| How we manage risks for banks–GTI
Insurance boss, Dan Okehi
By CHIDI NNADI and SEUN ADESIDA
Monday
May 8, 2006
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•Dan Okehi
Photo: Sun News Publishing |
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Before coming to GTI Insurance Company Limited as the Executive
Vice-Chairman\Chief Executive, Mr Dan Okehi, had traversed
the nooks and crannies of the insurance industry, playing
as an underwriter, marketer and administrator. Indeed, the
insurance guru has had a stint with the African Development
Insurance Company Limited (ADIC), the Central Insurance Company
Limited (CICO), Crusader Insurance Company Limited, Unity
Life and Fire Insurance Company Limited, Royal Exchange Assurance
Plc and NICON Insurance Plc before berthing at GTI Insurance.
And in just one year of driving GTI Insurance, Okehi was able
to put the insurance firm on the path of profitability, paying
dividends to the shareholders of the company in the second
year. Yet, he is determined to push the company to an enviable
position in the industry, banking on the current consolidation
in the insurance industry. Already, he has set the mechanism
to achieving this, beginning with a private placement in which
the company hopes to rake in N5 billion. After this, Okehi
is also planning to take GTI to the capital market in an Initial
Public Offer (IPO) that will see the company raising another
N2 billion just as they are thinking of merging with three
other companies.
In this exclusive interview with Daily Sun, the GTI boss looks
at the company, the industry, the Nigerian economy, saying
they would be one of the biggest three in the industry soon.
GTI Background
The idea of setting up GTI Insurance Company was to fill a
vacuum. Before now, in our industry, there has been this pressure
from the insuring public to have a company that will make
a difference, that is, to pay claims promptly. We came up
with 24-hour claim settlement policy. Once a claim is lodged
with the company, the processing is done in a very reasonable
time and we immediately issue you with discharge form and
in 24 hours you get your cheque. We set that standard which
is now the industry’s standard. Others are now trying
to emulate this.
So, GTI Insurance is a restructured top-flight insurance company
under a new ownership and management. The company formally
existed under the name Shieldhold Insurance Company, a five-year-old
company, before it was bought over by the founding fathers
of Guardian Trust Insurance Company, recapitalised and restructured.
It is instructive to note at this point that the Corporate
Affairs Commission (CAC) recently issued a new certificate
changing the name of the company to GTI Insurance Company
Limited (GTI).
GTI Insurance Company Limited is a wholly owned Nigerian company
licensed to transact all classes of insurance business, spanning
general, special risk and life/pensions. The primary objective
of GTI is to provide first class and dynamic insurance services
to both the private and public sectors of the Nigerian economy
and beyond. Although, the company focuses mainly on the banking
and oil sectors, we have a strong market presence in other
sectors.
The company has an authorised share of seven billion out of
which N364.5 million is fully paid-up. It has also paid the
full statutory capital requirement to the Central Bank of
Nigeria in compliance with the Insurance Act 2003. The National
Insurance Commission (NAICOM) has since re-registered the
company to continue as an insurer.
As part of the new management vision, we have assembled a
team of very seasoned professionals to handle our various
operations in addition to putting in place reinsurance treaties
with very reputable overseas and domestic reinsurance companies
led by Swiss Reinsurance Company. We have all facilities in
place to provide efficient services driven by state-of-the-art
information technology to ensure efficient and reliable system
of prompt claim settlement as well as meet our underwriting
obligations.
Our initial capital and network
At inception, we came up with one of the highest paid up capital,
N150 million. When others were setting up N20 million, N90
million issuance companies, we started with with N150 million.
We were fully automated from day one. Processing of claims
was completely computerised in all our 12 branches, all linked
by a wide area network, VSAT. We have an eastern zonal office
at Port Harcourt, controlling Aba, Owerri, Yenegoa and Onitsha.
Ibadan was the West zonal office, controlling Ibadan and Warri.
For the North, we have Kano, Kaduna, Jos and Abuja, which
is the zonal office controlling the other branches in the
North.
