Promoting Insurance Awareness Via Seamless Claims Settlement
Claims payment in insurance contract serves as spice that attracts potential policyholders to insurance patronage. In this report, Ebere Nwoji looks at past and present efforts by NAICOM to enthrone regime of seamless claims payment in insurance industry.
Insurance claim is a formal request for compensation made by a policyholder from an insurance company for loss (es) suffered under the terms/conditions of the policy. Although a claim could be filed by a third party like lawyer or broker, only the person listed as beneficiary on the insurance policy is entitled to receive payment.
Ideally insurance business is all about claims payment and claim is the main reason a policyholder takes up an insurance policy.
Without claims being paid by insurance companies, people are not likely to take up insurance policies. In every insurance contract, there is always a promise that when the eventuality (claim) happens the insurance company as a risk bearer will be there to compensate the insured/policyholder.
Therefore claims payment serves as a test instrument that determines the extent to which an insurance company lives up to the ‘utmost good faith’ promise. In other words, claim payment serves as brand image of an insurance company.
Industry challenge
In Nigeria, the problem of insurance industry is bad image. This has for decades stood as bane of the industry’s growth.
The bad image problem of the industry dates back to early 19th century when insurance business underwriting was taken over by Nigerians from the early British managers running the few available insurance companies in the country.
The way the then Nigerian managers carried out insurance business transactions especially in the area of claims payment made the public to see insurers in bad light.
Indeed not until few years back, insurance industry operators were seen as group of fraudulent people that were out to collect people’s money only to cook up stories when claim occurs .The industry then was unattractive to work in as a result, operators were unable to attract young and vibrant school leavers to work in the industry.
The job was therefore left for non-university graduates and old people with outdated ideas who could hardly breathe freshness into the already existing ones left by the British masters. Indeed, insurance industry then was seen as poor cousin of the bank.
The way the practitioners’ package their policy statements and the products they offered to people also played role in building negative image for the industry.
But in all, people felt more offended with the practitioners’ negative attitude towards claims settlement as they often use interpretation of the insurance policy wordings when claim occurs to shirk even genuine claims.
Poor attitude to claims
Against this backdrop, the industry and its practitioners looked like the Biblical salt that has lost its taste, which should be thrown away for people to tread upon.
What this means is that since the essence of buying insurance is for the policy holder to be paid claims when there is risk but the insurers who are in the business to pay the claims are no longer paying, the insuring public decided to hold their money and carry their risks by themselves when they come.
This was the genesis of the industry’s poor image and patronage problems until in recent years when modern managers started feeling the negative impact. They are now earnestly searching for patronage; some sector operators are busy taking their juicy accounts to foreign insurers whom they have more confidence in. This cuts across all sectors including government business just because the public has no confidence in the ability and willingness of indigenous insurance firms to pay claims.
Rebuilding image
Realising the negative impact of the distrust, some industry operators decided to rebuild the image of the sector and give it some measure of credibility and goodwill. So they decided to embark on image laundering through publicity.
This compelled them to set up a committee tagged insurance industry image committee led by one of the elders of the industry, the late Yinka Lijadu.
The committee could not do much to launder the industry’s image until the late 90’s when the industry’s regulator the National Insurance Commission (NAICOM) took it upon itself to address the issue of low capital base which it envisaged was the cause of operator’s poor attitude towards claims payment. It pushed up the industry’s capital from N20 million to N100 million in the first instance for general business underwriters then to N300 million.
The regulator under the leadership of the erstwhile commissioner Fola Daniel took over and continued to push up the capital base of insurance firms to the present level of N2 billion for life business, N3 billion for general business, N5 billion for composite firms and N10 billion for reinsurers.
This robust capital initially did not only position the industry to partially partake in the insurance of those businesses that were hitherto taken abroad but has empowered and positioned the operators to pay claims without delay.
The testimony of the insuring public since the capital increase was that Nigerian insurers now pay claims unlike before.
At one of the annual general meetings of one of the insurance companies held in Lagos, shareholders called on federal government and the industry regulator to use law enforcement agents to compel Nigerians to buy the listed compulsory insurance products in order to boost the industry’s premium income.
They argued that this has become necessary because insurers now pay claims; therefore, nobody would say that buying the compulsory products is waste of money.
Indeed the huge capital then when naira still had greater value went far in redefining the future and fortunes changed as well as people’s confidence in the industry.
Recently along Ikorodu road, two motorist driving different brands of SUVs were involved in accident. While they jumped out of their vehicles to commence the usual argument that often cause long traffic jam at accident spots on Nigerian roads, an employee of Mutual Benefit Assurance, one of the underwriting firms in another vehicle recognised one of them as his company’s policy holder and approached her immediately telling her that she insured the vehicle with his company.
While the woman was trying to understand what he meant, he called his office and within a short while a towing van was brought to carry the damaged vehicle for repair. This was a surprise to both parties; that just for N5000 premium paid, the insurance firm took it upon itself to bear the cost of repairing the vehicle.
