Insurance Industry: Nigerian insurance companies get recapitalisation deadline
* Nine years on, Nigerian Insurance Industry Database still a mirage
The National Insurance Commission (NAICOM) has extended the recapitalisation deadline for Insurance and Reinsurance Companies earlier slated for June 30, 2020 to December 31, 2020.
A circular with No: NAICOM/DPR/CIR/25-03/2019 /DECEMBER 30, 2019 signed by Mr Pius Agboola, Director, Policy and Regulation, NAICOM for the Acting Commisioner for Insurance, Mr Sunday Thomas, conveyed the new directive to all insurance and reinsurance companies.
It reads: “This circular is in furtherance to our earlier circulars referenced NAICOM/DPR/CIR/25/2019 dated May 20, 2019 and NAICOM/DPR/CIR/25-01/2019 dated July 23, 2019 on the above
“The Commission has reviewed the recapitalisation plans submitted by operators and various levels of compliance observed.
“Similarly, it has noted the inputs from the various engagements with relevant stakeholders.
“The Commission, hereby, extends the recapitalisation deadline to Dec. 31, 2020”.
Agboola explained that the Central Bank of Nigeria (CBN) has obliged the Commission with the Recapitalisation Escrow Account (T24) for the deposit of fresh funds raised for recapitalisation.
“Engagements with these Agencies on other palliatives are ongoing,” Agboola stated.
The directive was with the exception of Takaful operators and Micro-insurance companies doing business in Nigeria.
The circular added that existing minimum paid–up capital share of Life Insurance business was reviewed and raised from N2 billion to N8 billion.
General Insurance business was raised from N3 billion to N10 billion, Composite business was raised from N5 billion to N18 billion and Reinsurance business was raised from N10billion to 20 billion.
SEE Circular Below
Nine years on, Nigerian Insurance Industry Database still a mirage
As the number of vehicles continue to increase on Nigerian roads, more accidents are being recorded, which necessitates the need for all motorists to have genuine insurance covers for their vehicles.
According to figures obtained from the National Bureau of Statistics, 2,532 road crashes occurred in the fourth quarter of 2018.
Speed violation was reported as the major cause of road crashes in Q4 and it accounted for 52 per cent of the total road crashes reported.
Dangerous driving and wrongful overtaking followed closely as they both accounted for nine per cent and eight per cent of the total road crashes recorded respectively.
A total of 8,406 Nigerians got injured in the road traffic crashes recorded.
The NBS data revealed that a total of 1,538 Nigerians got killed in the road traffic crashes recorded in Q4 2018.
Estimated vehicle population in Nigeria as of Q4 2018 was put at 11.82 million with the total population estimate of the country put at 198 million as of 2018.
The FRSC Unit Commander, RS 2.16 Ikeja, Emma Fekoya, in a presentation on ‘The role of the FRSC in enforcement of genuine insurance document,’ said road crashes are a global health and development challenge with significant human and economic costs, especially in developing countries.
The leading cause of death among people aged 15 years and 29 years are road crashes which kill 1.25 million people every year, and injure another 50 million, he said.
He said that deaths from road crashes are more than deaths from malaria or tuberculosis.
Fekoya, said the United Nations recognised the severity of this challenge by adopting specific road safety targets in the Sustainable Development Goals: to halve the number of global deaths and injuries from road crashes by 2020.
Going by the corps strategy goal 2018, the corps aimed at reducing road traffic crashes by 15 per cent and fatality by 30 per cent, he said.
While mentioning the role of insurance in helping to reduce the costs of road crashes to society and the economy, the FRSC official noted that the insurance industry insures almost one billion vehicles globally.
According to the statutory laws, vehicle insurance includes covers for cars, trucks and motorcycles.
The Insurance Act 2003 mandates all motorists to have a minimum of third party motor insurance policy in place.
Section 68 of the 2003 Insurance Act says, “No person shall use or cause or permit any other person to use a motor vehicle on a road unless a liability which he may thereby incur in respect of damage to the property of third parties is insured with an insurer registered under this Act.”
It further explains that the insurance of this section shall cover liability of not less than N1m.
According to the Act, a person who contravenes the provisions of this section commits an offence and is liable on conviction to a fine of N250,000 or imprisonment for one year or both.