Our mission
Our mission is to remain a constructive and result-oriented
leader in the industry with an international outlook, an outlook
that provides a dynamic and viable insurance services. Driven
by innovation and excellence, we also aim at meeting the aspiration
of our stakeholders, whether staff, the insuring public or
our esteemed shareholders.
With this at the back of our mind we set out and within one
year we broke even and in the second year we paid dividends.
After that second year, we have been paying dividends until
2004. When we paid a total of N100 million dividend, which
was one of the highest in the industry, then it was 28 kobo
per share. We have kept faith with that pace and we still
want to continue with it.
Even after re-capitalisation, we want to be result-oriented,
we don’t just want to be playing only in the Nigerian
market, we want to become an international insurance services
provider. That was why we partnered Swiss-Re Insurance Company,
to give more confidence to people that we will be able to
perform. To achieve our mission and objective, we assembled
the best professionals we could lay our hands on in the industry
to drive this company. Going through our profile you see we
have one of the best members of staff.
Branding GTI
We have grown GTI Insurance to become a strong brand in the
market. GTI is a name you don’t toy with, and we have
in mind to specialise in the oil and gas sector and to carve
a niche for ourselves. For the banking industry, we want to
make sure we developed new products to take care of the area.
Our contributions and products
In the oil and gas sector, we are leading in a lot of accounts,
including the Shell Bonga, which is the largest producing
platform in the country. The Shell Bonga has an FPSO that
is sited about 120 miles from Warri on the high sea. It has
about sixteen wells. It is about the third largest oil producing
platform in the world. We are the primary underwriters appointed
by Shell and we are also participating in almost all the insurance
oil deals in Nigeria.
In the banking industry, we are leading in so many banks accounts,
and we have produced new products to support this area. Sometime
ago, we introduced six new products and that action alone
made us the most innovative insurance company in Nigeria.
We produced what is called the Walking Stick Policy, which
is for the aged people who want to plan for their retirement,
or those who are in companies with pensions and they want
to argument it with this policy.
We have Educational Access scheme, which is a replacement
of educational endowment, which we have before. This is meant
for parents planning for the education of their children.
It gives them the opportunity to plan for their education
such that whether they are alive or dead, their children will
be educated. They make a deposit regularly, either monthly
or quarterly, daily or half yearly, and we pay them interest
on these deposits, like deposits in the banks. It could happen
they pay only once or twice and the person dies, then we must
pay the sum insured. Assuming the man agreed to plan the future
education of the children in five years and he says he needs
N10 million and he pays the first and second premium and dies,
we will now have to pay them N10 million because that is the
mortality risk we are covering.
The Global Investment Policy is an investment linked policy.
But it is based on deposit administration, which makes you
to deposit money regularly; we pay interest and in addition
we cover your life.
There is the Home Stead Scheme. It is a policy designed for
house owners who would like to insure their houses and the
property against fine and theft. In addition to covering their
risk we give them free life cover for one year. That will
now encourage them to continue with the life policy. This
is another way of creating awareness on the life policy.
The policy is selling so fast because before now less than
10 per cent of the houses you see in Ikoyi are insured. The
same applies to Victoria Island, Asokoro and many other places.
We want to create awareness through this product so that people
can insure there houses.
We also have the Bankers Extra, which is meant for bank depositors
and the banks themselves, by protecting them against failure.
The banks need more protection now and we are going to take
them on. This is to prevent a situation where someone has
N10 million in the bank and because of bank failure he or
she is paid N50,000 or N200,000 under the new law. With Bankers
Extra, we will pay the depositors the total face value of
their deposits. Then, we have the Oil and Gas Plus, which
is targeted towards the oil industry. We are quite innovative
and so look at opportunities in the market to create new products
as we move on.
We can insure these N25 billion banks with the professional
collaboration with our international partners like Swiss-Re,
AIG London, ACE, we are talking with them in this direction,
so that we can provide adequate cover for our banks.
The big fish
We want to have a good share of the market by dominating the
insurance market and that is what we are having now. We are
big because we have good capacity, we have good professionals
that can effectively add value. We have a good and strong
board with a robust re-insurance package balanced payment
and that is why we are strong. We are not just the big fish,
we are also the golden fish of the insurance industry.
