Kenneth Udeh, Abuja
The Senate has expressed its displeasure over the poor regulation of insurance companies in the country, concerned about the low enlightenment of Nigerians on insurance policies.
This comes on the heels of comments by Senator Uba Sani, Chairman of the Senate Committee on Banking, Insurance and other Financial Institutions, that lower class Nigerians are being shortchanged by insurance companies due to non-moniroring of their activities by NAICOM.
Acting Managing Director of NAICOM Mr Thomas Sunday had appeared before the Senate Committee led by Senator Sani and Senator Orji Uzor Kalu.
Mr Sunday spoke of the challenges faced by the insurance regulator, saying that limited powers in existing laws were responsible for “arm twisting” the Commission from carrying out its enforcement and distress management duties of defaulting insurance companies.
He appeared to the 9th Assembly through the Committee to pass a pending insurance executive bill into law in order to support the performance of the industry.
“It is a common statement of fact that we are performing below our potential. One of the major challenge that we have has to do with trust and confidence; without trust and confidence it would be difficult for us as a Commission,” the NAICOM Director told the Committee.
On the issue of enforcement, Mr Sunday stated that separate government organs had the responsibility for enforcing different aspects of insurance, for example, Motor Insurance.
“The Commission engaged with the Federal Road Safety Corps and was able to develop what is now known as the NID, in which if you take an insurance cover today you will receive a text message, and if you don’t get that message then you should know that you have gotten your cover from a wrong source. That is part of the measures to tackle the non compliance [of] motor vehicles [insurers],” he explained.
“We have realized that at the federal level it would be difficult for proper enforcements to be carried out. We need to work with the state governments, and that is why sometime two years ago we attempted to reach out to the Governors’ Forum, but it was not quite successful.
“In 2020, we are going to work very hard with the states to ensure that they accommodate us as the regulator in their programme. As a result of the Annuity Pension Reform Act of 2004, which was amended in 2014, there has been massive growth in Annuity.
“In the 2018 data, Annuity is about 30% of the volume of transactions within the insurance sector; but it is increasing by the day. We are talking of over 10 trillion contributions that have come into the Annuity space,” he said.
“It is expected that with time, most of these funds will find their way into that sector. So we need to get prepared for it by the recapitalisation exercise that was announced. We believe that the capital of the insurance company, as it is, is grossly inadequate to take the insurance sector to the next level.”
Speaking further that it has increased the recapitalisation of insurance companies, the NAICOM Director stated that “on May 20th, we released a circular to all the operators and we increased the capital for life companies from 2 billion to 8 billion and general business from 8 billion to 10 billion.
“Currently, the dead line for the recapitalisation exercise has been put at June 2020. The insurance consolidated bill set up in 2008 to consolidate all the laws that relates to insurance, unfortunately as we speak, that is yet to see the light of the day. Managing distress in the insurance companies has become a bit difficult because of the limited powers in our existing laws . It is, therefore, our plea to this Committee to assist us.”
Committe Chairman Sani decried the lack of monitoring of insurance companies, saying that “the Senate is not happy that a lot of Nigerians pay for insurance, particularly at the lower level, but they are loosing everything. A lot of insurance companies are engaged in activities that are not been monitored by your Commission. We need you to do the needed to come up with strict form of regulation and act quickly. We are the National Assembly will give you all the necessary support.
Senator Onyewuchi Ezenwa (IMO East), on his part, expressed concern over perceived fraud by insurance companies who renege on paying claims, especially on third party insurance schemes.
“The major problem of the sector is confidence and you need to instill confidence, and your duty is to protect policy holders; and I want to say to you that the policy holders are not protected as we speak today. As the Nigerian parliament, I would tell you how Nigerians feel about the insurance sector in this country, especially the 3rd party insurance, which is the popular one. They think everything is fraud, they think you people are perpetuating fraud, they don’t have confidence in the sector because the insurance companies always have a way of wriggling out when it comes to paying claims,” Senator Ezenwa said.
“I never seen one obligation being fulfilled to the 3rd party. Nigerians are only interested in it to avoid police and road safety officer’s issues on the road, so that when they ask you for your particulars you bring out your particulars; you show them and then you move on. I’m sure that Nigerians don’t realise that they have an obligation to the 3rd party. In the case of any accident the insurance company is supposed to fix the 3rd party’s vehicle, but Nigerians don’t know about that. You have enlightenment and confidence building to do, so have to go back and restrategise.”
Responding to the Committee, Mr Sunday admitted that lack of public orientation on insurance rights were responsible for the defaulting nature of insurance companies.
“As far as the issue of mushroom companies operating in the country, if a company takes premium and refuses to pay claims, by the NAICOM Act of 1997 passed by this House, we were mandated to set up what is called the Complaints Bureau. What has happened over time is lack of not publicising that information to the public of their rights under an insurance transaction. Anyone that is not satisfied with an insurance transaction can report to our complaints bureau,” he explained.
“I must say also that for those who collect premium and fail to pay claims, there is a whole directorate that deals with that in the Commission when they complain. We have been able to resolve a lot of claims in this respect. Part of what some of the operators are taking advantage of is the low reading rate of Nigerians.
“Because some of these are clearly stated in those policies that they were given. Though there are reports of non-response to claims payment, there are also some beneficiaries, those whose claims have been adequately settled. I will say that the Commission has to stepped up its publicity of the rights of the public as far the insurance contracts are concerned. We have made adequate provisions in our budget for publicity. So that we shall engage the public from time to time.”
The Committee directed the Commission to make available its budget within 3 weeks.