Stories by Rosemary Onuoha

The National Insurance Commission, NAICOM, said that the current Transformation Agenda is offering the insurance industry the opportunity to readjust its governance, operational structures and leverage on the interest and support provided in the policy direction of the Commission.

Director, Inspectorate of NAICOM, Mr. Barineka Thompson who made the assertion stated that it is expected that companies will begin to review their strategic business and operating models, overhaul product portfolios and distribution strategy, enhance ICT capability and other elements that can stimulate the growth of their overall business.

According to Thompson, the pillars of NAICOM’s strategy have been to deepen insurance penetration; strengthen insurance institutions through effective regulatory framework; improve communication with all stakeholders to ensure transparency, public trust and confidence; transform the commission’s processes, people and systems, and optimize revenue collection and effective management of assets.

While its regulatory and supervisory practice was subjected to an IMF/World FSA Preview in 2013, NAICOM has commenced action to address identified gaps in the areas of solvency framework, accounting and auditing practices in the industry, viability of insurance companies, enforcement of compulsory insurance, long term investment instruments for annuities, consumer protection and industry tax challenges.

The changing face of regulation

Thompson said that on-going initiatives include on-going transition to risk-based supervision; enhancement of solvency management framework including consideration of Solvency II equivalence and early warning system; review and consolidation of insurance laws; adoption of uniform financial reporting template for insurance reporting; consolidation of guidelines issued by the Commission; issuance of licence to applicants for microinsurance and takaful insurance; development of regulatory capacity on microinsurance, takaful and risk based supervision; as well as ring-fencing of assets covering policyholders’ funds.

Others are review of investment guidelines to facilitate allocation of insurance and shareholders’ funds to infrastructure and mortgages; issuance of market conduct guidelines; implementation of on-going strategic objectives of the Commission; risk management approach; market conduct and consumer protection; aggressive publicity strategy; group wide supervision; digital transformation; restructuring of intermediaries and distribution channels; claims dispute resolution mechanism – response of insurance companies, conflict resolution, use of Ombudsman, NAICOM complaint bureau.

Complaint bureau

On risk management approach, NAICOM stated that the primary purpose of the RM regime is the protection of policyholders and beneficiaries while additional objectives are; to align capital requirements with the underlying risks of an insurer; to develop a proportionate, risk-based approach to supervision with appropriate treatment both for small insurers and large, crossborder groups; to provide incentives to insurers to adopt more sophisticated risk monitoring and risk management tools – this would include developing full and partial internal capital models and increased use of risk mitigation and risk transfer tools; as well as to maintain financial stability.

Accordingly, insurers will be required to have:- a robust risk management culture and practice; an effective internal control mechanism; good governance system; transparent reporting systems and disclosures; an efficient IT and processes platforms for improved operational efficiency and low cost operations; NAICOM will adopt appropriate supervisory tools to be much more willing to intervene in management/board governance matters and use predictive analysis tools to monitor forward solvency positions.

on market conduct and consumer protection, NAICOM said that solvency has been the primary focus of insurance supervisors for many years, particularly post the global financial crisis, as such policymakers are now beginning to place a greater focus on market conduct issues. New structures are being established to develop standards and best practices in consumer protection by NAICOM. Focus is on: product design, renewal pricing and governance; conflicts of interest; disclosure, privacy protection; complaints handling; dispute resolution, and ‘fair treatment of customers’.

On intermediaries and distribution network, NAICOM stated that there is restructuring of brokers into individual brokers; universal brokers; and partnership brokers; while there is restructuring of insurance agency into individual agent; corporate agent; insurance company agent; microinsurance agent; web aggregators as well as referral (bancassurance).

Setting the tune for 2016-2020 roadmap

NAICOM said that there is completion of on-going regulatory reforms; collaborate with all stakeholders in the implementation of outcomes from 2014 Insurance Summit; adopting best practice and international supervision standards; as well as adapting lessons learnt from other markets and industry reforms.

According to Barineka, NAICOM will remain focused on the issues relevant to the protection of policyholders, growth of the insurance sector and promote financial stability, adding that insurers must keep pace with evolving regulations, which are becoming more stringent, affecting everything from capital requirements, to commission rates and customer care.