Our IT backup
As the chairman of the information technology and committee
of NIA (Nigeria Insurance Association), we have brought innovation
to the industry through the NIA. We have just concluded arrangement
to commence vehicle tracking in the industry. Arrangement
have been finalised to commence vehicle data base for the
industry, using the GPRS technology. This technology will
be used for both tracking and data base collection.
This will encourage underwriters to give information about
their vehicle. It will be linked to the police and it will
be linked with the FRSC. There is no point people fighting
over damage to their vehicles. Once the FRSC and the police
can access information on the insurance status of accredited
cars, with this they will know if you are or not insured.
And this will go along way to improve on the services offered
by the insurance company. It will also help the FRSC and police
in doing their work.
At GTI, we have a VSAT network running for all our branches,
hooked to our operation about a year ago. We were using e-mails
via the Internet. But now, it has improved and it has given
us an edge over others in the industry. Any of our branches
can conclude any insurance business directly on-line without
physically coming to the head office.
We are encouraging other NIA members to get to this basic
level. In a situation where you want information, you send
it through e-mail, people can log on your website and get
every information they want. Like the private placement we
are doing, you can complete our form on-line. We sell our
products on-line. You can get whatever you want from GTI online.
We want to be a paperless insurance company. Where you come
in you don’t see any paper, but everything is on the
system and that is where we are going to within the next one
or two years.
Private placement and IPO
The new private placement is about a month old now. By the
end of April, it will be one month, and from the report from
our issuing houses and other placement agents, we have done
about 50 per cent. We are still looking forward to the core-investors,
we are expecting to generate N5 billion from the private placement.
This will stop by the end of May. So, by July, we will commence
our IPO that will take us to N7 billion, that is the plan.
Our authorised capital now is N7 billion, so, we are working
towards this; the agents, our staff are working towards achieving
this.
We have already done a right issue, one for one to our existing
shareholders at a discount, selling to them at N1 instead
of N1.70 kobo. So, that on its own has given us about N400
million already. So, before the private placement, we have
done about N1 billion. Now, we believe by May 26, we would
have done the N5 billion, leaving us with N2 billion to be
raised from the public.
Capital market saturation
The issuance stock is a different type of stock. Insurance
companies generate their own money, while banks depend on
people’s money. Those who know what insurance is all
about, know that GTI is a better stock. We are cheap but in
the long run we are better. In the developed economies, insurance
companies own banks, their operations are looked up as robust
and here because of the way the economy is structured, the
banks are having an edge now. But this is going to be a temporary
thing, when the economy is well structured and there is adequate
insurance awareness people who know what insurance is will
still go for the insurance stock.
I agree that we have investors’ fatigue in the market.
But we still have people who are highly disposed to investing
in insurance stock. Insurance stock is a long-term investment,
unlike in the banks where the money they trade with is not
their own. Insurance stock can stay for over 50 years and
still be doing well. So, we believe there are still people
who are interested in buying insurance stock.
Financial risk management
Banks are well exposed to financial risks, and we have identified
these risks. The banks stand the risk of cash in transit,
cash in custody and cash in … and we have policies targeted
at all these risks. Insurance is one of the ways of managing
such risks. There is the problem of infidelity on the part
of people who work in the banks.
We have a policy to insure this risk called fidelity guarantee.
Bank fraud, whether initiated from within on without is another
from of risk exposure for the banks. GTI financial risk management
is designed to help the bank manages this risk. In risk management,
you have to identify the risk, access the risk, and then control
the risk. Insurance is one of the measures designed to control
risks by transferring the risk you cannot manage to an insurance
company.
Three-quarter of risks generated by banks are covered by insurance
companies.
Future projection
On our premium, we want to generate a premium of about N5
billion by 2007. We need to net a profit of a minimum of N1
million in 2006 and 2007. We want to be among the first three
leading insurance companies. For us to achieve this, we must
have a good share of the market.
We are looking at a merger arrangement with three or more
insurance companies, so that we can also enlarge our specialisation
and provide adequate cover for other sectors of the economy.
