Guardian

IT is time to put a halt to criminal breaches of insurance laws. The National Insurance Commission (NAICOM) will henceforth wield the stick and publicly too. Gone are the days of keeping sanctions of criminal breaches within the family. Laws are made to be obeyed and sanctions are available for anyone, who violates the law. We will be decisive, short and sharp. No long lasting prosperity will be built on an atmosphere of indiscipline and disorder.

LAST year will be remembered in the industry when regulators took bold and decisive measures to correct market indiscipline in the underwriting of business in the insurance sector.

Apparently to fight back accusations of laxity and ineffectiveness, with the full backing of the minister of state for Finance, the National Insurance Commission (NAICOM) sanctioned publicly underwriting companies and insurance brokers and imposed heavy fines on any company that flouted insurance laws and guidelines guarding underwriting business in the industry.

For instance, 10 under capitalised underwriting companies status are not certain as they may be dispatched to the undertakers for insolvency unless they shore up their capital base. Besides, eight other insurance companies were sanctioned for operational infractions, 19 underwriters were penalized for breach of the guidelines for oil and gas insurance, while 38 others were dealt with for failing to provide evidence of reinsurance arrangements to cover their operations

During the period, the Commission also wielded the sledge hammer when it sacked the board and management of Investment and Allied Insurance Plc (IAA) for insider dealings, suspended the operational licence of A&G Insurance, Fidelity Bond Insurance Brokers and Prime Investment Insurance Brokers for six months, showing that none of the underwriting companies in the industry escaped the wrath of the Commission.

Also, the Commission banned underwriting of insurance contracts on credit, thus enforcing the provisions of “no premium no cover” of Section 50 of he 2003 Insurance Act which 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 an insurance risk, unless premium is paid in advance.

The Commission being adviser to the Federal Government in all insurance matters, also served notice to the Ministries, Departments and Agencies (MDAs) in the enforcement of Section 50 of this law on government agencies to avoid gaps in the insurance cover of government assets, beginning January 1, this year.

The self -regulatory bodies (SRBs) – The Nigerian Insurers Association (NIA) and the Nigerian Council of Registered Insurance Brokers (NCRIB), all joined the Commission in the war against professional misconduct and vowed to disclose firms violating ethical practices.

The Council of NIA, however, admitted the breach in the market agreement endorsed by member companies targeted at checking against price war in the industry, otherwise known as rate cutting, decided to set up the Customers’ Complaint Bureau (CCB) to deal with the issue.

Said the NIA “the premium in the industry kept going down under the weight of competition, which was unnecessarily softening the market. Because of this problem, we could say that when an insurance company had a contract with a client, the responsibility was on the company to perform their contract obligations to the client.

As a result of this problem, the NIA said, “we set up in our secretariat the Customers’ Complaint Bureau and we got a retired Supreme Court Judge to sit on the Bureau, so that if anybody brings any claims against any of our members and the claims is dispatched both in terms of quantum and liability of insurers, this matter can be referred to the Bureau and that would be an alternative dispute resolution mechanism.”

The Council of NCRIB in a statement titled: “Non-payment of insurance commission and claims said, “in furtherance to the desire of the council to uphold ethics and professionalism amongst its members, as well as, increase public confidence in the insurance industry, particularly the insurance broking profession, NCRIB is using this medium to advise insurance companies to forward names of insurance brokers that are withholding insurance premium due to them, as well as, any insurance company that is withholding brokerage commission and claims settlement cheques due to them and their client “for necessary action.” 

The Commissioner for Insurance, Fola Daniel, reviewing the activities of the market last year, however, told The Guardian that the problem of indiscipline and accumulated premium in the market was self-inflicted by operators, and if the Commission continued to condone such act, it would get to a point where insurance institutions would not be able to pay claims of N1 million due to bad debt, as well as, obligations to other stakeholders.

He explained that the Commission was determined to bring the problem to an end in the industry.

His words, “we applied drastic measurers on this issue last year and we are not relenting in our efforts to force operators to run the business according to the law and guidelines for the interest of the industry and economy.

If we look at the Insurance Act 2003 on the issue of “no premium no cover,” we are not supposed to have this debt burden in our books. If we agree to make a law to assist us to operate profitably, then why do we get ourselves involved in this misbehaviour. We are here to protect the interest of all stakeholders in the industry, we will no longer tolerate this act in the market.

On operators’ blame of ineffectiveness of the Commission to enforce regulations and sanction operators, NAICOM boss responded. “The Commission took a less combative approach to regulatory actions despite the temptations to copy other regulators in the financial services sector. We treated apparent criminal breaches as mere infractions and have applied sanctions quietly. The actions taken by the Commission were geared at nurturing a growing industry and laying a solid foundation for a modern and prosperous insurance market in Nigeria.”

Daniel said, “we have, however, witnessed some measure of impunity by our colleagues, who see some of our gentle actions as signs of weakness. Besides, the effect on the regulators, market indiscipline is now threatening the stability of most companies and the prosperous future that our environment has provided.”

According to him, “we have seen insurers destroying tariffs that were established to ensure they have strong financial bases.  Unbridled, unsustainable and technically unsound rates are being offered for risks by the underwriters more out of the need to market than to insure.

The insurance brokers are also not left out in these malpractices. Some of them even operate without proper documentation and in some cases mislead the public by presenting different set of documents for different purposes. They operate as if there are no laws or rules or that these do not matter. They are willing compliances in any unprofessional act as long as they get appointed.”

Daniel warned, “it is time to put a halt to all this indiscipline if we are to move the industry forward. The Commission will henceforth, wield the stick and publicly too. Gone are the days of keeping sanctions of criminal breaches within the family. Laws are made to be obeyed and sanctions are available for anyone who violates the law. We will be decisive, short and sharp. No long lasting prosperity will be built in an atmosphere of indiscipline and disorder, that is the point we are trying to make operators realise.”