Despite the fact that the statutory laws of the country stipulate that no motorists should move on the Nigerian roads without being in possession of genuine insurance certificates, most motorists have continued to show absolute disregard to this statutory requirement.
Also, the National Road Traffic Regulation 2012 Section 139, says, “A person shall not drive any uninsured vehicle, trailer, stage carriage or omnibus on any public road, and any person who contravenes the provision of this regulation commits an offence and shall be liable on conviction to a fine of N2,000 or to a term of six months imprisonment or to both.
“The insurance of vehicles as required under these regulations shall be in accordance with the provisions of the Motor Vehicle (Third Party Insurance) Act, or comprehensive insurance cover.
“It shall be an offence to drive any vehicle with forged or false insurance papers and a person in contravention of this provision commits an offence and shall be liable on conviction to a fine of N2,000 or to a term of six months imprisonment or to both.
About a decade ago, the National Insurance Commission disclosed that 90 per cent of vehicles on Nigerian roads had fake insurance certificates.
Nine years after, no significant improvement has been made in winning the fight against this battle.
This has continued to eat deep into the insurance sector’s premium and prevented certificate owners, the chance of laying any claims in times of losses.
While possession of fake papers could be attributed to ignorance on the part of the motorists, in most instances, some motorists have continued to deliberately patronise vendors of fake papers.
Officially, the third party motor insurance goes for a fixed price of N5,000, but as many are too cost-conscious, they purchase the fake, ordinary paper for even as low as N2,000.
Many also patronise the purveyors of fake insurance papers because they do not not know that there are benefits in the insurance policies. They see it just as an ordinary police pass.
This worrisome situation made the National Insurance Commission to partner with other relevant government agencies to address the situation.
NAICOM, in conjunction with the Nigerian Police, commenced raids in places notoriously used by fake insurance vendors.
They arrested illegal operators, who specialised in selling fake motor vehicle third party insurance certificates to unsuspecting motorists.
NAICOM carried out this exercise in places like Abuja, Lagos, and Enugu.
This chased away the fraudsters from the operating areas for some time.
However, they soon returned after NAICOM stopped raiding those areas.
In addition to this effort, the industry felt the need to migrate from the use of paper insurance certificate to an electronic method that would allow easy verification of genuineness of the papers.
On this ground, the Nigerian Insurers Association, the umbrella body of all insurance firms, introduced the e-certificate known as the Nigerian Insurance Industry Database.
Operators have said it is cogent for the insuring public to embrace insurance voluntarily because of the benefits and not see it as a mere regulatory requirement imposed on them.
A member of the Insurers Committee, Mrs Ebelechukwu Nwachukwu, said, it was important for Nigerians to imbibe insurance as a lifestyle and not as a regulatory necessity.
According to her, there is the need to redefine the narrative about insurance and to educate Nigerians on its importance.
Nigerian Insurance Industry Database
In 2010, the Nigerian Insurers Association with its regulator, the NICOM, took a major step towards eliminating fake insurance certificates in the market by introducing the NIID.
The NIID is an electronic means which allows drivers to verify the authenticity of their certificates.
The policyholders whose vehicle insurance details had been uploaded on the NIID can check their motor insurance policy status through the SMS and on the Internet.
Asides from going to the NIA portal, a motorist can also dial *565*11# on any network.
The NIID went live in 2011, and this enabled the insurance policies obtained by motorists to be verifiable online on the Internet and through dedicated hand-held devices.
The objectives of the NIID were to serve as an authentic database of the Nigerian insurance industry data, and provide qualitative statistics/analysis of the industry data, as a vehicle for easy verification of genuine insurance certificates by all stakeholders.
It also sought to reduce incidents of fraudulent insurance transactions especially for motor.
The NIID aimed to assist the industry in reducing the incidents of fake insurance certificates in the market.
The platform was enhanced to include information help to recover stolen vehicles and claims reporting modules.
This was to handle the challenges thrown up by actions of suspected fraudsters that made multiple claims with the intent to defraud the insurance companies.
The NIID aimed to provide information on the details of vehicles available on Nigerian roads.
The NIID on the industry’s portal, askniid.org, is the only central record of all insured vehicles in Nigeria.
It is the tool employed by the industry to ensure that only insured vehicles are driven on Nigerian roads.
When it was launched, the operators and their regulator embarked on massive awareness to stop motorists from patronising fake vendors.
