NAICOM Issues Guidelines for Takaful and Retakaful Insurance Operations

*Demands transparent, customer-centric services devoid of fraud, other malpractices

James Emejo in Abuja

The National Insurance Commission (NAICOM) has released guidelines for the operations of takaful and retakaful insurance in the country.
The framework, which was made available to journalists over the weekend, sets out the minimum standards required from takaful insurance operators in their dealings with participants/policyholders, shareholders and other stakeholders, and seeks to promote greater fairness and transparency between policyholders and the operators.

The “Market Conduct Guidelines for Takaful and Retakaful Insurance Operators,” among other things, stipulate the general licensing and authorisation requirements for takaful insurance operators and intermediaries – as well as spelt out the responsibility of operators in ensuring that their activities are properly coordinated and carried out in a professional manner.

Specifically, the regulation prohibits takaful insurance practitioners from any form of unfair practice including making or causing to be made any misrepresentation concerning the benefits, advantages, conditions, or terms of a takaful policy as well as providing false information or failure to make full disclosure of all requested information on an application for services/products.

The guidelines also frown at using false or misleading information to induce the lapse, forfeiture, exchange, conversion, or surrender of a takaful policy and further bars operators from obtaining money or property by means of any untrue statement of a material fact or any omission of a material fact necessary in order to make the statement made (in light of the circumstances under which it was made) not misleading.

NAICOM Head, Corporate Communication and Market Development, Mr. Rasaaq Salami, said the move was part of the commission’s strategic objectives to drive innovation of products and services and ensure that operators are professional in the conduct of their businesses in line with best practices.
Furthermore, the guidelines specified that it shall be illegal for any takaful insurance operator and intermediary to solicit, offer or allow commissions and/or rebates in the transaction of takaful businesses except as provided by the extant insurance laws or approved by NAICOM.

The document stated, “For the avoidance of doubts, overriding commission, business acquisition fees and other similar fees not provided for by the Nigerian Insurance Laws shall not be solicited, deducted, offered or paid in Takaful Insurance transaction.
“A takaful insurance operator, who grants or receives a rebate, offer, demand, pay or receive commission in any form contrary to the extant insurance laws and regulations issued by the commission may, in addition to the penalty prescribed therein, be liable to other penalties as may be prescribed from time to time by the commission.”

Under the new regime, an Insurance Broker who fails to notify the operator of any contribution received on his behalf shall be liable to a penalty in the sum between 1 and 10 times the contribution/premium subject to a minimum of N500,000 in each case of failure to notify.

Also, where contribution is paid to a lead operator in the case of CoTakaful, the lead operator shall act as if it were a broker as prescribed in the guidelines.
In this case, a lead operator who fails to notify all CoTakaful operators of any contribution received on their behalf shall be liable to a penalty in the sum between 1 and 10 times the contribution/premium subject to a minimum of N500,000 in each case of failure to notify.

Similarly, failure by lead operator to remit to other CoTakaful contribution received on their behalf within 30 days of receipt shall be liable to a penalty in the sum between 1 and 10 times the amount of contribution not remitted subject to a minimum of N500,000 for each unremitted contribution.
The document also spelt out the requirements for foreign facultative retakaful placements in terms of arrangements and exposure limits among others.