illicit funds(Opens in a new browser tab)

“The industry could have been better with a higher premium rate but what do we do, we reduce premium by 50 percent because we want to take the whole business. Insurance is not practiced that way.”

According to him, the industry needs to increase the level of trust the public has in the insurance sector and this can be done by grooming the upcoming professionals to do insurance in the right way.

He said: “If I tell you that this issue of cooperation is going to be resolved in my time, I am not sure. The issue remains that we can’t find a perfect market. But can it be improved? The answer is yes. How do we address the gap in the level of trust that outsiders have in us? It is not for those of us who want to bow out of the industry soon. It is a case for the young ones, the millennials that are organized. That is why we have been training the millenials to be innovative. When they come up with innovations, they might not produce immediate result but the result will come in the future and at that time, the millennials are the leaders of the industry.

Also speaking, Executive Director of Allianz Nigeria, Mr. Owolabi Salami, said that it is about time that insurance chief executives asked themselves the critical question of where they are missing it. “Why should this industry be N400 billion and not N2 trillion; Where are we missing it?,” Salami queried.

He further stated: “Every management team of every insurance company now needs to build a business case that will justify additional capital and if you can’t assure your shareholders that you can create value for them if they give you more money, I don’t think they will give you.”

Osijo on her part said: “It is a good step in the right direction for the industry because most risks are not priced with commensurate rates; consequently, underwriters find it difficult to pay claims at the end of the day.

“The claims ratio in the industry is so high that the industry needs to do something about it. With the new rating, all the unethical practices by operators will come to an end, because anybody that errs will be sanctioned.”



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