We hope to increase the value, add to our services and network
so as to be able to achieve the things we want to achieve
in the market. We are not just trying to satisfy this market,
but also the international insurance market. For us to achieve
this, we need to be adequately capitalised. We have started
the process and it is ongoing.
Automated claim settlement system
In insurance, we have different classes. We have designed
systems that enabled us to settle claims promptly. For theft
cases, we leave up to three months to search for the stolen
car. If it’s not found within three months we settle
the claims. That is a total loss settlement, we remove the
excess and pay to the owner. And if the car is eventually
recovered it becomes the property of the insurance company.
To enable an efficient service, we are introducing the tracking
system, to help track the vehicles. We have chosen three tracker
companies our clients can go to. And once you have the certificate,
we give you a substantial discount.
Fire cases are also a total loss settlement, except where
the house or vehicle was not totally burnt. If the car is
totally burnt, then it will be a total loss settlement.
For accident cases, it could also be partial, if the vehicle
is still repairable, we can repair within a reasonable time.
If any of these cases is a partial loss, we appoint loss adjusters,
and investigators who are independent professionals to investigate
and adjust the claims. And they will give a report based on
professional opinion.
Their report helps in determining the quantum of claims and
liability when it arises.
Now, on credit bond, performance bound, bid bond and advance
payment bond. These are guarantee policies and they are under
the accident class. Credit bonds are bonds given when people
borrow money from banks and insurance companies, giving them
guarantee, which means the insurance company will pay for
it. Before we do this, we will get a collateral that is equal
to the amount to be borrowed. In case the man defaults you
will fall on the collateral to recover your money.
Performance bond is meant to service contractors who are given
work to do. The principal will usually require a quarantee
to assure him that if the contractors fail, the insurance
company will pay. And for advance payment bond, it is meant
to insure advance payment to contractors, so that such advance
payment in case the contractor absconds, the insurance company
pays. Or where contractors bid for a contract, it is normal
to ask them to bring bid bond to guarantee that the contractors
will stand by the bid.
Claims
We have paid Elpina claims. Elpina shop in Port Harcourt got
burnt three years ago on a Christmas days, when people were
off duty. We were one of the underwriters, we have also paid
claims under the Shell Bonga policy. These are claims running
into millions because the Bonga policy was insured in dollars.
We have also paid other claims that are above N50 million,
Marine claims on vessels running into millions have also been
paid by us, including a lot of motor vehicle claims.
International connection
Swiss-Re is leading on our international treaty, that is our
first contact point. We don’t have up to 10 insurance
companies in the Nigeria market, which have a big insurance
player like Swiss-Re on their treaty. And this is the first
confidence international companies are looking at to deal
with you.
That is the first outlet we have, we also have re-insurance
brokers that are London-based. We have JLT Insurance company,
and we have a re-insurance consultant, John Bowsted. They
are all playing in Lloyds London and they provide us with
professional consultancy and re-insurance services, thereby
giving us the exposure that we need. We also play with other
big insurance companies in the UK. Like AIG Insurance and
ACE Insurance company, we deal with them on the international
level.
With the confidence created with this back-up, we believe
we can handle any business outside the country. We are the
insurance underwriters for the biggest oil deal in Ghana,
Lusan Enternet, that was revived by a Nigerian company, we
are their main insurers. GTI has a lot of business deals in
South Africa, and for now we believe we can still do more
for this country after our consolidation because we need to
build more capacity to be able to go outside, believing that
our economy will continue to improve, so that our currency
can add value, because the major problem we have is the de-valuation
of the naira. That made us not to have sufficient capacity.
Economy
The Nigeria economy has affected insurance business negatively.
You will remember when the naira was exchanged one for one
with the pound sterling. Then, our capacity was equal to the
capacity of all the other insurance companies all over the
world.
Then, if you say you have N5 million capacity, it is the same
with £5 million. Then we were playing on equal level.
Nobody will accuse you that you don’t have capacity.
Now, naira is being exchanged at N145 to $1, so even if you
have N5 billion capital is just a few million dollars. And
the international market will not recognise us as major insurance
international player. It is a major problem, the poor economy
is affecting our currency.
That is why we believe there should be more economic activities
that would put more insurable funds in the hands of people.
