•Seek review of 30 year -old Scale of Fees
By Henry Uche [email protected]
The insurance industry has different stakeholders in its value chain, including the National Insurance Commission (NAICOM), Underwriters, Insurance Brokers, Loss Adjusters and Agents. There are also the industry watchers, policyholders, analysts and other interest groups who play different roles in risk mitigation risks associated with insurance subscribers. The interconnectivity and roles each of the stakeholders play in no small measure could make or mar insurance business. Since these stakeholders perform different functions for the promotion of insurance, one ordinarily expects a fair relationship with each other.
In this interview with the president of Institute of Loss Adjusters of Nigeria (ILAN), Mr. Diipo Olanrewaju, he lamented what he tagged “as an unfair treatment” of his association by the NAICOM and underwriters alike, and called for a thorough review of long standing Loss Adjusters Scale of Fees, among others.
Excerpts.
In your review of 2022, you lamented that Loss Adjusters have been so badly treated by the rest of the industry . What were your reasons
All over the world, the work of Loss Adjusters is indispensable. The insurance value chain cannot do without us because we play a critical role when incidents for which insurance over is taken happen. There we come in between the insurance company and the policyholder involved. But in the year under review, we were not busy at all like in the previous years. So many factors were involved.
Like some other corporate organisations in the country, the insurance industry had a scaled down operations in 2022, some closed down certain lines of business, so as a result, there was a scaled down cover and premiums. The reasons are obvious- harsh economic environment. Insurance companies would not tell you this but we know. When there are scaled down operations, there would be a scale down in the number of claims, as a result we were affected- not busy as usual. If a company is a client of an insurance company, and the issuer closed down a line of business completely, the insurance company has lost business and by extension, there is scaled down claims and no work for Lost Adjusters. So we are affected badly. You know whatever that affects the insurance companies affects us. However, there was sufficient to keep us afloat.
Do you think Brokers and others are better off…(cuts in)
Yes, Insurance brokers are doing very well, because the premium gets to them first before it gets to the Underwriters. So they (brokers) pay themselves 100% of what they should have first. In most cases they keep premium more than necessary, but the reverse is the case for Loss Adjusters, the insurance companies pay them (Loss Adjusters). Because insurance companies pay Loss Adjusters, when insurance companies have problem, they delay payment due to Loss Adjusters or even cut it arbitrarily. So Loss Adjusters are at the receiving end of the insurance value chain. We bear the hottest brunt.
How do NAICOM and Insurance companies see Loss Adjusters?
They see us constituting expenses to them, rather than saving cost for them.
That’s their attitude towards us. Underwriters forgot that without us, they would wind up any day soon. For NAICOM, they look at us as professionals who doesn’t have funds to sustain them. Remember they (NAICOM) is sustained by levies paid by the operators. So Underwriters pay huge amount to NAICOM, Brokers would follow suit, but I do not think Loss Adjusters pay up to 2 percent of what NAICOM requires. So how do you expect NAICOM to give us due attention? NAICOM has a lot of respect for brokers, because we’re in the brokers world.
Why are you not measuring up with your due and levies?
Dearth of funds. Most underwriters don’t engage Loss Adjusters, some who do, either don’t pay us our fees or at best slash it. Remember, we are not many, we are just 50 on average nation wide. Even in the entire world, loss adjusters are usually not many. But we tedious work, full of traveling, exposure to risk, hazards etc. Because of the way and manner Loss Adjusters are relegated despite our essential services, so many people prefer to work as a Broker.
A broker can make N50,000,000, from one line of business but a loss adjuster may not make up to 200,000 from the same business. NAICOM is like a father who has many children, and a few sends goodies to him regularly, others who are not capable to do same (not intentional o) are not regarded.
So NAICOM apart from subventions from government rely on levies paid by Underwriters. So if for instance Underwriters pay between N50m & N500m for instance, and a broker pays between N20m & N100m, and Loss Adjusters pay N50,000 and N300,000, how do you expect NAICOM to pay attention to us?
Loss Adjusters and Brokers in Nigeria
In UK for instance, Loss Adjusters are bigger and strong in financial strength than other stakeholders in the industry. Over there when claims issues rise, Loss Adjusters have funds to do their job and seek refund and they are pay immediately.
Because most businesses that comes to Underwriters don’t come direct, they go through brokers. Underwriters have more respect for brokers as well. If a broker decides not to pay an underwriter, he won’t go to court nor report to NAICOM, because if one broker cut them off, nearly all the brokers would cut them off and that insurance company would die. Thus, they don’t hurt the brokers.
So brokers have been having field days. So when premium comes in, an honest broker would deduct his 100% brokerage fees before sending the rest to the insurance company. So no insurance company owes a broker. Though there can be over zealous one, who engage in some personal or sharp practices with premium before remitting to insurance company. In fact if the mother of a broker dies, many underwriters would buy cows for him (am not joking), Because it’s the brokers that holds the Lifeline of insurance companies in terms of premium. But the reverse is the case of Loss Adjusters who depend on the Underwriters to pay his due fees. Because fees are not paid in advance no matter where the length we go to get the job done. So even if you are going to Mambilla Plateau where you need to hire experts, with all the expenses and risk and hazards we face, we are not given a dime in advance, the Loss Adjusters would look for the money, even when you inform them (insurance companies) that you are going to hire different experts to enable you do the job thoroughly, they would grant you permission, but they won’t give you a dime, so we source and fund the project, when you are done, they would start owing you. There are due fees still outstanding even after 12 months.
