Insurance Contribution to GDP:  Task Before NAICOM 

The need for insurance industry to grow and improve the sector’s contributions to the national GDP is a mojor task before NAICOM in 2024, writes Ebere Nwoji

As the new business year begins with various sectors of the economy strategising to navigate through the year and achieve  optimum growth, insurance sector  has been pointed among the sectors in need of  this all important  growth. Sector analysts said stakeholders needed hard work and innovate to succeed through the year just as they said there was need for positive changes that would accelerate growth, enhance sector appeal to Nigerians and ensure its meaningful contributions to the nationa’s gross domestic products (GDP).  On negative factors currently plaguing the industry, analysts said insurance contributions to the GDP is still less than  1 per cent and many Nigerians don’t have single insurance policy, whereas many have more than three bank accounts.

They observed that some Nigerians don’t even  have common compulsory policy like the Motor Third Party Insurance; yet their motor vehicles ply Nigerian roads on daily basis while their businesses are sitting  on pool of risk without the least insurance cover, just because of their high level of ignorance of value of insurance.

In their view, many investors are averse to staking their investments to insurance stocks while those who did, complain of poor returns on investments. The operators themselves can hardly handle high ticket businesses;  they rather act as conduit pipes through which such businesses as aviation insurance , oil and gas insurance are flown to foreign insurers. 

Members of the insuring public still don’t have full confidence in operators because of piles of delayed, repudiated, outstanding and denied claims.

They said even among operators, misbehaviors and infractions which end in using investors’ money to pay penalty abound; some vehemently flout laws like “no premium no cover” which implementation was enforced by the regulator some years back.

Expectations from NAICOM

All these they observed have their overall effects on the annual premium income of the industry; whereas pension assets stand at N17.65 trillion, insurance assets is still N2.8 trillion while overall industry’s annual premium  is expected to hit the N1 trillion target which the industry set for itself since 2009.

Against this backdrop, as  the new business year runs on,  a lot is  expected of the regulator, NAICOM, which has over the years stood as the chief marketer and driver of the  sector.

Observers said ability of NAICOM to meet these expectations determines the mileage which the industry would cover during the year in its continued journey towards growth and development to meet  its counterparts in other climes.

NAICOM was established in 1997 by the National Insurance Commission Act 1997 with responsibility of  ensuring the effective administration, supervision, regulation and control of insurance business in Nigeria and protection of insurance policyholders, beneficiaries and third parties to insurance contracts.

The commission through its past and present chief Executive officers have been doing a lot to live up to  the above responsibilities.

Their efforts have no doubt yielded results but there are still grounds to cover to make the insurance sector prominent part of the finance services sector and the economy in general.

On their part, the insuring public from whom these expected streams of premium is  to flow for the realisation of these positive dreams, equally expects nothing short of quality, satisfactory and innovative  services marked by  quick claims processes and payment from the insurers.

Expectations from insuring public

Indeed, members of the insuring public, going by their behaviours and countenance last year seem not ready to accept anything any insurance firm decides to offer in terms of service delivery that is short of their expectations this year.

The situation has been compounded by the continued shrinking of the disposable income of the masses occasioned by the fuel subsidy removal and continued weakness of Naira to dollar which has forced prices of goods, especially consumer goods to hit the roof tops.

The implication of this is that as insurance has always occupied the last column in the scale of preferences of the masses, this year if they are not convinced on the possibility of getting value from any insurance products, the insurers have offered to them there is every likelihood that the few people buying insurance may decide to spend their limited resources elsewhere.

Already, insurance agents marketing life insurance to market men and women are dropping their jobs to sell tangible goods because according to them the traders are no longer ready to put insurance into consideration due to lack of funds.

This has emphasised the need for NAICOM and all arms of the industry  to contribute their quota towards ensuring maximum satisfaction and pleasing of these few available customers .

