Notwithstanding Nation’s Economic Challenges,  Insurance Sector Remains Stable With Success Records

By CLEMENT NWOJI, Abuja

Despite the nation’s economic challenges, at least in the last four years, the Insurance sector has strived to remain resilient given that the regulatory body, the National Insurance Commission (NAICOM)  has relentlessly been on continuous re-strategizing motion which enhances its staying atop, thereby boosting the sectors improvements and  successes. It is on the  basis of this that the Commissioner for Insurance and Chief Executive Officer of the  National Insurance Commission (NAICOM), Mr Sunday Thomas, is optimistic of the sector coming up stronger just as he sees the current economic hiccups as temporary.

The challenges of Covid-19, the change and reprinting of redesigned new Naira notes of N1000, N500 and N200 denominations; the swapping of the old Naira notes with the redesigned new notes, the current foreign exchange crisis and the skyrocketing inflationary trend notwithstanding, the insurance sector has remained relatively strong and positive as risks takers and has recorded appreciable strides.  Even when it encounters any impacting challenges, such are promptly nipped in the bud through proactive management decisions and regulatory policies which shields the insured and potential ensuring publics from being affected.

Consequently, it is in the light of efforts to ensure adequate enlightenment and education of the insuring publics and insurance sector stakeholders on current developments and ways forward in the sector which culminated to the just concluded retreat for insurance Journalists with the theme: “Improving Stakeholders Perception: 2023 and beyond”, organized by the National Insurance Commission (NAICOM) in Uyo, Akwa Ibom state.

The Commissioner for Insurance set the tone, revealing that the Commission has great plans for the sector even though, the management is yet to get close to what it intends to do. According to him, “We have done some of them even though there are much more yet to be done.” He revealed that as at 2020, the Gross Premium Income (GPI) was about N450 billion but as at close of business in 2022, the sector recorded N723 billion, representing a modest 20 percent increase. Mr. Thomas maintained that some of the several initiatives the Commission started in 2020 had been completed while others are  still ongoing, adding that today renewal of certificates had been automated  to the extent that insurance brokers doesn’t need to come to the  NAICOM office for the renewal of their certificates but can do so within the comfort of their offices by uploading the requisite credentials.

“It is also important to let you know that our Institute for capacity building is also ongoing. And it gladdens my heart to say that the Commission is not just giving to the industry, itself has become a part taker of the great initiative of the capacity building. In the area of products development, we have approved so many and probably initiated four of those products and selling the ideas to the market. One thing I will also want you to know which we are working on very seriously is that some time in October, we shall be having a National conference and during it, the strategic plan for the industry, for the first time, which was signed to by every arm of the industry will be launched”, he further disclosed.

Thus, while presenting a paper on “The insurance sector and the Nigerian  economy in the past eight years: Impacts, challenges and the new frontiers”, NAICOM Assistant Director, Corporate Strategy and Special Duties, Dr. Usman Jankara, noted it is virtually impossible to 

accurately measure or  to assess the exact effect of insurance on economic activity in Nigeria. According to him, this was because all the indices applied in the calculation overlooked the wider intangible but very important contribution of insurance to the Nigerian economy. However, he cited that currently, the indices used in measuring the contributions of insurance to the economy include: Assets, Claims Ratio, Capitalization, Retention Ratio, Gross Premium Income, Insurance Penetration Rate, Insurance Density and Sum Insured/Value of Assets. Presenting statistical figures, Dr. Jankara revealed that the annual average Gross Premium Income (GPI) growth has been 15 percent translating to N282.9bn in 2015 to N726.2bn in 2022. In the same vein, he said the industry assets grew from N917.3bn in 2015 to N2.328tn in 2022 which indicated an exceptional growth of 60.6% between 2015 and 2022. Further, he affirmed that the Nigerian insurance sector’s loss ratio for 2015-2022 has remained within tolerable limits, thereby making the sector relatively one of the most profitable globally. Saying that the average loss ratio so far is 46.1%, he said the lowest claims payout in 2014  amounted to N99.1 billion while the highest claims payout amounting to N318 billion was recorded in 2021.

