Tunnel is a symbolic object in the popular proverb ‘There is light at the end of the tunnel’ used a lot to breed courage in an individual to aspire irrespective of the current challenges.
But there have been instances where the end of the tunnel is not in sight or even at the end of it, instead of light, it was darkness.
The exclusion of the Consolidated Insurance Bill 2020 from the list of 15 bills passed last week to President Muhammadu Buhari for assent, nine days into the end of his administration means that, there is no light in sight at the end of the tunnel for that passage of the Insurance Bill into law.
This development followed the earlier aborted ones in 2010 and 2014, in which great efforts were put into the review by relevant insurance stakeholders, got to the Ministry of Finance to Ministry of Justice and waited for presidential approval but it wasn’t to be. In the end, all the efforts were wasted as noting concrete came out of it to the disappointed of market observers who believe the current 2003 Insurance Act, 20 years down the line, is too obsolete to take the industry to its next phase of development.
However, the implication of non-passage into law, is grave because the sector will need to embark on another fresh process with the new set of lawmakers making the 10th National Assembly.
And as it stands, it seems there is no light at the end of the tunnel of this bill, unless miracle, which sometimes happen, happens.
Although, insurance operators had high hopes that the bill would definitely be signed into law against all odds, events in the last few days may have dashed that hope.
This is because the industry operators and stakeholders who were hopeful that the Muhammadu Buhari-led administration will sign the long expected bill into law before leaving office, had come to realise that it is now mission impossible, less than 10 days to the inauguration of a new administration.
This has remained a source of concern for experts who strongly believe the bill, if signed into law, will better the lot of insurance industry well and position it for growth.
Although, in recent time, the sector seems to be growing at a snail speed, it slowness in growth is attributed to lot of challenges which experts said, could be addressed if the Insurance Act 2003 is repealed.
Insurance Act 2003: Need For Amendment
The 20- year- old Insurance Act 2003 deserves amendment. The business dynamics and operating environments have so much changed, especially, post COVID-19, which demands that the old template of underwriting be reviewed and updated.
Like the aborted reviews, recapitalisation exercise has been aborted three times in the last seven years, of which the Consolidated Insurance Bills could have addressed, as it has taken care of what constitutes capital for the next phase of recapitalisation exercise.
Similarly, the issue on enforcement of insurance laws are appropriately spelt out, the regulatory body is more armed to carry out its responsibilities diligently and effectively while there are heavy sanctions for defaulters in the consolidated bills 2020.
The call for review of Insurance Act can be dated back to 2008 following economic recession which significantly presented among others, the need for amendment.
Interestingly, within the period the Federal Government through the Federal Ministry of Finance set up a Prof.Joe Irukwu led committee to review all insurance laws and as well pursue amendment of stale laws that is the 2008 Insurance Bill. Unfortunately this bill did not see the light of the day.
Similarly, in 2016, Kemi Adeosun, then minister for finance inaugurated an insurance review committee chaired by Dr Omogbai Omo-Ebo, which was saddled with the responsibility of reviewing all insurance existing laws, market problems and making recommendations that will form basis for the amendment draft for Insurance Bill 2018. This bill yet, was not signed into law.
Unarguably, the Consolidated Insurance Bill 2020, which has remained source of hope for the industry, is still trading the same part of earlier ones. History has repeated itself again.
Thus, for the past 20 years, the regulatory law of the risk bearing industry has not been successfully reviewed nor amended. No doubt, so much time, energy and resources were put into the review exercise done for the aborted 2008, 2016 and now 2020 bills. For stakeholders, this does not augur well for the industry, judging from the fact that the sister industry- pension sector- has successfully reviewed its 2004 Pension Reforms Act in 2014 and it’s preparing for another review that may be done this year or in 2024.
Consolidated Insurance Bill 2020: Issues To Address
NATIONAL ECONOMY, however, learnt that the bill is proposing heavy punitive measures against insurance evaders, in a bid to increase insurance penetration and enforcement in the country.
The Consolidated bill, which was a review of the Insurance Act 2003, seek to also prosecute any individual or institution operating with fake insurance covers, while any fake insurer caught, will face the wrath of the law.
