In a crate of 30 eggs, one bad egg, makes the remaining 29 eggs suspects. This assertion is a clue of what is currently ongoing in the nation’s insurance industry.
The issue of unpaid claims, surprisingly, by few distressed ones have rob off negatively on the remaining ones that are promptly paying genuine claims.
In fact, in the last three years, insurance companies had used more than 40 per cent of their annual income generated to pay claims. Cumulatively, the industry paid more than N600 billion as claims within those periods.
However, the dominant issue has always been unpaid claims by the few distressed companies, who are not more than 10 out of 56 insurance operators, that has downplayed the efforts of the industry towards claims payment.
Unless and until the distressed companies were heavily sanctioned or their licenses revoked, efforts of the industry in claims payment will continue to be a wink in the dark. While most of these checkmating activities rest solely on Insurance Industry regulator, that is, the National Insurance Commission (NAICOM), the regulatory authority has been addressing the issue with kids’ glove, until recently where it has to revoke licenses of Niger Insurance Plc and Standard Alliance Insurance Plc, two firms notorious for accruing several billions of Naira of unpaid claims.
While the move of NAICOM is commendable, there are more underwriting firms out there in the mold of the two defunct operators, but are still carrying out businesses as usual, taking up new insurance businesses, while they have billions of unpaid claims from the previous risk businesses they undertook.
With many policyholders of the distressed firms now struggling to get their claims and the publicity that comes with such acts, experts advised the regulatory body to axe more companies who are guilty of these unpaid claims to sanitise the industry.
Firms With Huge Unpaid Claims
Earlier in June 2022, NAICOM had withdrawn the licenses of Niger Insurance Plc and Standard Alliance Insurance Plc over their failure to meet their civic obligations, such as payment of claims and inability to pay workers and debtors.
However, investigation revealed at the weekend that five or more other insurance companies risks similar fate, if they fail to turn things around in the next couple of months, especially, in the area of claims payment.
Investigation revealed that Alliance and General Insurance Company Ltd, A&G Life Assurance Plc, Goldlink Insurance Plc, NICON Insurance Plc, Nigeria Reinsurance Corporation and Industrial and General Insurance (IGI) Plc are all struggling for survival with mountain of unpaid claims in their books as policyholders besiege the companies on a regular basis, requesting for their claims.
In between them, it was discovered that they have over N20 billion unpaid claims.
Insider sources revealed that, they could be the next target of the regulatory sanctions if things continue as it were in the affected firms.
International Energy Insurance (IEI) Plc and Staco Insurance Plc were equally struggling for survival in insurance industry with huge unpaid claims as well and have been warned by the industry regulatory body severally.
However, both firms have recently secured fresh investors, which market observers believe should lead to a positive change in fortune of the duo in the years ahead and subsequently able to pay up their unpaid claims in the process.
While the regulatory body was trying to be cautious , which was why it intervened very late in the case of Niger Insurance and Standard Alliance, it is unaware that most of the struggling insurers are shaming the image of the insurance industry, hence, had adopted several approach to safe these firms in the past.
In the case of Goldlink Insurance Plc and IEI Plc, the regulator had taken over their board at some point in time to bring them back to profitability but the result of this step is not visible.
NAICOM had, in the past, restricted the daily spending of IGI Plc, IEI Plc and Staco Insurance to curb mismanagement of those firms and institute prudence in spending, but it seems those efforts were not yielding the needed results.
NAICOM, had, in 2012, suspended Alliance and General Insurance Company Ltd and A&G Life Assurance Plc from transacting further business for six months.
With the death of the owner of IGI Plc, Mr. Remi Olowude, the company struggled to survive after him, as most of the actions and businesses were built around him, with no serious succession plan. Subsequently, after his death, businesses were not forthcoming, there was breakdown of corporate governance, mismanagement, unpaid claims rose, among others, which necessitated the regulatory intervention in the firm as far back as 2015 and even till now.
NICON Insurance used to be the biggest insurance player, not only in Nigeria, but across Africa prior to its privatisation, under the Olusegun Obasanjo’s led administration. However, the exercise saw the coming of businessman, Jimoh Ibrahim, to take over its ownership, alongside Nigeria Reinsurance Corporation (Nigeria Re). Although, the two firms started well post-privatisation, midway, they begin to struggle to cope with competition.
Recently, both companies were in a legal tussle with the Asset Management Corporation of Nigerian (AMCON) over a debt of about N69.4 billion, as NICON Insurance were owing claims running into several billions of Naira, among others.
Meanwhile, IEI Plc and Staco Insurance Plc have gotten fresh investors who are already in the process of repositioning the companies for better.
IGI Plc, it was equally gathered, is seriously searching for investors to reposition the company, the same as Goldlink Insurance Plc, who have short time to salvage its operating license.