He enumerated that the summation of the impacts of the sector in Nigeria include: Peace of Mind, Savings, Investment & Wealth Creation, Facilitation of Trade and Commerce, Social Security – Reduces ad-hoc support, Investment & Infrastructure Development, Facilitation of Trade and Commerce, Business Sustainability & Continuity and Financial/Economic Stability. Other impacts of insurance industry to the economy include Risk management and financial protection, Wealth accumulation and capital formation, Sources of preserving and/or earning FX, Contributes to economic development, Job creation in terms of engaging labor as sales agents, underwriters, claims adjusters, actuaries, and other staff. Despite all the positive impacts of the sector thus far, Dr. Jankara expressed optimism that the best are yet to be realized given that the sector’s future is certainly going to be driven by technological innovations which the operators cannot afford to be left behind. Such technological imperatives include: Big Data – Analytics, Artificial Intelligence, Internet of Things (IoT), Block chain, Claims Automation, Cyber risks – cyber-security requirements and Guidelines to incentivize innovation, among others.

On her part,  NAICOM Assistant Director, Compliant Bureau Life, Mrs Augustina Onojake, who dealt extensively on insurance claims while making presentations on “Re-awakening the Nigeria Insurance through claims settlement”, observed that the rate of payment of claims by insurers had tremendously improved unlike past years when there were frequent repudiation of claims payments which of course, cast the sector in bad light.  While highlighting the need for verified claims payment, she said: “To an insured, claims payment is the end product of insurance service. Once an insured pays the premium, all he or she expects from the insurer is to be indemnified at the critical time. Ability to pay claims is the real test of a solvent insurance company. The quality of claims administration can make or mar an insurance company.”

Further, Mrs Onojake enumerated the importance of claims to the growth of insurance industry, adding that these benefits cannot be underestimated or overlooked by any serious minded insurers. According to her, payment of claims drives Policy holder’s loyalty to the insurance company, boosts Policy holder’s acquisition and recurring revenue of insurance company, publicizes the company, improves trust and promotes Insurance market development. 

However, she proffered words of advice to the insured and potential insuring publics, saying that there could be genuine grounds for delays in claims settlements by insurance companies just as there are grounds for repudiation or rejection of insurers to pay claims. She listed that reasons for delays in claims settlement can be due to the following reasons: Delay in notifying and submitting the claim form to the insurance company, Losing the insurance policy document, Non-submission of necessary documents, Making a claim after the deadline has passed and lack of timely Premium Payments. Also, the circumstances under which insurance companies can reject claims settlement include: The claim is fraudulent and cannot be substantiated with material facts; Notice is not given to the insurer at all or within a specified period or a reasonable time; The claim will violate public policy; The insurance contract is illegal; There is no insurable interest in case of life; There is a breach of utmost good faith; When the policy holder did not pay premium in line with Section 50 of Insurance Act 2003 (No premium, No cover);  and there is a breach of a fundamental term of the insurance policy.

She concluded that insurance companies should endeavor to off set claims saying “Ideally, a prudent claims settlement promotes customer contentment and allegiance. In other words, claims settlement is the activity of insurance companies that truly portrays what they are there for, because claims settlement is the reason for insurance contract.

Lack of trust and confidence in the Nigerian insurance industry resulting from non-settlement of claims constitute one of the biggest challenges of the industry. Non settlement of claims have negatively impacted confidence in the industry. Thus, insurance companies should endeavor to settle claims promptly because Claims payment in insurance contract serves as spice that attracts potential policyholders to insurance patronage.”

In his presentation, Mr. Ibrahim Ngaski, Assistant Director, information Technology, underscored the relevance of “Leveraging Technology to promote insurance inclusiveness”. He listed most of the technological innovations critical to future insurance practice and advocated that insurers should adopt them to enhance their operations and deepen insurance penetration. These innovations include: Cloud computing, Mobile technology,  Internet of things(IoT) which involves networking of physical devices for seamless exchange of data; effective use of web aggregator which implies maintaining/owning a website to avail information about competitive insurance products, prices, feature comparisons, and direct leads to the insurers; data analytics, cyber security, On-demand insurance, among other innovations.

Mr Adeyemi Abubakar, Head Servicom, also presenting a paper on “Service delivery: A panacea to an effective and efficient growth in the insurance industry.  The role of media”, provided insight into  NAICOM service charter. He said the strategy for service delivery by NAICOM include ensuring prompt claims payment which will promote public confidence, Development of Insurance Education across board, Promoting  Public understanding of insurance mechanism, enforcement of Compulsory Insurance in collaboration with strategic partners, implementation of financial inclusion initiatives through Micro – Insurance and Takaful Insurance, Improvement on insurance distribution channels (virtual marketing), Insurance of Government Asset, and growing insurance premium volume, density & contribution to National Gross Domestic Product (GDP).