Coming from the background of the Indian insurance industry, which, despite its exposure to the financial crisis, was safely anchored in the sheltered waters behind prudential regulatory seawalls, there are quite a few thoughts that I can share with you. I wish to share with you three thoughts of mine.
I wish to condense my thoughts in four words, re-examine, re-build, re-structure and re-establish. Re-examining is a form of stocktaking. In the aftermath of the financial crisis, we should re-examine our companies, our regulations and the way we do business. Insurance companies should have a fresh look at the economic environment; the internal working systems of the company, understand its strengths and weaknesses and realign themselves to the best strategic position that would make them successful.
While a business process re-engineering exercise can be done at any time, practitioners would vouch that there are marked advantages in kick-starting the exercise during troubled times. First of all, the necessity for change would be felt most by the stakeholders during bad times. When in trouble, different interest groups more readily accept the reality that the old order is not doing them good any longer and they cannot afford to cling on to it. Change managers, I am told, have a secret affinity for times of trouble as they do not have to prove the inefficiency of the system and even marginal successes would stand out against the dismal backdrop.
It is no secret that the growth of insurance penetration in Nigeria over the years has not been stable and Mansur Muhtar, Minister of Finance has decried the low penetration of the nation’s insurance industry. A survey conducted by Business Monitor International (BMI) Ltd places Nigeria’s insurance density at $8.2 as against South Africa’s $870.6, Mauritius’s $377.6 and Morocco’s $80.3.
Coming from one of the world’s most populated countries, I would like to see this as a tremendous opportunity for developing insurance; especially, life and personal lines of business. As an insurance practitioner, I feel happy to hear that National Insurance Commission (NAICOM) is committed to increase insurance penetration from around 6% at present to 30% by year 2012, grow the nation’s insurance density (purchases) from N1200 to N7500, premium volume from N179 billion to N1 trillion and contribution to the GDP from 0.7% to 3%. For all practical purposes, a serious feet-finding exercise needs sustained regulatory support for its success and I am happy that the Nigerian Regulator has already initiated the process of re-examination by a set of regulatory mandates.
Re-building is a more difficult exercise where the Regulator and the insurers have to come together to re-build the insurance market so that insurers, intermediaries and all stakeholders in the business benefit from an environment more congenial to growth and development. It is heartening to note that the National Insurance Commission (NAICOM) launched the ‘Code of Corporate Governance’ for the insurance industry in Nigeria in 2009 as part of its strategic efforts to rebuild and sustain the waning confidence of stakeholders in insurance. The ‘2010 Insurance Guidelines’ that followed are expected to ensure strict compliance to the rules that guide insurance practice and consequently rid the industry of the negative public perception. The guidelines stipulate that no defaulter would go scot-free any longer. I believe that these two documents would go a long way to ensure that Nigerian insurers practise insurance according to the rules that guide it.
When the going gets tough, insurers conventionally get tough with their customers! Sagging bottom lines in the books of account trigger drastic management measures and often it is the policy holder who is at the receiving end of sharp claims adjustment measures! The Commission was quick to note that the issue of non-payment of claims by a few operators in the market had given the industry very bad publicity in the past. The Commission’s ‘zero tolerance’ approach to non-payment of claims, its insistence that claims cheques must be given within the period of 90 days and the strong warning that the certificate of any insurance company that fails to pay claims on time would be cancelled, underscores the Nigerian Regulator’s commitment to a no-nonsense approach in business practices.
Fola Daniel’s (Commissioner for Insurance) statement that NAICOM would not hesitate to make sanctions against firms engaging in unethical behaviour, which would serve as deterrents to others; the Commission’s initiatives in settling 174 claims with a financial implication of about 182 million Nigerian Naira (N182,321,599.11) in just the first quarter of 2010 are clear messages to the insuring public that their interests are well protected and that there is a regulator who is responsible and responsive.