Insurance

Why insurance N1tn premium target failed – NAICOM

From left: President, Chartered Insurance Institute of Nigeria, Eddie Efekoha; Chairman, Nigerian Insurers Association, Tope Smart and Deputy Commissioner for Insurance, Technical, Sunday Thomas at an event in Lagos.

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Chuks Udo Okonta

The National Insurance Commission (NAICOM) has said the industry’s N1 trillion premium income failed because insurance operators failed to behave rationally.

Deputy Commissioner for Insurance, Technical, Sunday Thomas, who started this at a forum in Lagos, noted that the commission proposed N1 trillion for the market, under certain circumstances and with a lot of assumptions, stressing that part of the assumptions was the effective enforcement of compulsory insurances, assuming that operators would behave rationally.

According to him, the operators aborted the target through reduction of statutory premium, he noted that there was a point that 3rd party was N5000, but it came to a point where people were charging N1000 and the market was producing N200 million. “If they decide to charge N5000, what is the market likely to produce? I am just telling you why we are not at N1 trillion,” he said.

He also accused operators of violating laws to hurt their business, as against their counterparts in the banking sector that would do same to promote their operations.

“I did a comparative analysis between the banking sector and the insurance sector. The central bank of Nigeria will put a cap on interest rate for certain sector. The banks would violate this rate, not by reducing the rate, but by increasing the rate, using other terminology like administrative fee. If CBN for instance says the rate should not be more than nine per cent, the banks would charge 12 per cent.

“There was a time that CBN also gave a directive to the banks to have branches, even at rural areas.
“The banks would violate such directive and pay the penalties for not having branches in those areas because they consider these areas as not being viable.

“In my industry, we also commit the same offense, by violating the law. Rather than do it to their own advantage, the operators would reduce it, I just don’t get it. There was a point in this market when 10 per cent for comprehensive insurance was sacrosanct, but later, it came down to five per cent and that became the standard. But you and I also know that there was a point that some operators were charging as low as 1 per cent,” he said.

He noted that there is no way the regulator can go after all operators, stressing that it beats his imagination why anyone would want to cut himself, whilst doing his business.

He said NAICOM is committed to taking the industry to lofty heights, adding that the commission has always reminded government agencies that if they want insurance operators to pay their claims, they need to pay the right premium.

“The federal government through the office of head of service reach out to the commission, they told us to be considerate, that the budget has been passed, we insisted that we will not change our position and that is why you find today that government pay the rate the commission has stated,” he added.

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