18 February 2008
opinion
Lagos — The National Insurance commission (NAICOM) is no less a regulator as the Central Bank of Nigeria (CBN). Yet the apex bank is widely perceived as the regulators regulator. But our insurance Editor KELVIN EGERUE argues that NAICOM now has the golden opportunity of redeeming insurance practice in Nigeria . His report:
The latest moves by the Central Bank of Nigeria (CBN) aimed at monitoring the performance of banks in the country is its pet project of hiring consultants for what the apex bank described as check on the 25 mega banks.
The exercise, when operational would be anchored on the basis those banks in the country run electronic system.
The apex bank had argued on the need for a timely but synchronized pattern of monitoring banks' electronic Financial Surveillance System (e-FASS) with the view to spotting inconsistencies on time.
The e-FASS is a new device by CBN for obtaining timely and regular returns from banks. The returns made through e-FASS come by way of soft copies and are usually done on daily basis.
But the out come of a recent bankers' committee meeting which revealed that most banks have continued to default in the e-FASS scheme had triggered the resolve of the CBN to initiate the consultant monitoring project. Here in lies the lesson for the insurance industry in Nigeria.
Will it not be possible and desirable that the post recapitalized Nigerian insurance industry acquires the image of the beautiful bride based on the score cards of all its stakeholders?
The emergence of mega insurance companies, courtesy of the last consolidation exercise presupposes that positive changes would have taken place in the industry.
There are indeed enough evidence to believe that the insurance market is up and running not with many of the companies having the courage to challenge the banks in such areas as product restructuring and branch expansion.
The argument in most quarters now is that the rise in the profile and perception of the 49 insurance firms mean increased activity and indeed volatile insurance landscape demanding tight monitoring and supervision.
But industry watchers are quick to observe that the new found comparison between the banks and insurance companies should not be limited at business rebranding as it should be stretched to include but not limited to the capacity of insurance companies to conform to established business codes and principles as well as laws and regulations. Anything to the contrary, they said, will spell doom for the emerging market.
There have been many reasons and occasions when the capacity of insurance companies to comply to rules became the issue. That was the era when insurance companies were perceived as out posts of fraudsters. This was based on the thinking that the industry is porous and it allows any form of illegal transactions.
One recalls with dismay the then criticisms of the authorities of the Nigerian Deposit Insurance Corporation (NDIC) over the insurers' reluctance to render returns to it.
The few insurance companies which had the courage then to trade their shares on the floor of the stock market were known to be habitual defaulters in terms of conformity to rules even when it has to do with quarterly trading results. Authorities at the National Insurance commission (NAICOM) will confirm how difficult it used to be persuading insurance firms to furnish the commission with workable data.
Although many have indeed blamed the perceived lapses on what they described as poor attitude of the insurance industry's regulatory body, it has been argued strongly that the better way to achieve a complete rejuvenation of the insurance market in Nigeria is for the regulatory body to try to instill high level discipline in the conduct of the business to the extent that both the insureds and the investors will begin to hold somebody responsible for certain actions and or inactions.
The current commissioner for insurance Mr. Fola Daniel has the challenge of effecting a closer monitoring of the activities of insurance companies. Returns, response to queries, compliance to rules, and judicious response to contractual obligations as well as related corporate governance issues should begin to occupy the attention of the management of NAICOM.
The understanding and appreciation of the fact that the insurance market with its wider spread of investors both local and foreign constitutes a veritable mirror for measuring the efficacy of the present government's posture of zero tolerance should spur Mr. Daniel into directing NAICOM away from frivolities and towards constructive measures capable of boasting public confidence.
Can it not be possible that NAICOM could acquire such an image that will be capable of boasting public confidence.
Can it not be possible that NAICOM could acquire such an image that will make the presence of its inspectors to any insurance company look like when bank inspectors visit any bank? Customers in the banking hall virtually feel the thickness of the presence of inspectors.
Will it not be possible that the product of the analysis of the returns made by insurance companies constitutes the base mark for rating companies?
There is the general belief that it will take the actions and inactions of NAICOM for the insurance industry in Nigeria to gain higher grounds.
As companies prepare to return to the capital market for bigger funds, many of the prospective investors would be looking up to the commission for unbiased information required for investment decisions.
Cheeringly enough, the new commissioner for insurance had assured that the total computerization of the commission's work processes fall within his priority zones. This is the better time for NAICOM to confer on itself the status of the bull dog with a mouth full of teeth. Insurance market will be the better for it.
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