Moreover, the bill also increase the supervisory power of the National Insurance Commission(NAICOM) to be able to successfully carry out its civic responsibility, while enforcing, especially, the compulsory insurances through collaboration with the law enforcement agencies captured in the new bill.
Investigation also revealed that the insurance brokers are proposing Life licensing period, just like the insurance companies or five years minimum renewal period as opposed to the current annual licensing renewal.
Although, most of the aforementioned issues are already in the current Act, but there were changes to some of the existing sections in a bid to enhance insurance adoption and enforcement in the country.
Moreover, the bill is also expected to make it compelling for state governments to domesticate insurance laws in their respective states, as only Lagos, Ogun, and some few states have domesticated some part of the insurance laws.
The insurances expected to be domesticated by states in the revised insurance bill include; Motor Vehicle (Third Party) Liability Insurance, Builders Liability Insurance (Buildings under construction), Occupiers Liability Insurance on Public Building, Healthcare Professional Liability Insurance and Group Life Insurance.
Such domestication of insurance law will result in increased insurance penetration and premium income for the industry and will also create another veritable source of Internally Generated Revenue (IGR) for the adopting states.
Industry observers believe that enforcement of insurance policies in states will hopefully stem the proliferation of fake insurances, and also ensure that the people enjoy the benefits inherent in the consumption of genuine insurance products.
The bill seeks to address many other industry headwinds by rectifying shortcomings of the Insurance Act 2003. One of the improvements would be in the area of recapitalisation. The bill has settled the definition of capital in the insurance domain, building on the framework in the Finance Act 2021, ending the incongruity between operators and regulators in the sector, which previously led to the cancellation of several proposed recapitalisation attempts by the regulator.
“It is expected that the new law will have a positive impact on the insurance space in Nigeria and align it with global best practice.
“We must acknowledge the cooperation received from the Speaker, Federal House of Representatives, Rt. Hon. Femi Gbajabiamila, Chairman and members of the House Committee on Insurance and Actuarial Matters, National Insurance Commission (NAICOM) and other stakeholders in the journey thus far,” said the chairman, Nigerian Insurers Association(NIA), Mr. Segun Omosehin when he assumed office.
On his part, president of Chartered Insurance Institute of Nigeria(CIIN), Mr. Edwin Igbiti said, transition of the Insurance Bill into an Act would be the best legacy President Muhammadu Buhari administration would bequeath the insurance industry while imploring all insurance practitioners to come together and push for the signing of the bill into law.
Implication of Non-Passage Of The Bill Into Act
Exclusion of Consolidated Insurance Bill from the other bills passed for presidential assent means that the industry will wait a while before the next administration sign it, that is, if it gets to the table of the incoming president.
Investigation revealed that the industry is losing N135billion annually to fake insurers as well as non-insurance of 8.5 million vehicles on Nigerian roads. Third party motor insurance, which is the least insurance requirement for vehicles plying the nation’s road, which was previously N5, 000 has been increased to N15,000 annual premium.
Moreover, the industry also loses lN30 billion to non-insurance of six million tricycles, even though, both means of transport are covered under the Third Party Motor Insurance Act.
On the other hand, the cut-throat competition among insurance operators in the battle to capture and win the same insurance businesses through rate-cutting and discount is making insurance industry lose about N700 billion annually.
In the same vein, Insurance industry is losing about N20 billion annually on building insurance, among other compulsory insurances from each of the 36 states of the federation annually, amounting to N720 billion from all the states in a year. This, according to market observers, was because most of the states are yet to domesticate insurance law into their respective state law, thus, depriving the industry such huge premium.
These losses, however, amount to a cumulative N1.6trillion premium income loss in a year, which could have been recouped if the bill is passed into law.
Similarly, this delay, according to experts, may give room for weak capitalisation of the industry, unabated weaknesses of the moribund insurance Act 2003 and at the international level, the risk bearing industry may not be able to play a leading role. Thus, the urgent need to strengthen the laws of the industry which the Consolidated Insurance Bill 2020 would have done if signed into law at such a time like this.
