Insurers’ Tortuous Year Under Tinubu

As Nigerians celebrate one year of President Bola Ahmed Tinubu’s regime, insurers said it has been one year of tortuous business experience

It is exactly one year since former President Muhammadu Buhari handed over the leadership baton of Nigeria to President Bola Ahmed Tinubu as the incumbent president, insurance sector operators have paused to re examine how their businesses have fared in the past one year and concluded that it has been a whole year of tortuous business experience that is not peculiar to insurance sector.

The operators chronicled all events and developments that have bedeviled their businesses during the period and concluded that it has not been anything favorable to the insurance sector in particular.

According to them, the period has been marked by stagnancy and negative developments that if operators don’t take care are capable of sinking the sector and throw many out of business.

These negative developments the operators said started from the annual budget in which the regime during the budget announced the sum of N9. 6 billion as budget for Group Life insurance of its entire workforce.

The development threw the entire industry into confusion on whether the N9.6 billion is all that the regime approved for Group Life insurance of its entire workforce out of the total of N854.81 allocated to pensions, gratuities and retirees benefits under which group life insurance falls.

The insurers therefore, argued that to approve or allocate mere N9.6 billion as total premium for group life insurance of the entire workforce of government is obviously a disorder.

Some insurers raised the question on whether the N9.6 billion is the total amount President Tinubu’s administration has approved for the workers’ Group Life Insurance cover for the entire year or for a short period to serve as part payment for the coverage.

Their question arose because of the statement by the minister of information and National orientation Mohammed Idris on the N9.6 billion in which he said: It’s a normal annual cover that insurance companies give workers.

But insurers argued that if the N9.6 billion is not just a part payment for the workers’ group life insurance premium but is taken as the full premium for the policy for the entire year, irrespective of basis of calculation, then something is wrong some where.

Their reasons are not far fetched. In 2020, the insurers received a total of N15 billion as premium for group life insurance of government workers. In 2022/ 2023, government appropriated N24.7 billion  for the policy representing 64.7 percent increase in the N15 billion it appropriated for the policy in 2020 although last report heard on this in the November of that year said insurers received only 50 percent of the total premium despite N9.2 billion approved for the policy by the Federal Executive council in its meeting in June that year. It was gathered that the delay in payment of the total premium was not unconnected with government’s dwindling income during the period, a situation, which compelled government to enter into dialogue with the insurers on the possibility of reducing the premium payable on the policy.

Revenue deductions

There was also the issue of 50 per cent deductions from the revenue of government agencies which affected the industry regulator National insurance Commission (NAICOM) prompting some industry stake holders to appeal to government to exempt NAICOM from such deductions but this did not hold water. The development is seriously affecting the commission in carrying its overhead cost and insurers are not happy about that.

What looks like the last straw that broke the camel’s back in the checkered history between this regime and the insurers which is the failure by the president to renew the tenure of the erstwhile commissioner for insurance Mr Sunday Thomas despite his immense contributions to the insurance sector which has left no body in doubt as to whether he will have his second tenure in office or not. But to the bewilderment of every body in joy second tenure This is despite the sudden death of his wife. Indeed he was asked to exit the same week his wife died.

All these are setbacks to the industry during this one-year of the new regime especially as the sector is expected to contribute to the achievement of the Federal Government’s target of $1 trillion economy.

Again is the inflation rate which has maintained a double digit of 33 per cent, which is affecting the business of insurance as a long-term fund saving scheme.

Insurance Claims to rise

Analysts have said that the industry is already being hounded by the threat of asset replacement value.

They said asset replacement value or replacement asset valuation is a way of auditing maintenance programs by weighing their annual value against that of a complete asset replacement. 

Citing an example, the analyst said if an insurance company insures a car valued at N5 million in a given year, the insurance company may be faced with the liability of replacing that same car at a value of N7.5 million just after a year or two because of the extra cost owing to rapid inflation in Nigeria.

The analyst said Nigeria’s galloping inflation exacerbates underwriting risks for insurance companies, as the value of insured assets and liabilities fluctuates in tandem with inflationary pressures.

The analysts said insurers must accurately assess and price risks to ensure that premiums adequately reflect the increased replacement cost of insured assets and the heightened probability of claims payouts.

On the positive side the new administration appointed Ayo Omosehin as the new commissioner for insurance.With the appointment insurers have expressed hope of better days to come during the regime.

But one big expectation of the insurers from Tinubu’s regime is the signing of the consolidated insurance bill.

They expected this to happen during Buhari’s regime but to no avail but under Tinubu’s regime every Dick and Harry in the industry is hopeful that this will happen during this period of his first tenure in office.