Premium policy gives push to insurers as income rises by N228bn in 1 year

One year after successful enforcement of the ‘No Premium No Cover’ policy in the nation’s insurance industry, the economy last year witnessed generation of additional N228 billion or 80 percent of the total industry revenue over the preceding year, BusinessDay investigations reveal.

Consequently, as at end of 2013, one year after the policy became operational, the insurance industry recorded an estimated premium figure of N285 billion, with over 80 percent of this being cash-backed business, unlike in the past when cash business was less than 40 percent and the receivables over 60 percent.

The implication of this is that before the new policy, about N68.4 billion or 40 percent of the N171 billion (being 60 percent of the current revenue) was being generated by the insurance industry, a development that had continued to impact negatively on the operations of the insurance companies in the country.

It was the general consensus of most of the stakeholders who spoke with BusinessDay yesterday that the policy, which was greeted with fear and apprehension when it commenced last year on the grounds that it could shrink premium volume, has turned out to strengthen contractual obligation between insurance companies and the insured public.

Consequently, both parties have increased obligations to each other, where the insured have now been compelled by this policy to pay premium before risks are accepted with the attendant prompt payment of claims and enhanced service delivery.

‘No Premium, No Cover’, a provision of section 50 (1) of the Insurance Act 2003, states that “the receipt of an insurance premium shall be a condition precedent to a valid contract of insurance and there shall be no cover in respect of the insurance risk unless premium is paid in advance”.

Analysts who assessed the policy told BusinessDay that it had put the insurance sector on edge and in another phase of increased responsibility, consumer relationship and confidence sustainability.

Val Ojumah, managing director/CEO, FBN Insurance, said the enforcement of the ‘No Premium, No Cover’ policy in Nigeria was perhaps one of the best things to happen in the industry in recent times.

“I continue to hold the regulator in high esteem but actually praise them for their courage in enforcing the policy the way they are doing it right now,” Ojumah said.

“The policy has helped the business tremendously, particularly in improving cash flow and investments returns. The industry is much stronger and the incidents of outstanding premiums in the books reduced to barest minimum,” he said.

Ojumah said the policy had helped to encourage those who believe in insurance to actually take it more seriously, noting that it was also weeding out laggards. Overtime, he said, only those who believe insurance covers contribute something to their risk management policy would buy (and, of course, pay with pleasure).

“It has helped build consumer confidence and also put pressure on the operators to be more professional in making good their promises,” he said.

Mayowa Adeduro, managing director/CEO, Anchor Insurance plc, said enforcement of the policy was indeed a milestone in the annals of insurance regulations in Nigeria.

“A cancerous cell that needed to be removed for body to be free has been removed, and in my estimation, it’s exactly what NAICOM has done,” he said. 

Sunday Thomas, director general, Nigerian Insurers Association, said the initial response of the operators to the policy was informed by the fears that normally accompany change.

“Whenever constructive change is allowed to have its way, it will always produce profitable results,” Thomas said, adding that the market that was sceptical about the policy when its enforcement commenced was now quite happy with the policy.

He said today’s performance could be related to the actual performance of the operators, and beyond that, the costs of credit control, both in financial and human resources, had been saved.

Thomas said the increased liquidity of the underwriters, which resulted from the policy, had enhanced prompt response to claims settlement, which, no doubt, had also increased the confidence of the consumers in the insurance sector.

MODESTUS ANAESORONYE