KEYNOTE ADDRESS BY MOHAMMED KARI, COMMISSIONER FOR INSURANCE AND CHIEF EXECUTIVE, NATIONAL INSURANCE COMMISSION (NAICOM) AT THE 2017 PROFESSIONAL FORUM OF CIIN HELD AT PARK INN HOTEL, ABEOKUTA, OGUN STATE ON THURSDAY, SEPTEMBER 21, 2017
It is my pleasure to address you this morning on the occasion of this year’s Annual Professional Forum for members of the Chartered Insurance Institute of Nigeria (CIIN) holding here in the ancient city of Abeokuta, Ogun State.
I want to once again welcome and congratulate Mrs. Funmi Babington-Ashaye on her ascendance to the leadership position of the Institute as President and Chairman of the Governing Council. I wish you a very eventful and successful tenure. As I earlier assured you, you can count on the support and maximum cooperation of the Commission at all times in your drive to lift the Institute a notch higher.
In my message at the investiture of the new President on July 25th 2017, I challenged the Institute on the urgent need to reinvent itself as a professional body and update its curriculum to either adopt or adapt contemporary best practices for the overall benefit of the profession.
I implored the new President to treat the issue as priority in her agenda. I will reiterate that call on her and her team here today because I strongly believe that when this, alongside other steps are taken, it will engender respect and credibility for the Institute and the insurance industry.
All my short professional life I have consistently harp on the issue of Ethics and Professionalism. Posterity will not judge us right if we depart this career without leaving a positive and lasting impact on what had sustained us this far. By a simple exercise, we can ask ourselves how many of these CIIN certified and qualified members have exhibited and sustained the spirit of the profession. How many of us conduct our business in line with the ethics, standards and principles that guide the practice of an insurance professional.
The conduct of some of our professionals in the market is; to say the least; appalling and I want to urge the Institute to take a critical look at this development with a view to coming up with measures to arrest it. We look forward to a day when a professional will be de-certified by the Institute for unprofessional conduct. Cases are abound around us in other professions where the privileges of a practitioner is withdrawn for some unacceptable act in his calling.
When the President and some members of her team visited us at the Commission on Tuesday, September 12, 2017, to apprised us of her agenda for the Institute during her tenure, I picked one aspect of the agenda as very key to the success of her reign and that is in the area of ensuring members upholds the ethics of the profession.
Our cursed history has shown that it is easier to say what we want do than actually do it. If anyone can break this jinx, it is our current President. She is known to be fearless and what we say in Nigeria “positively crazy”. I plead with all to be a little
crazy positively and support her to achieve this agenda during her tenure.
So I call on the Institute to review its Code of Conduct for members in order to be in tune with the current international best practice. There is obvious need to enforce discipline in the system and there cannot be a better a place to start than from the members of the Institute.
In the spirit of self-regulation, the Commission therefore demands that the Institute gives an accelerated attention and incept the process of reviewing and enforcing the Code of Conduct for members, failure of which we would be left no option but to enforce it as contained the law.
Only recently, I read the report of the Marine Insurance Committee of the Nigeria Insurance Association (NIA), the report claimed that Nigeria is being deprived of billions of Naira due to “dearth of professionals in marine insurance in the country and this has paved the way for unethical practices in this class of insurance business.” I am glad that this is coming from the NIA, the umbrella trade Association of the Underwriters. So, my question is: what is the NIA, either as a body or individual companies doing about this dearth of professionals not only in the marine sector but across all the classes of insurance?
This fact was sadly confirmed by many of our well respected Chief Executives when we ruled that all Insurance companies must recruit at least one top professional as an Executive Director, their excuse for non-compliance was that we don’t have the right professionals to be EDs. Given that statement we concluded that some wants to continue to be sole administrators of their companies or if that assertion was true then we have too many operational license out there. Either way there is justification for further consolidation in the industry.
There is an urgent need for a reawakening to ensure our professionals are continually trained, re-trained and equipped with prevailing skills and knowledge for optimal performance in line with international best practice. The Commission on its part would continue to support initiatives either from the institute or any of the trade Associations towards ensuring Insurance professionals are regularly updated to enable them align with current global trends.