Decrying the exclusion of consolidated insurance bill amongst the 15 bills passed to President Muhammadu Buhari for an assent before leaving office, the chairman of Session, Chartered Insurance Institute of Nigeria (CIIN) Year 2023 Fellows’ Event, Dan Okehi called on Fellows in the insurance industry to arise to their responsibilities as it is their obligations to collaborate with NAICOM in ensuring that the bill becomes an Act.
Okehi stated that, Fellows should note that the burden of growth and development of the sector rest on their shoulders as the industry’s policy makers.
Similarly, a past President, CIIN and former group managing director/CEO, LASACO Assurance Plc, Olusola Ladipo-Ajayi, said: “there is supposed to be a synergy between the regulatory body and operators in the industry. The industry doesn’t have much visibility in the public space. This means, we are not in government contemplation. The way we operate the industry has not given us visibility. It should be our priority.”
Coroborating this, an insurance professional and former member of Houses of Representatives, Hon Lanre Laoshe, explained that, with the exclusion of the bill among the 15 passed to the President for assent, it means a new process will start again when NASS resume on June 4th, 2023. “If they really want to change their law, let them work or why didn’t the bill go far? “ he queried.
Meanwhile, the managing director, Peninscope Professional Warranty Limited, Mr Tai Adediji pointed out that, such omission will hinder development in the industry and put the sector on suspense.
Simlarly, managing director, Risk Sift Consultant Limited, Mrs Janet Omoniyi, said. the industry cannot act on it until the president signed it into law. She said: “It means we will continue to use the obsolete law. The industry will have to wait till a new set of NASS comes onboard, brings it up and work on it, then send it to the President. Something must have gone wrong along the line; may be it still needs to be fine-tuned.”
Similarly, the vice president, Association of Registered Insurance Agents of Nigeria (ARIAN), Mr Kehinde Jegede , regretted that, not signing the bill will hinder insurance penetration which is yet to reach 0.5%. According to him, a bill acceptable to all players will promote sense of belonging among insurers and bring about healthy competitions, adding that, ‘it means NAICOM needs to be empowered. There are a lot of innovations it wants to bring about in the industry.’
Moreover, the president, Independent Shareholders Association of Nigeria (ISAN), Mr Moses Igbrude opined that, “when we visited NAICOM last week, the Commissioner for Insurance, Mr Sunday Thomas, promised that the cmmission has done some work to enhance insurance industry. If the industry bill didn’t get the assent of present administration, the question is – ls it that the bill is not ready? If yes, why is it not ready?. It means there will be delay. The bill will start all over again. Its supposed effect will be postponed. It means it will further delay the enhancement of the industry.”
Way Forward
Speaking on way forward, Ladipo-Ajayi had said, all contending issues should be looked into. On behalf of the industry, he stressed that, there must be someone monitoring the movement of the bill. At every stage, somebody must be on ground, he noted.
Similarly, Laoshe noted that, the industry should go back to the drawing board and find out why the bill didn’t go far.
In the same vein, Adediji stated that, “there is need to find out the reason why the bill has not got to the President table for his assent. Is it human error or the content of the law? Was it a mistake – intentional or sabotage? Is there another opportunity for the bill to get to President Buhari before he leaves office? These are some of the things industry regulator and operators should find out. Even though the president has few days left, as long as he is still in the office, there is still hope if all necessary things are timely done.”
Stakeholders believe it would be unfortunate If by May 29, the President Buhari did not give assent to the bill. The industry, they said, might have to start the process all over again.
While market observers expect insurance operators to look inward on the need to have representatives at the National Assembly, they urged them to think seriously about the importance of being proactive.
It would be recalled that it was when Hon Lanre Laoshe was a member of the House of Representatives that the lnsurance Act 2003 was signed into law. They said, there is need for strategic lobbying and resistance against bureaucracy in government.
It is hoped that when the incoming National Assembly kicks off, lnsurance bill will receive speedy attention so that it will be among the first set of bills to be signed into law by the incoming administration to enable the industry begin to tap into the opportunities provided by the new law.