The number of registered vehicles on the NIID increased with the hype, but unfortunately, the initiative began to experience diminishing returns.
The NIA had in February 2016 disclosed that about 4.3 million vehicles had been registered on its NIID.
In January 2019, the association revealed that just over three million vehicles were still on its NIID.
But newest figures obtained from the NIA as of September 2019 revealed that about 2.5 million vehicles were registered on the NIID.
This shows that the number of motorists with genuine insurance covers on Nigerian roads dropped by 1.8 million between February 2016 and September 2019.
The falling number of those taking genuine insurance is becoming a concern to the industry.
Operators are worried that more motorists are endangering the lives of other road users by driving their vehicles on Nigerian roads without appropriate insurance certificates.
Instead of procuring valid certificates that would provide insurance cover and compensation for road users in times of accident, most motorists are returning to fake vendors to buy cheap papers.
Operators have blamed this setback on lack of cooperation among the insurance companies.
According to them, the companies have been de-marketing each other through price war.
Rather than attract the motorists with good services, they have continued to cut prices of obtaining the third party insurance, and neglected the cooperation that the NIID ones enjoyed.
The Group Managing Director, Mutual Benefits Assurance Plc, Dr Akin Ogunbiyi, said it was important for the operators to collectively work together.
He said initially, the industry was cooperating before but the companies that “are big are now only interested in taking the whole business, leaving the smaller ones.”
The individualistic approach instead of collectively putting strength together is affecting the NIID, he said.
Ogunbiyi said, “We have not got started in this industry. What has become of the NIID now? It is dead.
“This is one thing that we could have taken advantage of third party in Nigeria. You know that 70 per cent of third party insurance in Nigeria are fake and money to the boys who sell them.
“We should come together under the umbrella of NIA and invest in resources to take advantage of all opportunities.”
While explaining the genesis of the NIID, he said, “The NIA made a bold move to work with NAICOM to have a central underwriting capacity where every underwriting company could take a bit of it, but some stronger companies disrupted it; they said they did not want it.
“NAICOM approved it, this NIID is the platform you find in some countries like Niger and Cameroon. There is no one company that is underwriting third party insurance alone. Every registered companies take a participation.
“But here in Nigeria, some companies say if they can do it at N1,000 and sell one million, they are better off. They refused to cooperate under the NIID.”
According to him, there are about 20 million vehicles, trucks and motorcycles on Nigerian roads that could be insured, but just a few of the cars were insured.
He worried that practioners no longer deliver value but are only after their balance sheets.
Unstructured Supplementary Service Data
Though the NIID platform had been operational nationwide, it had challenges with the ability to verify authenticity of vehicles, especially in areas with poor Internet coverage.
Verification of motor certificates through the dedicated devices became highly impaired due to the vicissitudes of Internet operations in the hinterlands.
This led to the introduction of the Unstructured Supplementary Service Data technology by the NIA in January, 2019.
The introduction of the USSD was done in partnership with the Nigeria Inter-Bank Settlement System Plc, and Courteville Business Solutions Plc.
The NIA also got the co-operation and support of the Federal Road Safety Corps, Vehicle Inspection Services of various states, Nigeria Police Force , National Union of Road Transport Workers and other stakeholders in the insurance industry.
The USSD is a Global System for Mobile Communication technology used to send text between a mobile phone and an application programme in the network.
It works independent of Internet connectivity.
In this instance, any mobile phone (not necessarily a smartphone) would communicate with the NIID system to retrieve policy status whenever required.
It was hoped that with the USSD, the industry would fully overcome the problems associated with the dedicated devices as it guarantees uninterrupted service throughout the country and on all networks.
During the official introduction of the USSD code in Lagos, the Chairman, NIA, Mr Tope Smart, said, its existing and prospective customers now have the opportunity to confirm the genuineness of their respective policies at the time of purchase to avoid any embarrassment should claim occur.
While explaining further, he said motorists could verify their motor insurance for a fee of N20 by sending “*565*11#” to any network without having Internet network on the phone.
Smart said that the USSD represents another giant step towards bringing insurance closer to the people and ultimately eliminating fake insurance certificates in the market.
With appropriate insurance cover, drivers do not need to exchange blows if their vehicles hit each other
They only need to exchange papers and allow their insurance companies to settle the damages.
A motor insurance cover provides financial protection against physical damage or bodily injury resulting from traffic collisions.