You can imagine our joy when the President’s plan included continuous training as one of the cardinal point of her agenda. We would work with the Institute and the College of Insurance to agree on the appropriate curriculum for such training and pass the necessary regulations to make it mandatory. Training for practitioners goes beyond attending some conference for MCPE points.
I want to task the CIIN and indeed, every insurance professional to brace to the challenge to upscale our skills in all areas to safeguard the growth of the industry. In this regards, all hands must be on deck to rid the industry on quacks and unprofessional activities for the overall benefit of all.
The Commission would continue to provide the enabling and sane environment for insurance business to thrive in the country. The various reforms and initiatives of the Commission all points towards ensuring the business environment is prepared and conducive for business.
We are leaving in a world that constantly opens new realities. We have to be bold in identifying these new realities and then embrace them and reinvent our industry. Our industry is ailing while our profession is sliding into extinction. Symptoms of the ailments can be seen all around us.
This includes aging workforce, low operating capital, scattered capacity and we spend our time crossing the Ts, dotting the Is but missing the point. We are an industry created on the principles of partnership but has failed to imbibe the culture of partnership. We have lost our stale justification for failure to learn and progress.
Our persistent self-inflicted failure has distracted investment from our industry. It has increased skepticism in our consumers and most tragically it has attracted “clever and ingenious people” into our assumed professional undertaking. In other climes these clever people would be called criminals but we have provided a convenient platform for them to excel and in turn continued to enable corners to be cut even where there is supposed to be non.
The looming disaster as it is now, is, professionals are turning into “clever people” and the professionals don’t see the danger anymore. All past attempts to reinvent ourselves have been attacked by these clever people in our mist sadly through our professionals. Their stake in us is short term. They very much know if we plug the leaks and change, they loose, and If we fail they would only move on and we’d be the losers.
As gloomy as it may sound, I believe we can make it better if we want. If we want we can resolve to turn around the fortunes of our industry and profession.
As part of this resolve, the Commission is about to exposed the draft of the revised Code of Corporate Governance to all stakeholders. Not only have we always resisted change as an industry, we have actually fought against it, sometimes with silly arguments of being different or requiring more time to do what other sectors have achieved overnight.
Low Insurance penetration has continued to an issue in this market. To resolve this, we have identified the limited channels of distribution as one of the major draw back. The industry has concentrate on servicing only government and corporate clients to the detriment of the retail and micro consumers. Failure to effectively enforce the compulsory classes of insurance is another.
In these regards we have considered and agreed to create additional distribution channels in the market to include using the services of state government to enforce compulsory insurance at the state level. We have further decided to explore and de-mystify the partnership type of operation for Brokers and I can assure you it will open a new vista in insurance inter-mediation in Nigeria and most importantly it would clearly separate the professionals from the businessmen.
To underscore our determination in this regards, we have just exposed the following draft guidelines:
Web Aggregators Operational guideline
State Government’s Implementation of Compulsory Insurance (or State Financial Advisers) guideline
Independent Agents Operational guidelines
Mutual Organisations, Associations, Community Based, Micro Insurance Agencies and Non-Governmental Organisation guidelines
You would also remember that the revised Micro Insurance guideline had since been exposed, a final and clean copy would soon be released.
Suffice it to say that insurance Supervisors the world over are charged with a variety of responsibilities, the specifics of which vary from jurisdiction to jurisdiction. These responsibilities typically include safeguarding policyholders and fostering a supervisory framework that contributes to public confidence in a competitive financial system. I dare say that the National Insurance Commission (NAICOM) is guided by these responsibilities in all its actions.
We are however alarmed by the incessant complains of failures of Insurance companies to settle genuine and discharged claims to policyholders. This sad failure include the companies’ inability or refusal to settle inter-company balances.
These claims and balances have risen to an unacceptable levels where again we are now required to withdraw the self-regulation option given operators to total enforcement of the law. We have already received requests from claimants to apply the companies statutory deposit to settled discharged claim; as stated in law; and the process has already commenced. And as a punitive measure we have agreed to also publicise any company whose deposit is so applied and coupled with that to have the Chief Executive of such company discharged.
