Reform boosts market attractiveness to foreign investors
The successful implementation of two major policies “No Premium No Cover’ and International Financial Reporting Council (IFRS) in the Nigerian insurance industry over the last four years has increased the attractiveness of the local market to international investors.
While ‘No Premium No Cover’ has brought strong liquidity into the market making it viable for profitability, the implementation of IFRS has also brought transparency into the sector and capable of competing with other companies offshore.
Section 50 (1) of the insurance Act 2003 states that “the receipt of an insurance premium shall be a condition precedent to a valid contract of insurance and there shall be no cover in respect of the insurance risk unless the premium is paid in advance.”
Over the last four years companies like Old Mutual (Oceanic Insurance); Sanlam (FBN Life Assurance); NSIA Participations (ADIC Insurance); Greenoaks Global Holdings (Union Assurance); AXA (Mansard Insurance); Metropolitan Life (UBA Life) and Sunu Assurance Group (Equity Assurance) as well as other equity investors have taken position in the Nigerian attractive insurance market.
George Onekhena, deputy commissioner for Insurance, Finance and Administration, National Insurance Commission (NAICOM) said the industry now can boost of liquidity and ability to meet financial obligations with the implementation of “No Premium No Cover Policy”.
“The attractiveness of foreign investors into the Nigerian insurance market today is the impact of this policy because it has made our market exciting and liquid”
He stated that with IFRS, you can proudly place side by side annual accounts of an insurance company in Nigeria with those from the America and European markets. “With this, we can easily be evaluated and appreciated”. Onekhena who spoke at the 25th Anniversary Ceremony of Boff & Co. Insurance Brokers said by the time the reform on Risk Based Supervision (RBS) in the industry is concluded, the market would be stronger and more appreciated.
Insurance sector in Nigeria has existed in the last 50 years without a positive consumer perception, that taking insurance as a means of protection is worth its while, since it’s generally believed that insurance companies do not pay claims.
While this perception may not necessarily be right given the huge sums of money paid out annually as claims by insurance companies, and the number of people and families that have benefited from insurance, a few patches of claims issues in the industry still make the sector look as perceived.
This poor perception and low confidence has not only slowed and robbed the sector of its growth potential and contribution to the country’s GDP, it has also cost potential consumers some life fortunes as they had to carry their risks and bear their losses themselves.
In trying to change the perception and offer more protection to the insurance consumer, the industry regulator, the National Insurance Commission (NAICOM) few years ago came up with its Market Development and Restructuring Initiative (MDRI), a medium-term plan to reform the areas of industrial capacity, market efficiency and consumer protection.
This was further extended in 2013 when NAICOM decided to enforce credit policy of “No Premium No Cover”, a provision of section 50 (1) of the insurance Act 2003.
In implementing the law which became effective January I, 2013, NAICOM warned that any insurance company found in its books unpaid premium for policy granted to clients would be sanctioned or license revoked. The whole idea in promoting the policy is that insurance companies having received premium from the insured as and when due have the obligation to pay claims when it arises without any excuses.
While this policy does not only give the insurance companies the opportunity to build capacity by investing premiums on time and generating good returns that would enable them pay future claims when they arise, it becomes a moral burden not to pay the consumer when there is a loss.
Here again, the consumer’s right to ask for claims becomes further enhanced having paid premium to purchase cover.
Today, the consumer is better protected and also given the opportunity to seek redress at no cost when not satisfied with any insurance company’s services through the Consumer Complaint Bureau, a department in NAICOM established to address consumer claims issues.
This has become a great success and hardly would you find a consumer, who has paid premiums and is denied claims when the risk crystallizes.
Modestus Anaesoronye