The National Insurance Commission (NAICOM) inaugurated the advisory committee on divestment of banks from insurance institutions on Monday.

The chairman is Lanre Laoshe while the members are Chioma Agomo; Mohammed Kari; Segun Aina; Mary Uduk; Sunday Thomas, George Onekhena and Jide Oniwinde. Mr. Fola Daniel, Commissioner for Insurance spoke to journalists on the duties of the committee. ROSEMARY ONUOHA was there

Why the inauguration

By inaugurating the advisory committee on divestment of banks from insurance institutions, we want to engender a continuing confidence of the populace on the insurance institutions. We cannot wish away the banking participation because it has its merits. Aside from the merits it also has its own defaults.

One of the merits is that some people will insure with an insurance company because it is owned or partly owned by a bank. But if the bank is divesting, they begin to say, ‘can this insurance institution stand’. That is why it is very important for us to ensure that only worthy investors are taking over the vacuums created by the exit of banks. So we need to sustain customer confidence, which is very important.

Fola Daniel

Other risks that you perceive

You know about the anti money laundering law, so there is a risk with somebody coming with so much money from wherever and he wants a place to invest it, these are not the kind of investors that we are looking for. Insurance profession is the only business where you are required to practice under the principle of utmost good faith. In all other businesses, even in newspaper houses, if I have a contract with you, I am required as a customer to be aware, in other words let the buyer be aware. Under the insurance business, there must be a principle of utmost good faith. This utmost good faith is more on the side of the insurance company. So it is very important that the owners of insurance companies must be people of integrity and not people who can add monetary value by bringing money to invest but people who that can engender confidence in the company.

Worry regarding banks’ divestment

It is true that the banking industry added some value to the insurance sector, but the practice of banking is completely different from the practice of insurance. I don’t know of any vibrancy from the banks because I am aware of a lot of public complaints that the banks are compelling them to deal with a particular insurance company. But people must not be compelled. People must see reason why they are insuring with insurer A and not B and it should be driven by the kind of service particularly after sales service and claims payment and not just because they are borrowing money from a bank. If you borrow money from a bank and you are still compelled to insure, primarily you are still going to pay back the money anyway.

So that is not what drives insurance marketing. Insurance marketing as is done in places like UK is that you can see transparent value because you can see what you want to buy, so you are persuaded of your own. You can take a mortgage loan from a particular bank in UK and not insure the building with them.

So they must provide genuine reason for using their insurance service in addition to the banking service, and not by compulsion.

The emergence of a new industry after banks’ divestment

I see a stronger insurance industry emerging because this divestment is not just open to local business people. International guys have been making enquires that they want to come into the Nigerian market.

Nigeria depict a potentially large insurance market on account of our population. With a population of about 150 million, at least the raw material for selling insurance for insurance to thrive really is the population which we have in abundance. So Nigeria is a good insurance destination. So we have been having enquiries from foreign investors who want to invest.

And in the last two years, I have been inundated with requests from foreign investors who want to do business here and I have been saying to them, no there are too many insurance companies as far as I am concern, judging by the level of insurance activities.

And that they should rather come and invest in an existing company. So this is an opportunity for them to realise their goal of being part of the Nigerian insurance market by investing or taking over or buying over an existing insurance company.

Bank’s holding company structure

The holding company arrangement is one of the options given by the Central Bank of Nigeria (CBN), but it is not clear cut yet. I know two banks that are looking at this holding company arrangement but they don’t even know how it will play out. So, it a shot in the dark, that is why it is important for us to have this committee to look at all these options. So if any banking institution wants to go the holding company way, we can provide guidance based on experience here and elsewhere. That is why I called it a shot in the dark.

Even the banks that are telling you that they want to exercise these options, can’t give a clear cut destination of what it is all about. So it is an experiment. The author of this holding company is the CBN, so I think the central bank will have a clear understanding of what it is. The recipient, the banking industry that have received this directive, don’t seem to understand it very well. But that may not be a serious problem.

They still have one year to go, so there is enough time to navigate, understand and make it work well. What is important to me as a regulator is that divestment from these insurance institutions should not leave the company dead or dying.