And for all, especially intermediaries that hold back clients’ and companies’ money or collude to steal or corruptly operate, such actions being criminal, would be forwarded to the appropriate law enforcement agencies. Our recent visit and meeting with the EFCC was well reported where the two commissions agreed to establish a join task-force to among other things ensure corruption is weeded out of the insurance sector for good.
I decided to keep away from addressing any subject that has to do with the theme of this forum because there is nothing I can say better than the resource persons you selected to address the subjects. I can only ask that you should please not be distracted by what I have said but listen carefully to what they would say and mix that and mine to get a comfortable balance. That said, we have to agree that Insurance growth forecasts in recent times have remained uncertain due to continuing global tensions and fragilities.
Although numerous insurers have already begun to transform their business models in response to the changing business environment and successive regulations, they are now confronted with a future of weak demand and rising costs. Improving future growth prospects and market share and achieving a good return on capital – while reducing unnecessary inefficiencies and costs – are beginning to emerge as the short to medium term norms for most insurers.
The insurance industry in Nigeria has indeed, undergone a series of changes which have had a considerable effect on efficiency, positive productivity change, stability, market structure and performance that has attracted foreign investors in the process.
The unrelenting pace of regulatory reform continues as insurance initiatives such as the International Association of Insurance Supervisors’ (IAIS) Insurance Core Principles (ICPs), International Financial Reporting Standards and Codes (IFRS 9, 15, 16 and 17) and the European Union’s Solvency II directive remain a key focus.
The implementation of Solvency II in Nigeria will no doubt present a true picture of the risk profiles of the insurers, while fostering an improvement in the culture of risk management as it aims to ensure that there is adequate understanding by insurers of the inherent business risks in the industry and the allocation of sufficient capital to mitigate them.
As a result of increased risk coverage, there will also likely be an increase in the minimum capital requirements and potential reduction in qualifying capital of insurance companies. We expect this to lead to further consolidations and stability in the industry which will subsequently create an influx of foreign investment.
After such an exercise, we would have no reason to continue with the suspension of issuance of new operating licenses. For the period since that policy was introduced, there had been no local merger or acquisition and I believe once more the market had lost an excellent opportunity to strengthen itself from within. It is no surprise that big international players are taking position in our market, they obviously see something you don’t. In the field of fairplay there is hardly more than a couple of companies that can complete with them.
Insurance institutions must therefore, review and where necessary, enhance their capital, risk management and governance in order to survive the interesting future ahead. Barring hindrances such as high costs of implementation, paucity of requisite data and skills and political obstacles; we posit that a intelligence implementation of a strategic consolidation in Nigeria will boost the overall performance of the industry and position it as one of the foremost in the continent.
Our market by all standard deserves to be reckon in the International playground of insurance, but how can we when we operate in uncoordinated silos. We have to wake up, sort ourselves out and be ready to play our role at least in the sub-region. For operators that are members of the West African Insurance Companies Association, (WAICA) it is common knowledge the the integration of members countries into a single market is on the front burner.
Both the WAICA and the newly formed West Africa Insurance Supervisors Association (WAISA) have resolved to work with the ECOWAS and West African Monetary Institute (WAMI) to fast track the realisation of this integration.
This in my opinion is a good reason enough to recapitalise or consolidate to benefit from this huge opportunity when it arises, but to really benefit from this international opportunities we have to organise our local WAICA chapter which would be the fulcrum of this project.
I am happy to also announce that the Federal Executive Council meeting that held on the 13th of September approved the participation of Nigeria into the membership of the African Trade Insurance Agency (ATI). This is an excellent opportunity for support to our industry to be involved this class of international business.
Ladies and Gentlemen, our overall desire is to have an industry that is knowledge driven and run in line with international best practices. Let us all join hands to build a stronger market that is capable of competing with its pears not only on our home turf but across the sub region and the continent.
I wish us all a very productive interactive next few days that will enable us deliberate, discuss and set out on a path for stability and growth that can impact the sector’s contribution to the nation’s GDP positively in this era.
Commissioner for Insurance/CEO