Insurance operators in Nigeria have been blamed for the National Insurance Commission’s (NAICOM) failure to meet its projection of N1 trillion, with NAICOM admonishing the insurance operators for their irrational behaviour.
The Deputy Commissioner for Insurance, Technical, Sunday Thomas said the behaviour of insurance companies regarding the collection of the required funds prevented NAICOM from achieving the N1 trillion premium income projected target for the industry
Factors that worked against the projection
During a seminar held in Lagos, Thomas said backdoor dealings by Insurance operators affected the projection, giving instances when operators sell third-party motor insurance lesser than the required amount.
He stated that the N1 trillion projection was made under certain circumstances, with many assumptions as well. And one of the assumptions identified by the commission is the effective enforcement of compulsory insurances which Insurance operators failed to abide by.
In comparison to the banking industry, Thomas said Insurance operators violate laws to hurt their business, while the banking institution violates the laws for their own advantage. Adding that this irrational behaviour resulted in the market producing N200 million premium income.
“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. 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 offence by violating the law. but 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.
Crackdown on defaulters
Despite his condemnation of the Insurance operators, Thomas said the regulator can’t go after all operators, The Nation reported. But stating that the illegal activities of Insurance operators are bewildering to him, as he’s shocked an individual would purposely hurt their business.
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Meanwhile, Thomas said to have insurance operators pay their claim, government agencies must pay the right premium because NAICOM is committed to taking the industry to lofty heights. Adding that the commission has taken the responsibility of ensuring the Federal Government comply with industry rates and others.
“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.