• Thursday, July 18, 2024
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BusinessDay

FG policy on insurance premium opens new channels for retail business

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The adoption of the ‘No Premium No Cover’ policy by government has opened a vista of opportunities for insurance companies who are beginning to see improved premium contribution from retail businesses, BusinessDay investigations show.

The policy which makes it impossible for insurance companies to accept covers without collecting premium, with the consequent illiquidity for contribution to the economy, has therefore paved way for ingenuity on the part of operators who are now exploring other options to remain competitive locally and internationally.

Also, delay in the passage of the 2014 budget has continued to deny the sector of much-needed revenue, resulting in delayed payment of premium from government accounts, which hitherto were the major source of revenue to the sector. This has made operators to look in the direction of retail and private businesses.

Consequently, insurance operators are optimistic of improved revenue, particularly life insurance companies.

“Private sector and retail are a major source of revenue for the insurance industry today,” said Tunde Braimah of Mansard Insurance. “Though I cannot be specific as to what proportion of the industry premium comes from government accounts, I do know we are doing quite a lot in private sector businesses and retail. For us in Mansard Insurance, we do more of private and retail.”

The National Insurance Commission (NAICOM) had last year commenced enforcement of ‘No Premium No Cover’, making it impossible for insurance companies to accept covers without collecting premium, a problem that had denied the sector stability and needed liquidity to make reasonable contribution to the economy.

‘No Premium No Cover’ is a provision in section 50 (1) of the Insurance Act 2003. It stipulates 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 the premium is paid in advance”.

Government, being the biggest single client of the insurance industry because of public sector group life account, was the major victim because of its characteristic budget delay and late allocation of funds at the beginning of each year.

The implication is that government assets and employees remain uninsured for the current year, since there are yet no available funds to pay for insurance.

Segun Omosehin, managing director, Mutual Benefits Assurance plc, said though the delay in the passage of the 2014 Appropriation Bill had delayed release of fund for government insurance, income from private sector accounts and retail had closed the gap on premium projection.

“For us in Mutual Benefits, we are on course with our projection for the first quarter and we are hoping this will be sustained till the end of the year, given the efforts we are making to increase our income sources through the retail and agency network,” he said.

Lafor Olateru-Olagbegi, former managing director, Oceanic Insurance Group, said the marketplace was changing and companies wishing to take advantage of the new growth opportunities in the industry, be they in micro-insurance, Takaful or in the retail space generally, must ensure sustainable investment in human capital development, product/marketing research and robust technology for seamless operations.

“There is a lot of opportunity in the retail market space and we must not assume that it is still the old way of doing things, and I can tell you, forward-looking companies will make huge statements with their earnings in the near future,” he noted.

The insurance expert further asserted that companies must simplify their product offerings and expand their distribution options through innovation and collaborations that would create inroads into the under-insured and un-insured populace across the nation.

Industry analysts interpreting the policy had observed that in the new dispensation, operators, particularly underwriting companies, would become more liquid, adding that this would redefine the direction of business and expansion in income sources from new areas.

Within the African market, Nigeria, despite its huge economic potential and rising population of over 160 million, still trails countries like South Africa, Egypt, and Kenya in terms of premium income where Nigeria as at the end of 2012  generated N250 billion.

Modestus Anaesoronye