These are some of the incidents that become reference points indicating that the sector has changed in its disposition to claims payment.
Both the industry regulator and leaders of the various trade groups in the industry have realised this and they are currently leaving no stone unturned in their effort to ensure that the operators pay genuine claims promptly.
Effort in this direction started during the administration of Chief Oladipo Bailey as the industry regulator when in 2002, he compelled the operators to pay claims that emanated from the Ikeja cantonment explosion. Indeed Bailey prevailed on the insurers to pay both genuine and spurious claims from the incident as a way of advertising the industry.
Also during the Dana Air crash of June 3, 2012, both the umbrella body of insurers the Nigerian insurers Association and NAICOM prevailed on operators involved in the contract to pay claims to the victims’ dependants not minding that some employers of the victims have not renewed the contract, which was due for renewal in January.
The insurers were compelled to pay the claims under the consideration of what the then chairman of Nigeria insurers Association (NIA) Mr Ladipo Ajayi called ‘gentle man’s agreement’.
The most recent case being the #endSARS protest claim in which the industry paid a whooping N11 billion.
These are meant to advertise the industry as claims paying industry before Nigerians and to save the industry from the existing bad image occasioned by non-payment of genuine claims by the early practitioners.
It has often been said that the best awareness creation and advertisement insurers could do is to pay genuine claims without much argument.
NIA Consumer Complaint Bureau
To ensure that genuine claims are paid without much argument both the NIA and NAICOM had set up what they tagged customer compliant bureau where any member of the insuring public that has unsettled claims should lodge his complaints.
According to NIA, the bureau serves as a place where displeased claimants can lodge complaints against insurance companies in Lagos.
At the inauguration of the bureau, the then NIA chairman, Mr. Olusola Ladipo-Ajayi, had identified the need to change the poor public perception of the insurance industry as a major reason for introducing the bureau.
According to him, “Over the years, incidences of unsatisfactory response to settlement of claims by underwriters seem to have contributed to the poor public perception of insurance as a financing option. Today, we want to shake off the yoke of the inglorious past and chart a new beginning for the insurance industry anchored on the principles of trust and utmost good faith, the basic pillars of insurance practice.”
He said that after a comprehensive review of the situation, especially as it concerned confidence building mechanisms, the NIA had come up with the idea of establishing a Customer Complaints Bureau structured to provide the needed platform for intervention in cases of dispute leading to delay or non settlement of claims.”
According to him, the objectives of the bureau are to serve as alternative dispute resolution mechanism, providing an independent opinion on disputes that might arise in any insurance transaction between members of the association and policyholders; and reducing the cost of obtaining justice in respect of insurance related matters, especially those involving members of the association.
Others, he said, include promoting good and prompt service delivery as well as bringing about trust and confidence between the insurance industry and the insuring public.
The NIA boss said that the bureau would listen, discuss, answer questions, provide information, and help develop options for resolving issues that might be brought before the body.
NAICOM said its own Complaints Bureau was a unit established in accordance with section 8(a) of the National Insurance Commission Act No. 1 of 1997. It serves as an organ to which members of the public may submit complaints against insurance companies and intermediaries. The Bureau is not an alternative to the court of law, where certain disputes necessarily have to be resolved. Its findings may be related to the provision of section 8 of the National Insurance Commission Act No. 1 of 1997, which empowers the Commission to enquire into the operations of insurance companies and intermediaries.
The commission said the bureau is to handle all insurance disputes arising from insurance policies issued by registered insurers, such as undue delay in settlement of genuine claims, denial of liability, where the complainant is convinced that there is liability and other matters relating to the discharge of obligations by insurance companies and intermediaries etc.
NAICOM said the insuring public should seek for the intervention of the bureau only after the complainant has failed to reach settlement with the insurer, or intermediary, in respect of a matter properly reported or lodged with the insurer or intermediary.
These point to the importance of claims settlement as a medium for building public confidence on the insurance industry.
To buttress this point the commissioner for insurance at a recent forum told insurers that claims payment has remained the best advertisement and publicity they can do for the industry.
A recent World Insurance Report shows that “a less than satisfactory claims experience prompts one in five customers to switch insurance providers”. As such, no insurance company worth its salt will neglect the issue of claims because doing so is at its peril.
This being the case insurance firms involved in few cases of unpaid genuine claims which news currently fly around should follow suit in the efforts of the industry regulator, leaders of the industry and few others who have determined to launder the already battered image of the industry through prompt payment of genuine claims to settle such claims so that together they will make the insurance industry in Nigeria take its pride of place as the pillar upon which the nation’s economy rests.
Under the leadership of the present commissioner for insurance Sunday Thomas, NAICOM had used many strategies to compel insurance underwriters to pay claims.
He had threatened to use name and shame strategy, sanctions and finally withdrawal of their operating licenses, which it did to two insurance firms few months ago.