Among high expectations from the regulator is the proposed publication of notice on outstanding claims which the commission late last year said it would mandate the umbrella body of insurance underwriters, the Nigeria Insurers Association(NIA) to publish inviting members of the public who have outstanding claims with any insurance firm to come up with the necessary documents for payment of such claims.

The development according to former Chairman NIA, Gus Wiggle,  is  first in history in the industry and is a cheering news for both Nigerians and the insurance industry itself if well  handled.

According to him, it was a cheering news because never in the history of insurance practice in Nigeria has it been heard that insurance firms invited policy holders to come for their claims.

According to him, what is common in Nigeria is situations where insureds file claims and some insurance companies sometimes reject the claims giving one reason another why the claims should not be paid .

The Executive Secretary Nigeria Council of Registered Insurance Brokers(NCRIB), Mr Tope Adaramola, said if NAICOM implements this, it would  go a long way to build confidence of the industry in the minds of Nigerians.

There is the proposed  Risk Base Capital  policy which the regulator proposed to achieve during the year.

It is on record that for some years now, the commission has tried to conduct capital increase programme but has not been successful because of resistance from the operators but with high inflation rate in the country, it is obvious that the present capital level which was instituted since 2007 can no longer work.

Finance experts said if  at the present level of inflation the commission fails to implement a successful capital increase, with time, the industry cannot insure even the least comprehensive motor insurance let alone insurance of oil and gas and aviation which operators are struggling to take control from their foreign counterparts.

According to them, this time, given the high rate of inflation, operators should allow the next round of recapitalisation to hold smoothly by shunning any form of litigation otherwise they will shoot themselves below the belt.

Furthermore, some underwriters complain that brokers were far from complying with the “no premium no cover” rule in insurance contract which the commission implemented since January 1,2013.

According to the underwriters the policy only applies in direct businesses not with businesses brought by brokers.

Industry stakeholders,especially shareholders said the commission should join hands with the umbrella body of insurance brokers, NCRIB  in its bid to fish out and punish brokers who hold underwriters’ premium beyond the stipulated period of 30 days.

Also the commission has been advised by industry observers to ensure uniform implementation of the new rate on Motor Third Party Insurance premium in all the states of the federation and ensure that activities of fake motor insurance certificate sellers are clamped down. Otherwise, they said certificate fakers will seize the opportunity of the over 200 per cent increase, which NAICOM effected on the popular policy in January last year, to rip off genuine insurers by charging peanut instead of the official N15,000 premium.

The implication is that Nigerians hit by vehicles with such fake certificates will be left in their fate.

NAICOM’s transformation agenda

Already the commission said it was aware of  the position of insurance as a key  driver for economic growth and would continue to collaborate in different ways to ensure the industry’s growth.

In recent times, the  commission had embarked on a number of reforms which is targeted at ensuring protection of the consumers and laundering of the sector’s image.

At a National conference organised by the commission late last year Thomas

said the commission has  set a seven point agenda aimed at continuing its transformation agenda in insurance sector.

The commission also  launched ten-year  strategic roadmap for the insurance sector as well as a guidance note for the insurances of government assets and liabilities.

Thomas said over the next decade (2024-2033), the Insurance industry would  seek to continue its transformation journey along the following Seven strategic thrusts with the objective of achieving the corresponding goals.

He listed the agenda as: transforming the regulatory environment to sustain the industry growth, transition to risk-based capital model, promoting  insurance awareness and adoption, broadening  insurance product offerings and improving  effectiveness of distribution channels.

Others are enhancing digitalisation of the insurance industry, deepening  the industry’s talent pool and capabilities and supporting Nigeria’s economic transformation and sustainability agenda.

Thomas said NAICOM under his leadership had  remained resilient and focused on implementing initiatives that would  foster development of the Nigerian insurance industry and align its fortune with that of the nation as the Africa largest economy.

Industry analysts said practical implementation of the above agenda and heeding to the yearnings of the insuring public during the year was  the only way to go in the struggle to popularise insurance among Nigerians and improve on its contributions to the GDP of the economy.