On his part, the executive secretary/CEO, Nigerian Council of Registered Insurance Brokers (NCRIB), Mr. Tope Adaramola said, the council has advised insurance brokers, who are its members, to be wary of distressed insurance companies when they are making choices for their customers.
As intermediary, which brokers are, he said, policyholders would rather hold brokers responsible for claims default because he procured the policy through brokers and not the insurers, hence, the need for brokers to be careful when choosing who to place their businesses with.
“As a council, we have always advised members to do due diligence and shun sentiment when they want to choose insurance companies to place risk businesses. This is critical because, any failure on the part of underwriting firms could be misconstrued to be a failure of broking fraternity, thereby, rubbing off negatively on the entire brokerage industry,” he pointed out.
While NCRIB will not choose insurers members should deal with because of the sensitive nature such decision could bring, he said, members should always prioritise claims paying ability and track record to choose an insurer.
Commending NAICOM for its recent intervention, he said, the sanity of the industry should be the upmost aim of the regulator to redeem the battered image of the insurance industry that was created by few bad eggs.
“In the end, claims is central to insurance business, either as a broker, agents, operators and so on. Hence, it is essential to deal with those who could fulfill this obligation,” he advised brokers.
Similarly, an insurance sector player, Akintunde Sunday, while commenting on a social media platform ‘Insurance Practitioners Forum in Nigeria,’ said the regulatory move is fantastic, adding that, many firms are long overdue for liquidation.
“Any insurance company that has no regards for genuine claims payment as at when due, with long standing outstanding claims of five years up to and more than ten years are not fit to remain in operation,” he added.
“Any insurance company owing fellow underwriters, Insurance Brokers, Tax Authority, Pension Fund Administrators, the Nigerians Insurers Association, Reinsurance companies and ECOWAS Brown Card claims do not deserve to remain in operations.
“Any insurance company whose corporate philosophy is to use employees, owe them outstanding salaries, force them to cancel 50 per cent each operating year with fictitious and scandalous agreement on and employ victimisation tactics to silent it’s employees opposing this activities which are in opposite directions with the standard operating guidelines laid down by NAICOM is not fit for continued operation.”
He pointed out that, “any Insurance company whose only product is N1,000.00 Third Party insurance sold through the VIO is not fit to remain in operations. Any Insurance company operating with 2017 approved account whilst those of 2018 to date are yet to be approved is not fit for continued operation.”
The managing director, Tangerine Insurance Limited, Mayowa Adeduro, posited that claims are the essence of insurance contract while prompt payment is at the heart.
He said, “Nothing less than this is expected from the commission. Take note payment of claim is the essence of insurance contract with insuring public. Prompt payment is at the heart of the contract. The commission has power to sanction board and management of insurance companies neglecting to pay their claims within the ambit of provisions in 2003 Insurance Act and circulars and regulations of the commission.
“However, not only on claims but also on inter-company settlements. Some companies are notorious in settlement of dues to other companies. Commission should come hard on this.”
The managing director, Legacy Insurance Brokers Limited, Babatunde Thomas, also frowned at the practice, noting that, every insurance practitioner knows that claim is the acid test of insurance. He maintained that failure to pay genuine claims come with penalty that may not be palatable.
He added that what was being paid for at the commencement of insurance transaction is the assurance that insurance firms will honour their obligation of the contract in the event of occurrence of a loss producing events. Therefore, he said, any insurance institution that knows its onions should not toy with claims payment.
“Knowing full well that the National Insurance Commission is the agency saddled with the regulation of insurance practice in our space will not and should not fail to call the attention of the insurance institutions in the country to be alive to their obligations in the contract of insurance.”
Weeding Out Bad Eggs
The deputy commissioner, Technical, NAICOM, Sabiu Abubakar, at an event in Lagos, said more companies may also face similar sanction as part of moves to sanitise the industry.
According to him, “Recently two insurance Companies licenses have been withdrawn and these are; Niger Insurance and Standard Alliance Insurance. Though managing the death/failure of Financial Institution is very demanding, nevertheless, more may still be liquidated in order to sanitise the Insurance sectors.”
He stressed that NAICOM has strengthened its regulatory oversight and implored operators to settle genuine claims reasonable time and discharge their obligations.
Abubakar noted that insurance regulation and supervision are always the bedrock of national economic development, believing that NAICOM’s reforms and regulatory initiatives will positively impact the insurance industry if achieved and that the industry will witness tremendous development and growth.
Similarly, the commissioner for Insurance/CEO, NAICOM, Sunday Thomas, noted that, underwriters must pay utmost attention to payment of claims, especially, at a time the industry is nursing negative public perception.
While calling insurers to be responsive to the plight of their clients in prompt settlement of claims, he equally charged operators to strengthen their human and financial capital for effective participation in big ticket risks..