4 July 2012

Nigeria: Making Insurance Socially Responsible

Some events that shaped the industry in the last six months include renewed war on terrorism financing, launching of the insurance industry database and introduction of a risk management framework for insurance among other things as enumerated below.

Insurance Database

The umbrella body for insurance companies in the country, Nigerian Insurers Association (NIA) launched the Nigerian Insurance Industry Database (NIID) in Lagos last week.

Speaking during the product launch, the Commissioner for Insurance, Mr. Fola Daniel, said the database would protect Nigerian governments, individuals and corporations from the dangerous activities of fraudsters racketeering fake insurance certificates.

"The NIID is of great benefit to all stakeholders in the insurance industry. These include but not limited to the various government at all levels, policyholders, shareholders of insurance firms and would be investors," he said.

Also the immediate past Chairman of NIA, Mr. Olusola Ladipo-Ajayi during the launching said he was convinced that the database would help to eradicate fake insurance.

The NIID would serve as a vehicle for easy identification of genuine insurance documents by relevant authorised persons, monitor insurance transactions documents and reduce incidences of fraudulent insurance transactions.

The association also procured over 300,000, out of the earlier promised 500,000 hand held devices to be distributed to security agents across the country for easy differentiation between genuine and fake motor insurance certificate holders.

Also, policyholders were asked to check the status of their motor insurance policies via SMS by sending their policy number through text message to 33125 or on the internet.

MDRI Committees

Members of the State Implementation and Monitoring Committees (SIMCs) for compulsory insurances started gathering data on public buildings and buildings under construction across their respective states in the first half of this year.

The project which is furtherance with the Market Development and Restructuring Initiative (MDRI) initiated by the National Insurance Commission (NAICOM) was to ensure smooth implementation and enforcement of the compulsory building insurances.

Daniel said the SIMCs were charged with the collation of data on public buildings and buildings under construction and sensitisation of the public on compulsory insurance products.

Section 64(1) of the Insurance Act, 2003 provides that: "No person shall cause to be constructed any building of two floors without insuring with a registered insurer his liability in respect of construction risks caused by his negligence or the negligence of his servants, agents or consultants which may result in bodily injury or loss of life to or damage to property of any workman on the site or of any member of the Public."

Section 65(1) of Insurance Act 2003 also provides that "Every public building shall be insured with a registered insurer against the hazards of collapse, fire, earthquake, storm and flood."

The insurances in question covers the legal liabilities of an owner or occupier of premises in respect of loss of or damage to property or bodily injury or death suffered by any user of the premises and third parties.

The Act defined "Public building" as a tenement house, hostel, a building occupied by a tenant, lodger or licensee and any building to which members of the public have ingress and aggress for the purpose of obtaining educational or medical service, or for the purpose of recreation or transaction of business.

Risk Management Framework

NAICOM said it would focus on the implementation of risk-based supervision, adding that with effect from July 1, 2012, all insurance and reinsurance companies would be expected to have a workable risk management framework in place.

"You cannot migrate to risk-based supervision unless you have risk management framework. We have just released our risk management framework and I am glad to say a few insurance companies have in place risks management framework," he said.

Unlike other regulatory bodies, NAICOM usually allows operators enough time to assimilate and comply with one regulation before introducing another. In coming up with the risk management framework directive, the commission took into consideration issues such as the impact of capital on the business of regulated companies as well as spill-over effects from the banking industry and uncertainties in the system, she said.

Compensation for Air Crashes

The crash of the Dana airplane in Iju area of Lagos State a month ago threw up three important issues for the insurance industry and Nigerians generally. The first and most important was the need to pay adequate financial compensation to relatives of victims of the air disaster and to ensure that insurers meet stakeholders' expectations in this regard.

The second was the fact that six months into the year, the Federal Government was yet to renew the Group Life Assurance for its workers for the year and life insurers were yet to be appointed to underwrite the risks and no premium has been paid on the programme by June for a cover that is renewable yearly. This means federal government workers who died in the crash were not qualified to get group life compensation.

The third and most worrying was that the aircraft was not properly insured. 70 per cent of the premium for the cover was paid to insurer outside the country while the 30 per cent meant for local underwriters were not paid before the crash. This reduces the amount payable to victims and their families to 70 per cent of whatever they were supposed to get as compensation.

However, succour came for the victims and owners of the airliner when the Commissioner for Insurance declared that since the lead insurer, Prestige Assurance Plc has given cover without collecting premium as specified in relevant insurance laws and directives, it is liable 100 per cent for all claims arising from the incident.

For the lapses in Federal Government insurance, the CIIN president appealed to insurers not to let government down but to rally round it to avoid embarrassing government. "It is not in the interest of the insurers not to come to the aid of government this time," he appealed.

Combating Economic Crimes

NAICOM renewed its resolve to ensure that formations under its supervision are not used by criminals to launder dirty money and finance terrorism locally or internationally. It issued guidelines on what the operators are expected to do and how they are to proof to the regulator and other stakeholders that they are not in any way involved in any of these crimes.

The commission also went ahead to ensure that the top echelon of the industry really understands what are expected of them in this crusade even as it warned that it would ensure that all operators under its supervision observe full compliance with relevant the anti-money laundry laws the country.

The Deputy Commissioner in charge of Finance and Administration, Mr. George Onekhena made the position of the commission known recently saying: "In compliance with the anti-money laundering act, we are making efforts to ensure that the operators understand what the requirements are and what steps they need to take."

Meanwhile, NIA harped on the Know Your Customers (KYC) mandate handed insurers by the regulatory body. KYC is "the due diligence that financial institutions and other regulated entities must perform to identify their clients and ascertain relevant information before entering into financial relationship with them."

It is expected to protect companies from reputational risks, operational and other risks and help them to establish a reliable customers' database in-house.

College of Insurance Graduates

In the first half of this year, the Chartered Insurance Institute of Nigeria (CIIN) started negotiations with the Federal Ministry of Employment, Labour and Productivity with a view to confirming the entry level for graduates of the College of Insurance and Financial Management (CIFM).

CIFM is the baby of CIIN and was established under the CIIN Act which empowered it to determine the standards required of insurance professionals in the country as well as train and upgrade their skills.

The professional body for insurance practitioners in the country said that the negotiation became necessary because the institution was not going to run under the curricula of the National Board for Technical Education (NBTE) which oversees polytechnics in the country.

Certificate and advanced certificate in insurance which are equivalent to Ordinary National Diploma and Higher National Diploma under the NBTE programmes respectively would be awarded to graduates of the college. Accordingly, the government needs to formally recognise the certificates awarded by the college as equivalent to OND and HND respectively.

New NIA Chairman

The Vice-chairman of Industrial and General Insurance Plc, Mr. Remi Olowude was last week elected Chairman of the insurers and reinsurers body, Nigerian Insurers Association (NIA).

With his coming on board, the trade group would now have to expend energy on how to win the support and respect of all stakeholders in the Nigerian economy, particularly the Executive, Legislative and Judiciary arms of government and the Nigerian Bar Association (NBA).

NIA is an association representing the interest of insurance and reinsurance companies operating in Nigerian and the new chairman said he would promote ethical standards among member companies and the entire insurance industry among other things.

With the above, stakeholders believe that the industry was on the right part to repositioning itself for better productivity and to ensure that its impact is felt in the economy positively. It now depends on how well the regulated and self-regulatory authorities are able to follow up on set rules and regulations.

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