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Chuks Udo Okonta
As the newly appointed management of the National Insurance Commission (NAICOM) settles down for task ahead, the Lead Director, Transparent Protection Limited/GTE, Dr. Sam Onyeka, has identified dark spots in the Commission that should be removed through entrenched radical reforms.
Dr. Onyeka, who spoke at a press conference last week in Abuja, congratulated the new team led by the Commissioner for Insurance Olusegun Omosehin, whilst appealing for supports from all stakeholders in moving NAICOM and the insurance industry to lofty heights.
According to him, the objective of the press conference was to draw public attention to the current challenges of insurance regulation and supervision in Nigeria, and to warn of the impending collapse of the sector if urgent remedial steps are not taken by the stakeholders.
He submitted that
it is no longer news that since January 2024, regulatory and supervisory activities at the National Insurance Commission have been running at a rather unusually slow pace, adding that although NAICOM like several other Federal Government’s institutions in Nigeria has always been relatively inefficient, at the moment, the inefficiency at NAICOM has become a matter of serious concern to stakeholders, and this must quickly be addressed to save the industry from imminent collapse.
“Ever since its establishment in 1997, NAICOM has faced many challenges including funding, limited technical capacity, poor infrastructure, political interference and corruption.
“To alleviate the funding challenge, from the beginning, the government had under the provisions of the NAICOM Act 1997, established the Insurance Supervisory Fund (the ISS Levy). This fund is constituted by one per cent of the gross (premium or commission) earned by the insurance institutions in Nigeria.
“Similarly, NAICOM has always faced the challenge of attracting and retaining qualified and experienced staffs. Indeed, NAICOM has been unable to replace its staff as fast as they are being lost through retirement,” he posited.
Dr. Onyeka noted that in recent times, NAICOM’s staff recruitment has been driven more by political considerations, stressing that worse still, the Commission has been unable to guarantee its staff members the minimum training required for the job.
There is also the challenge of undue political interventions which has made it difficult for NAICOM to take urgent regulatory and supervisory actions, including by licence cancellation, against erring insurance institutions, he said.
The former NAICOM’s Director, stated that the commission is not shielded from corruption, stating that frequently, management and staff of NAICOM have been fingered in corrupt practices which are opposed to effective regulation and supervision of the insurance industry.
“The peculiar ugly situation of the insurance industry in Nigeria is that, no serious regulatory and supervisory activities are going on.
“This portends serious danger to the survival of the insurance industry in Nigeria. Without effective regulation, the industry in Nigeria will soon collapse.
“Even with close monitoring of the activities of the insurance institutions, as it used to be, it was difficult to guarantee 50 per cent efficiency in market discipline. It follows logically, therefore, that in the absence of effective regulation, as is currently the case, it must be taken fore-granted that in less than no time, the insurance industry in Nigeria will finally collapse,” he posited.
On the Commission’s financial position he said:
“It should be recalled that in December 2023, the federal implemented 50% compulsory deduction from the revenues of some federal government revenue generating agencies.
“NAICOM was erroneously considered as being among the revenue generating agencies. However, NAICOM is purely a regulatory agency which derives its funding from statutory levy paid by insurance institutions in Nigeria.”
He said NAICOM’s approved budget for 2024 is N10 billion. Of this, the federal government takes 50 per cent which is N5 billion, stating that the current annual wage bill of NAICOM staff is N5 billion.
This simply means that NAICOM is only able to pay salary and will be having no operations funds. Worse still, effective May 1 2024, the federal government announced 25 per cent increase in salary for civil servants. This means that NAICOM’s wage bill will rise by 25 per cent. The implication of the foregoing is that NAICOM will be unable to continue to deliver on its mandate which is effective regulation and supervision of the insurance industry, he submitted.
He remarked that already it is common knowledge that the insurance industry in Nigeria suffers from low public confidence, stating that recently, some insurers in Nigeria have been implicated for non-settlement of genuine claims.
According to him, discrete enquiry at NAICOM revealed that no less than 8000 complaints of unsettled claims are lying untreated at NAICOM’s Complaint Bureau.
These, he said are clear evidences of inefficiency that is driven by insufficient funding.
Proposing immediate solutions to the maladies confronting the insurance regulator, Dr. Onyeka, alerted the Federal Government and all stakeholders that there is fire on the mountain and the insurance industry in Nigeria at the verge of collapse and the most critical challenge at the moment is funding, hence, in the immediate, the Federal Government should consider removing NAICOM from the application of the 50 per cent statutory revenue deduction.
Also, NAICOM should consider urgent reforms including staff rationalisation, relocating its supervisory operations to Lagos where the operators are concentrated, and building a strong IT capacity. In the long run, the Federal Government may think of increasing the percentage of the insurance supervisory levy, but apart from requiring amendment of the existing law, this may amount to indirect taxation on policyholders which may further drive the masses into poverty, he suggested.
He said this is the time to save the insurance industry in Nigeria from imminent collapse and that all hands must be on deck.
