Expert lists legal hurdles to effective take-off of micro insurance
As the nation’s insurance industry prepares to embrace micro insurance and operational guideline awaited from the National Insurance Commission (NAICOM), the regulator, experts warn that the business will remain unattractive except some legal impediments are removed.
This it noted would not only discourage new investors from seeking operational license, but will not motivate existing operators who have found safety and fortune in conventional insurance and corporate clients.
Simon Akaayar, lecturer, Commercial & Industrial Law, Unilag in a presentation entitled “Legal and Regulatory Issues Facing Micro Insurance Business in Nigeria” during a BusinessDay Roundtable in Lagos said though the market potential is huge, effort must be made to streamline the regulatory framework.
“It is important to develop legal and regulatory principles and standards that will assist in identifying the entities that need be regulated and providing rationale to insurance supervisors to differentiate micro insurance regulated under insurance laws, or other laws or unregulated al all.”
Some of the challenges he cited include the issue of licensing and what the capital base should be, stating that in micro insurance huge capital may not be necessary questioning on whether players not regulated by NAICOM can be allowed to operate micro insurance business.
According to Akaayar, another concern would be the new premium policy “No Premium No Cover”, which he noted should be considered on whether or not it will apply in micro insurance. “But the rate, mode of payment, time and frequency of premium payment as it affects the poor need to be given a thought.”
Language of presentation is also critical, which according to him need to be simplified for more understanding. “Insurance business in Nigeria is transacted in English language and complex legal jargon, which even lawyers struggle to understand.”
Another issue is, who are micro insurance intermediaries? Given that delivery channels bring in a lot of parties into the business unlike the conventional insurance that have just the brokers and the agents. “Legal uncertainties on the meaning of micro insurance intermediaries; micro insurance delivery channels are beyond conventional channels; stringent requirements to practice as intermediaries many be discourage development of micro insurance intermediaries.”
While he believes that a lot can be done to ensure effective implementation, he argues that there could be lessons from other jurisdiction, noting that India currently have the most dynamic micro insurance sector in the world and also the first country to enact specific regulation for micro insurance. Literature shows that three central regulations have shaped it in India, he stated.
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