This will make more funds available to the insurance sector.
This government has started something good on the economy
by stabilising the economy from one sector to the other, commencing
the privatisation of public organizations, bringing sanity
and removing corruption as much as possible. Even if it has
not been totally removed, they have started on a good note,
the fear has been created.
People invest in a business to get good returns from it. But
the unfortunate thing is that basic infrastructure we have
are in deplorable condition. The roads are bad and power is
almost non-available. The rot in the system was enormous before
this administration came in. So, it cannot be changed over
night, we need to be patient for coming administrations to
repair this damage done in the years of misrule.
Consolidation in the insurance sector
The N5 billion re-capitalisation is the starting point, it
is to kick-start the consolidation of the insurance sector.
It will make insurance companies to have a better leverage
to operate. It will enable them to go into bigger deals unlike
what they can take on before the consolidation. The new capital
requirement is good as it will ensure a good re-insurance
capacity. The better your capital, the better and more enhanced
your re-insurance capacity. It will also make available more
infrastructure to the insurance companies, so that they can
canvass and win bigger deals.
The new capital base will make the players to become more
relevant. We need insurance companies with over N20 billion
capital base in this market. It will give us more visibility
and relevance in the economy.
We are picking three more insurance companies, because we
believe no matter the capital you make, you need a convergence
of competencies. You combine what you have with other companies.
In the post-consolidation era, insurance will not be a game
of one person. If you go it alone, then others who are consolidating
will teach you some lesson. Before you get to where you are
going they have done more things.
We realised this and we believe we must combine competencies
of people. If we are good in oil and gas, we may not be good
in public sector accounts, we must combine to achieve an overall
objective to be among the first three leading insurance companies
in the post-consolidation era.
We have signed MoU with two companies and the third will be
done before the mid of this month. We are merging with these
companies. We are still working out on other post-merger issues
that will affect
GTI Insurance and the Managing GTI Insurance
The management of a company like GTI Insurance is based on
focus. As the manager, I need to have the right focus, I need
to know where I am going. Again, there is need to have the
right professionals working for you together with the right
policies that can drive that focus or vision. The board has
been trying to set the policies that will enable us run efficiently
and to meet our mission and vision, which is basically to
be profitable. As you need to make good returns to all stakeholders,
you also need to generate enough money to be able to pay claims.
Remember, insurance is a pool of funds. So, all we do is to
set in motion marketing policies that will enable us generate
more money to be able to have a good pool, to have the ability
to meet our financial obligations. If you don’t have
a good pool, you cannot survive, you need right under-writing
policies and claims settlements. These must be backed up with
a good infrastructure, because this is a long-term business.
There is also the need to make available appropriate reserve,
so in a year you start with a budget, apply the necessary
control mechanism that will enable you achieve the mark in
every year. We ensure that we reduce leakage to the barest
minimum and improve on staff standard through training and
re-training. And we set a benchmark for each departmental
operation and make sure it’s in focus. Again, you should
try as much as possible to show your people where you are
going and where you are coming from. And total quality control
must not be lacking in anyway.
Leadership style
I have adopted a quality leadership style that goes by example.
We set targets in this place, our marketing drive is what
we called the 40-10-3 system. If you are in a department where
you don’t meet people, you must meet, at least, 40 people
a week.
If you are in marketing, you must meet 40 people a day and
you must interview 10 of them and make sure you get a contract
deal with three of them in a day. And this also applies to
everybody in this insurance company, the only difference is
while marketing meets this target daily, others meet it on
a weekly basis.
To make the policy work, I lead by example and I show my result
everyday and every week and others under me are expected to
do just that.
My job and worshipping God
The issue is that without God you can do nothing. Those of
us who read the scriptures know that without God you can do
nothing. So, if He is your source you’ll do everything
to satisfy Him. If you satisfy Him, he would help you do your
work and you will follow Him like a blind man. He leads you
to where you go. At difficult moments, He knows what to do,
that is why the scripture looks at people and says anybody
that says there is no God is stupid. You don’t know
what will happen to you the next day. I find time to attend
all my church services and to serve my God.
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