NAICOM asks shareholders to hold insurance firms accountable for their investments

Insurance regulator, the National Insurance Commission (NAICOM), has tasked shareholders of insurance companies to hold management of their firms accountable for their investment to ensure accountability and good returns on investment.
This, the commission said, has become necessary to complement the regulator’s efforts towards ensuring that insurance firms operate transparently and deliver value to all stakeholders.
“While you look up to the regulators for solutions, shareholders should have a change of heart and live up to their responsibilities by taking keen interest in what happens in the companies they have invested in,” Fola Daniel, commissioner for insurance, said.
Daniel, who spoke at an interactive session with stakeholders of quoted insurance companies and NAICOM held in Lagos, said only the regulator cannot do it, but collaboration with all stakeholders would enable the industry realise its potential and contribute reasonably to the country’s economy.
According to him, shareholders have invested money in companies to get returns on investment by way of dividends, capital appreciation – rise in the price of stock and bonus issue, and where this is not happening something is wrong somewhere.
“You have to note that delegation of your responsibilities to the board and management of your companies does not translate to abdication. Most of you do not ask questions as to how well your companies are being managed by your representatives,” Daniel said.
“Beyond the annual general meetings which you attend, how often do you seek information and get satisfactory feedback from your board and management? Do you engage in intelligent and constructive interrogation of the financial reports of your companies? If you are not doing this as a shareholder, it means you have no interest in protecting your investment. It also means that your objectives for investing in these companies may not be realised.”
The commissioner, however, identified some of the challenges facing the insurance industry, which the shareholders must take interest in to include pricing of risks which are not commensurate with the risk they are taking, stating that there is no way such a company will make profit.
“No company will make profit and pay dividends if it writes business for almost free, gives rebates and gratis but pay huge claims on risk it collected little or no premium on.”
Others are investment decisions, issuance of policy on credit and bloated premium, management and underwriting expenses.
“Until the directive by NAICOM for strict compliance to the no premium, no cover policy by insurance operators in 2013, majority of insurance firms wrote business on credit. In most cases, these premiums are never collected and this had a negative impact on the bottom-line of these companies.”