Insurance companies in the country are facing declining revenue on motor business as a result of falling rates and the activities of fake operators. To add to their pains, claims are rising, putting pressure on their bottom lines, BusinessDay investigations reveal.
This is further worsened by economic headwinds caused by foreign exchange scarcity and the fall in oil prices, which have reduced the purchasing power of individual and corporate customers.
Analysts who spoke on the development last night, said the insurance industry is faced with mounting challemges which range from unhealthy competition among players affecting rates, fake certificates, poor purchasing power, as well as ignorance on the part of the insuring public.
Motor insurance is the second largest source of premium for the insurance industry, after oil and gas. Motor insurance contributed N42.91 billion or 14.62 percent out of the N293 billion premiums recorded in 2014. Of this, N14.61 billion was paid out as claims at the end of 2014.
Godwin Wiggle, immediate past chairman of the Nigerian Insurers Association(NIA) who confirmed declining rate and pressure on the profitability of motor business in the country, said the “prevalence of fake insurance certificates and lack of enforcement have affected the growth of motor business”.
Wiggle further observed that at the association level, operators were seeking to have a common rate for third party motor insurance, targeted at reducing the incidence of fake certificates.
“We are experiencing a sharp rise in claims, which we believe are coming as result of increased awareness of consumer rights”. There are also some elements of fraudulent claims which we have accommodated for reason of protecting the image of the industry.”
Wiggle said there is already a proposal with the National Insurance Commission (NAICOM) for approval to enable the industry harness opportunities in motor third party policy.
He pointed out that the operators have done their best in ensuring that the public is educated to discern between fake and original insurances, but that unfortunately, people continue to patronising fake insurers.
“Our strategy is to continue to engage the public on the needs and benefits of insurance.”
Wiggle noted that over four million vehicles have been uploaded by companies underwriting motor insurance business, assuring that it will continue to drive the Nigerian Insurance Industry Database (NIID) in order to bring more motor vehicles into the net.
“We implore motorists to make sure that they buy genuine insurance certificates from insurance companies, brokers or accredited agents and to resist the temptation of patronising touts, and other unauthorised sources as they do not sell genuine motor certificates and cannot be guaranteed any benefit in the event of a loss.”
He noted that the association is working with all stakeholders to eliminating fake insurers in the country which has contributed to low GDP contribution by the industry.
We are urging government and agencies at all levels to ensure strict enforcement, adding that that lack of enforcement of laws has remained a major hindrance to growth and development of insurance in the country.
Sunday Thomas, director-general of NIA said capturing over 4 million in the Nigerian Insurance Industry Data Base (NIID) now was a significant increase in the motor insurance portfolio of companies belonging to members.
He said the database has gained recognition amongst the populace, as the mechanism to ascertain genuine motor insurance cover.
According to him, vehicles on Nigerian roads are estimated to be between 16 million and 17 million, “but what we have registered in our database is about 4.3 million vehicles.
“The NIID is enjoying the support of federal and state agencies in the enforcement and compliance with the minimum third party motor insurance requirement for vehicle owners”.
Modestus Anaesoronye
