Rebuilding Public Trust in Insurance

Public trust in Nigeria insurance industry is ineffectual due to negative experiences of the insuring public in claims payment. Ebere Nwoji highlights the on-going determination by the National Insurance Commission to rebuild lost trust through seamless claims settlement.

In his deliberate long walk towards rebuilding public trust on insurance industry since his assumption of office as the Commissioner for   Insurance April last year, Mr Olusegun Ayo Omosehin, has maintained that enthronement of stress-free claims payment regime was at the heart of the efforts towards winning the trust, confidence and patronage of the insuring public.

Omosehin, has been emphasising on his regime’s zero tolerance to outstanding insurance claims.

At the recent 17th meeting of insurance committee meeting, a bi-monthly meeting of insurance chief executives with National Insurance Commission (NAICOM) held in Lagos, the need for the insurance operators to rebuild the trust of the insuring public towards their business was the highlight of discussion at the meeting.

Omosehin, told the insurers that seamless claims payment was the shortest and easiest way of rebuilding this all important public trust on insurance.

He told the insurers that what his administration was pointing out is not just claims payment but paying claims without stress.

According to him, his regime is much interested in seeing insurance companies make process of claims payment less stressful as well as softening the hard lines for the insureds.

“It is not just about claims payment but truly about the process, making sure it is less and less painful for the insureds,” he stated.

Claims Payment Records

According to Omosehin, though companies have been paying claims, available reports on the industry’s claims payment status showed that the situation as at today is not encouraging as there has not been significant reduction in the quantum of outstanding claims for the industry.

To address the situation, the insurance commissioner urged the insurers to liaise with brokers and customers to sees how they could reduce outstanding claims.

He said NAICOM has constituted a committee that would oversee easy documentation 

for easy payment and reduction adding that there will be a meeting between technical committee of insurance industry committee, the Nigerian Council of Registered Insurance Brokers (NCRIB) and NIA to deliberate on how to reduce documentation required for certain claims because it has been discovered that most times, documentation is what delays claims payment.

Third Party Motor Insurance Claims

The commissioner was particular about Third Party Motor Insurance claims saying that it would release guidelines on claims emanating from the policy.

This, according to him, is because in the past when there was no enforcement of the policy and when the premium was N5000, claims were not demanded on the policy but now that the enforcement has started and the premium increased, operators should expect claims from the policy. 

He said they should therefore be prepared to pay the claims. Omosehin before now had threatened to employ “name and shame” strategy against any insurance firm that denied the public genuine claims.

Warnings to Insurers

At the November 2024, insurance directors’ forum held in Lagos, Omosehin had warned insurers against unnecessary delays in payment of claims, calling  operating firms to reduce the quantum of outstanding claims in their books.

Claims payment problem in insurance industry is as old as insurance business itself.   Its adverse effect on the image of the industry cannot be over emphasised.

Indeed claims payment problem is what battered the insurance industry’s image in the past and despite the efforts of some new generation insurance firms to correct the problem, it has stood still as a hard nut to crack.

Successive regimes in NAICOM have severally fought against poor attitude of some insurance operators towards claims payment but despite their efforts, problems of outstanding claims in the financial reports of insurers persist.

Given his experience as former insurance chief executive, Omosehin has insisted on getting rid of unpaid insurance claims problem among insurance operators.

Omosehin at the insurance directors’ forum had said that his primary focus was on ensuring timely payment of genuine claims (payment of claims and timely too). 

“We expect all insurers to significantly reduce their outstanding claims by the end of the year, as emphasised during the last Insurers Committee meeting. Unnecessary delays in the settlement of genuine claims will no longer be tolerated.

“As a Commission, we are committed to strictly enforcing the law and taking swift action against any insurer failing to meet his claim obligations. Simply put, if a company cannot honour legitimate claims, it has no place in our industry,” Omosehin emphasised.

Continuing he said “The financial stability and soundness of our institutions are now more vital than ever. To remain relevant and competitive, our institutions must comply with all the relevant prudential regulations and requirements. We must begin to prepare our various entities well ahead of the Risk-Based Capital regime, so that ensuring adequate capitalisation is no longer optional. We must prioritise robust capitalisation to effectively tap into target markets and navigate current industry realities,” Omosehin stated.

One of the key points of discussions at the 17th insurers’ meeting with the regulator was operating firms’ solvency levels. Indeed, much emphasis was laid on solvency control and regulatory framework.

Omosehin told insurers that the regulator’s solvency checks should now be on quarterly basis. This is to ensure that operating firms are strong and healthy enough to fulfil their claims obligation at any point in time.

Nature of claims

Insurance experts said claims payment in insurance contract serves as spice that attracts potential policyholders to insurance patronage.

According to former commissioner for insurance, Mr Fola Daniel, stress- free claims payment is the most effective advertisement any insurance firm would make to win the public.

By its simple definition, 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 bad image 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. 

Some insurers imbibed the negative attitude of coming up with a lot of excuses whenever claims occur. Some begin to point out some hidden meanings of the words in the policy statements which were not interpreted to the policy buyer at the beginning, just as a way of wriggling out of the claim’s net.

This attitude is very common among Nigerian insurers. To address the problem, Omosehin at the 17th meeting of NAICOM and insurance chief executives said he has set up technical committee that will look into reducing number of documents to be filled before assessing claims.

But insurance technocrat and former Chairman NIA, currently Principal Consultant Claims Advocacy Group, Mr Gus Wiggle, condemn poor attitude of insurance underwriters towards claims payment.

According to him, timely payment of genuine claims give confidence to the insuring public that insurers are really prepared to pay claims and they can be held to their word. 

He said no excuse is acceptable from any insurance underwriter who failed to pay claims on the reason that some claimants failed to follow up their claims rightly.

 “This could be true but what stopped the insurance companies from reaching out to the client and sending reminders.  It’s all about communication and customers satisfaction. You send renewal notice when the policy is getting due and repeatedly sometimes, why not do same for uncompleted claims,” he said.

failure to file claims

According to him, there may, however, be reasons insureds don’t want to file for claim some of which could include fear of rejection of their claim, lack of knowledge of steps to filing their claims and the fact that some don’t know which documentation may be required by the insurance company.

He further said some see it as time wasting and will therefore not want to waste time filing the claim particularly if the value of the claim is small or the process is cumbersome. 

Wiggle said another major reason insured don’t file or follow up their claim is this passive notion that insurance companies don’t pay claims and therefore don’t want to waste their time.

He said this lack of motivation could lead to procrastination and ultimately, abandonment of the claim.

He, therefore, advocated the use of brokers/agents whenever people want to buy insurance. 

“I am not sure you can buy any stock in the capital market without a stockbroker who still charges you for the services rendered but not so in insurance. The insured does not pay broker but the insurer does, so it’s not a cost to you, “he said.

Industry analysts said with current readiness of law enforcement agent like the Nigerian Police Force to enforce compulsory insurances, a big opportunity has come to the insurers. They added that insurers should be wise enough not to allow this opportunity elude them through non-payment or delay in payment of genuine claims.