Don’t you think there is something ILAN is not doing well that makes NAICOM and underwriters you Yes, but Loss Adjusters have no courage to do. Oversees people would prefer to be Loss Adjusters to brokers. The reason is that over there, they’re not paid a negotiated fee where Underwriters influences low payment.
Overseas they agree to pay hourly rate, so when a Loss Adjusters do their job, they quickly informs the underwriter of their due fees, they calculate fee by number of hours worked and sends to the insurance compayment is made.
Remember in some cases a Loss Adjuster may hire a lawyer, a quantity surveyor, special consultants etc when you see fees paid to these other professionals who are involved in a Job, you will weep for Loss Adjusters.
A lawyer involved who just prepared a two page document in some minutes would collect N2m, a Loss Adjusters who spent months would be gunning for N200,000. Loss Adjusters in Nigeria are at loss when compared with other stakeholders in the insurance value chain. We go home groaning while other stakeholders like the Registered Brokers go home smiling.
Any agreed / legal document between ILAN and Underwriters… (Cuts in)
Yes we have an agreed document. It’s called Loss Adjusters Scale of Fees, it was signed 30 years ago. It’s very outdated and they have refused to review it.
They keep tell you they too are struggling to survive, but the person telling you he’s struggling to survive has fleet of super jeeps, leaving loss Adjusters to be jumping from one truck to another. This Scale of Fees was negotiated between NIA & ILAN over 30 years ago. So you hardly see Loss Adjusters making N10m from even the biggest claims, in fact it’s unseen. The highest take-home for loss Adjuster is between N50,000 and N200,000, shared among co-insurers that would not honor payment but then other professionals who did the job with Loss Adjusters would be smiling home with millions.
What’s the fate of your members?
Loos Adjusters have been made to be poor in Nigeria. Poor remuneration and
Poor image. I foresee a crowding out of practitioner’s from that arm of the insurance industry soonest.
Underwriters will realise the importance of that subsector only when it fully collapses and foreign Adjusters take over and charge fees at hourly rates in Dollar or Pounds! We have even lost so many Adjusters. The job is losing its savour. To be honest with you, if this anomalies continue in the next one year, there would be no Loss Adjusters in Nigeria. This Loss Adjusters Scale of Fees must be revisited now, it’s over 30 years.
Any demand on government?
We would rather seek a charter for the Institute so that some things will be properly placed. We attempted it but then the National Assembly (NASS) would be looking for funds from the sponsors, unfortunately forgetting the long run impact if Loss Adjusters go extinction.
Message for NAICOM
The commission has been doing well because the Commissioner knew the problems beforehand. He was advantaged to have worked in insurance companies, and NIA (where insurance companies bring report) so I don’t expect him to do less.
However, the way and manner NAICOM’s treats us towards has not been encouraging. When NAICOM has anything to do, it has Underwriters and brokers in mind, when Underwriters want to do anything, they have brokers in mind (who brings them premium to them. Sadly, Underwriters forgot that if anything goes wrong with their claims, it would affect their funds and fortune, that’s where we come in but they don’t remember Loss Adjusters when they’re taking decisions. Remember there are a lot of false or bloated Claims and the Loss Adjusters is there to burst the bubble any time. NAICOM should mandate Underwriters not to cut Loss Adjusters fees and pay what is due to Loss Adjusters as and when due so they can meet their own obligations.
Way forward?
It’s for NIA to sit with ILAN over the scale of fees. NIA must tell their members to pay Loss Adjusters their fees as and when due.
NAICOM can come into this but they would tell you it’s not their responsibility to collect your fees for you. But they can do something. You know Underwriters submit periodic data to NAICOM, so, NAICOM can make case (literally) with Underwriters by signing an agreement with insurance companies mandating insurance companies to submit Loss Adjusters Data as part of the documents they present periodically. From the data which shows the relationship/information between insurance companies and their Loss Adjusters, NAICOM would know what is going on between insurance companies and Loss Adjusters and act accordingly. Remember Loss Adjusters would have signed such document. I think that would make insurance companies to settle any outstanding issues with Loss Adjusters before they submit their report to NAICOM. So Loss Adjusters information must be attached for the regulator’s review. By doing that, Loss Adjusters can periodically send to NAICOM the total amount owed to them by Underwriters, then cross check it with what insurance companies submit to them. I’m just thinking aloud. There can be better ways NAICOM can come in to reverse this bitter work relationship between us and Underwriters.
Ur expectations from the first quarter of 2023.
This government has already done very bad, so the future of Nigerian economy would depend largely on who they choose. If the wrong person is chosen definitely Nigeria would deep /slip further into economic dungeon and Nigerians would carry bags and away run like Ghana did years ago. But if the right person is chosen, the excitement alone would even make people their sorrows. We pray Nigerians behave themselves.