NAICOM concludes stakeholder engagement ahead of microinsurance take-off
Preparatory to the issuance of final guidelines for take-off of microinsurance business in Nigeria, the National Insurance Commission (NAICOM), in engagement with stakeholders both within and outside the insurance sector has seen increasing desire by investors and allied service providers to tap into the growing opportunities in the sector.
This is happening as statistics reveal that 70 percent of the country’s population is living below poverty level, with 52.50 percent of the population living in rural areas and more than 87.9 million of the population being adults.
Riding on this excitement, the Commission notes that issuance of microinsurance guidelines and that of takaful become major steps forward after the industry’s recapitalisation exercise to fully attune it to the Nigerian financial industry initiatives.
Fola Daniel, commission for insurance, said that at this stage of producing workable guidelines for effective take-off of microinsurance and takaful is a culmination of the Commission’s commitment to driving the insurance industry to greater heights by providing strategic and far reaching regulatory frameworks.
Highlights of the guideline being reviewed by NAICOM and to be made public soon states that depending on the type of business the applicant has chosen, the following are provisional minimum paid-up share capital requirements for each business: Life Microinsurance business N150 million; General Microinsurance business N200 million and Composite Microinsurance business N350 million.
However, the draft guidelines exposed by the duo of Sabiu Abubakar, head, compliance and Leo Akah, director, both of NAICOM, highlight key provisions of the expected guidelines include role of provider groups which would require licensing and authorisation by the Commission.
Specifically, they would require approval for Service Level Agreement (SLA) to distribute or sale microinsurance products to low income earners.
Service Level Agreement here is a documented of undertaking, signed and sealed between Service Provider and Insurance Company or Microinsurance Company containing terms and conditions of a partnership contract to deliver insurance or provide certain insurance services by the Service Provider for the Insurer.
The document shall contain as minimum standards: Right and obligation of either parties; premium collection notification clause; claim administration and settlement clause; commission payment and or other deduction; record management and any other requirements as the Commission may from time to time prescribe.
Approval of Service Level Agreement (SLA) also has to be obtained by Insurer where Insurer wants the service provider to provide additional service to him such as premium collection from low income earners; premium remittance to the Insurer; collection of underwriting information from low income earners to Insurer; clients data update; claims notifications and remittance of claim amount to Insurer, and so on; to carry out these functions no license is required, SLA is sufficient.
Both insurance broker and agent are exempted from going into SLA agreement with insurer for transaction of microinsurance because they are already registered by NAICOM.
However, license has to be issued where service provider wants to underwrite microinsurance risks as risks taker and the service providers groups can only perform this role when they have specialised microinsurance license from NAICOM.
By: Modestus Anaesoronye