It also provides compensation against liability that could also arise from accidents involving a vehicle.
Vehicle insurance may additionally offer financial protection against theft of the vehicle, and against damage to the vehicle sustained from events other than traffic collisions.
Insurance companies are absent in many parts of the country, thus, making it not easy for motorists to buy the genuine covers.
The Managing Director, African Alliance Insurance Plc, Mrs Funmi Omo, says it is necessary to take insurance to the rural areas.
“There is a lot of work that is to be done in terms of enlightenment and a lot of work that also needs to be done in terms of educating the rural populace on the relevance of insurance, “ she said.
Regularly, many insurance companies publish the amount of claims they paid out to their policyholders.
For instance, NSIA Insurance Limited disclosed that it paid N257.8m as claims to its claimant on motor insurance in 2018.
The Head, Corporate Communications and Brand Management, Sovereign Trust Insurance Plc, Mr Segun Bankole, said it paid N567m to its claimants on motor insurance in 2018.
Mutual Benefits Assurance Plc says it paid N1.1bn claims to its policyholders on motor insurance in 2018.
However, while many companies have been diligent in claims paying, some others have been delaying or defaulting on payment.
The Group Managing Director, Cornerstone Insurance Plc, Mr Ganiyu Musa, said prompt claims payment was important to boost the confidence in the industry.
However, he said the underwriters were looking into the issue, to address default by some companies, which could affect the industry’s image.
The acting Commissioner for Insurance, Mr Sunday Thomas, said the body would start to rank and publish the performances of insurance companies according to the services provided to their customers.
He said, “Let me reassure you that the commission shall continue to introduce new reforms and initiatives in line with international best practices for consumer protection and customer satisfaction.
“Henceforth, insurance companies will be assessed and ranked on the quality of their service delivery to customers and the ranking of companies in this regard will be made public in order to provoke healthy competition among insurers.
“This, we believe will boost consumers’ choice and confidence in insurance.”
Thomas expressed concern over the concentration of insurance companies and brokerage firms in major cities and their reliance on government accounts, stressing that there would not be effective enforcement of compulsory insurances in the hinterland with poor presence of underwriting and brokerage firms there.
He urged insurance brokers to establish their presence in all the nooks and crannies of the country to accelerate insurance penetration and financial inclusion.
Thomas said the vision to have the nation’s critical population accept and patronise insurance services would only be achieved if brokers who were professional intermediaries extended more of their operations to remote areas of the country, rather than urban areas.
To make motor insurance more accessible, many companies have been offering the sales online.
The companies are also expected to upload the details on the NIID.
Consolidated Hallmark Plc introduced online third party motor insurance policy.
The Managing Director, Consolidated Hallmark, Mr Eddie Efekoha, said with this technology, the company would be able to deliver enhanced motor insurance services.
The Managing Director, Unitrust Insurance, Mr John Ijerheime, explained that individuals and organisations could buy insurance through its electronic insurance portal and be issued their certificates within a few minutes.
He said through its e-insurance portal, motorists can purchase, renew and reprint certificates of their third party motor insurance.
Sunu Assurance launched the mobile (USSD) insurance solution.
The product is a simple, ‘first-of-its-kind’ self-service solution which enables car owners /users to purchase authentic third-party auto insurance with the use of their mobile phones in less than five minutes.
According to the company, the application also serves as a platform for customer engagement, claims payment and other after-purchase services.
‘Wetin you carry’
As the number of insured vehicles registered on the NIID has continued to decrease, the NIA has deemed it necessary to commence an awareness campaign.
The Director-General, Nigerian Insurers Association, Mrs Yetunde Ilori, has said that the industry has commenced an awareness campaign tagged, ‘Wetin you carry’, to create awareness on the benefits of insurance.
She said this was part of efforts to eradicate fake motor insurance certificates in the country and ensure that motorists took genuine covers.
She noted that there are almost 12 million motorists on Nigerian roads, according to the National Bureau of Statistics, and that far less of the cars were insured.
According to her, about 2.5 million vehicles are registered on the NIID.
With genuine insurance, she said, motorists would be able to get compensation if there is an accident or an insured loss.
However, experts have said that the success of the NIID can only be achieved through a concerted effort that involves all major stakeholders in the industry.
They also say it is important for the insurance companies to improve their service delivery, most especially in response to claims payment.