As Claims’ Denials Unsettles Insurance Sector

Non-payment of claims is one ugly habit that is threatening the future of Nigerian insurance sector, writes Ebere Nwoji

Customers of insurance companies are no longer at ease with the rate of claims denial by companies in the sector.

Some of the aggrieved policy holders have threatened to take it personal with insurance agents who sold policies to them, but could at the expiry of the contract, could not stand by them to get their claims paid by the insurance firms.

Some policy holders have gone to the extent of threatening the lives of such agents if at their insurers deny them their claims.

Checks by THISDAY revealed that some of these non-claims paying insurance firms have weak financial base while some are even the big players.

A case in point was one of the firms with the highest premium who insured a house for a journalist at the sum of N20 million. According to the journalist, at the time of signing the contract, after the inspection of the property, the insurance company said he should pay an extension for the policy he wants the insurance to cover.

Shortly after, the house the journalist insured was ravaged by flood.

The journalist claimed that when he saw the flood affecting the house, he called the insurer’s attention but the officers failed to do anything or even to go to the area where the property was located.

According to the journalist, he even asked the insurer whether he could start doing something to prevent further damage to the house, but they said it was an insurance case therefore he should not tamper with the house.
But when the damage was completely done, he filed his claim only for the insurance firm to tell him that the cause of the damage was not insured against.

The journalist asked them about the extension he paid, but the company’s claims’ manager replied that what he insured for was flood but what damaged his house was erosion.

Thereafter, the journalist approached the Nigeria Insurers Association, (NIA), secured a meeting with the Director General who promised to look into the matter, but up till today nothing came out of it.

He went further to report the case to NAICOM, the regulator whose officials told him to forward all the policy papers and mails between him and the insurer, but after all these, nothing has been done by the commission officials.
The journalist said he is now homeless because the damage to the house was enormous and his insurer had made away with the premium he paid before the damage occurred.

Aside these, various members of the insuring public who insured with some weak insurance companies are now in very tight corners as the companies are unable to pay their claims.

Indeed, claims settlement plays a pivotal role in establishing public confidence in insurance operators.

Unfortunately, the issue of non-settlement of claims and its attendant controversy between the insurance operators and the insuring public has continued to reoccur in the relationship between the public and insurance industry operators.

The controversy sometimes occurs when an insured begins to make claims on a policy that was not accommodated by the contract he signed with his insurer or that his claim is genuine, but the insurer tries to deny it.

Going down memory lane, controversy on claims settlement could be said to be as old as insurance business in Nigeria.
The result is that till date, public confidence and trust on insurance industry has remained vague while patronage of the industry is very low.

This explains why for decades, the National Insurance Commission (NAICOM) has continued to struggle to get the industry out of the woods and make its contributions to the Gross Domestic Product (GDP) of the economy meaningful.

From where the industry is today in terms of contributions to the GDP among other members of the financial services sector, it is certain that the commission is still far from achieving g this.

Currently, insurance contributes less than one per cent to the country’s GDP.

On their part, insurers have put up various strategies to woo Nigerians to increase their patronage to the industry.
The insurers claimed that result of one of their researches on low penetration of insurance showed that ignorance of benefits of insurance has remained a prime factor that makes Nigerians not to buy insurance.

Believing this, the insurers have evolved series of awareness programmes geared towards making Nigerians buy insurance.
They had embarked on road shows, lobbied government to introduce insurance as a subject of study in senior secondary schools and now their efforts have geared towards introducing insurance as subject of study in junior secondary and primary schools, all in an efforts to catch Nigerians young in their knowledge of insurance which will grow to patronage of the industry when they begin to earn income.

The insurers have gone round universities and other tertiary institutions to encourage them to establish insurance departments.

But, because of non-payment of claims, these efforts have not yielded the desired results as the industry continues to suffer from low patronage.

On its part, NAICOM had in the past put up policies on claims payment in order to address the situation.

For instance, the commission had in the past given insurers a deadline to pay all outstanding claims or face sanctions.

The commission had then said the directive became necessary because non settlement of genuine claims had brought the image of the industry to disrepute.

But despite the commission’s threat, operators remained adamant as they have been non-payment of claims.

According to a former insurance commissioner, Mr. Fola Daniel, claims payment is the best advertisement the industry operators should do because a satisfied customer is the one that will market the next product of the company that satisfied him and the main thing that can satisfy a customer in insurance contract is the ease of claims payment.

Generally, some of the issues that could make claims payment outstanding include reporting delay, that is time gap between claims occurrence and claims reporting to the insurance company); and settlement delay because it usually takes time to evaluate the whole size of the claim.

Indeed in advanced countries, insurance managers are so faithful to their claims settlement obligation that they keep what they referred to as claims reserves which involves an insurance company putting sufficient provisions from the premium payments aside, so that it is able to settle all the claims that are caused by these insurance contracts.

Here in Nigeria, it is not certain if such reserve is made. Where it is made, it is just merely put there for the regulator to see.
Often what is experienced is long period of argument between the insured and the insurers when claim occurs.

The argument is caused by the fact that while the insured wants to get his claims paid without delay, the claims department officers of insurance firms want to save their companies from spending on claims payment and this often delays payment of the claim.

The Commissioner for Insurance, Mr. Sunday Thomas, recently threatened to deal decisively with insurance firms not paying claims.
Indeed, from his statement, the commission will soon come up with a strategy that will expose non claims paying firms and deal with them without fear or favour.