Insurance

Mainstream underwriters skeptical of micro insurance model

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Chuks Udo Okonta

Underwriters seem to be skeptical of acquiring micro insurance licences as the National Insurance Commission (NAICOM) says majority of the applications it had received were from outside the mainstream Insurance providers.

The Commissioner for Insurance, Mohammed Kari, who disclosed this at the just concluded National Insurance Conference in Abuja, said NAICOM has concluded the process to license two micro insurance operators with four other applications near conclusion.

He noted that in a bid to deepen insurance penetration, NAICOM developed and launched the Micro Insurance and Takaful operational guidelines which allowed insurance companies to offer relevant products through “the window” models of operation, adding that after the commission had gathered some experience, it reviewed the guidelines and upscaled the operations to specialist and dedicated licensing to entice specialist operators from within and without the Insurance industry.

Operators who seemed not to be comfortable with the microinsurance guidelines, are seeking a workable model that would enable them key into the regulator’s vision.

“We are engaging the National Insurance Commission to find workable model, and that has been included in the insurance industry development Plan, which KPMG is helping the industry to harmomnise,” a member of the Nigerian Insurers Association (NIA), said.

An industry source said, NAICOM may have to engage operators again, because operating as micro insurance window is not working and not serving the purpose of the project. We have so many local governments that have no sign of insurance companies at all, and this is what micro insurance scheme was meant to address.

NAICOM had on release of the Revised Microinsurance Guidelines which became effective 1st January, 2018 stated that non-life conventional insurers operating Microinsurance as a window operation are given till June 2018 to wind up this operation, while the life operators has December 2018 as the deadline to do same.

The Revised Microinsurance Guidelines further stated that, “No person shall commence or carry on any class of Microinsurance business without being registered or authorized by the Commission.

According to the Commission, efforts to make existing insurance companies key into micro insurance products and reach the grassroot was not successful, so the new direction was strategically decided to drive penetration and increase access to insurance services.

Section 10, sub section 1 and 2 of the revised Microinsurance guidelines released recently to the public said “Existing Conventional microinsurers shall wind down their window operations for non-life classes within 18 months from the effective date of this Guidelines and in not later than 24 months transfer the life classes to a dedicated microinsurance company.”

It added that, ‘no policy shall be renewed or new one issued with an expiry date beyond the date stated above.’

According to the guideline, a National Insurer, who seek composite micro insurance licence, is expected to be capitalised to the tune of N600 million, while N400 million minimum capital base is needed from a General micro insurance and N200 million for a Life operations

It noted that national operators are allowed to have presence in at least six states within the three geopolitical zones of the federation.

For a State Microinsurer, the minimum capital base is pegged at NI00 million, broken into N60 million for general and N40 million for life operators. The regulator also expects such underwriter to operate only in one State of federation with at least three branches or office locations, each in a different Local Government Area.

A Unit Microinsurer investor, must be capitalised to the tune of N40 million, N25 for general business and N15 million for life, with operation in one location within a local community.

The regulator, has therefore made it mandatory for these micro insurance outfits to make themselves visible and must be seen to be serving the low income earners grassroots.

NAICOM, had in the guideline mandated the 17 insurance firms selling microinsurance products through the window operations to acquire fresh licence within a period of 18 months.

The regulator noted that in a case any of the concerned insurance firms failed to acquire fresh license, those with non-life Microinsurance products should wind up their operations, within 18 months while those with life classes should not later than 24 months transfer the life classes to dedicated Microinsurance company within this period.

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