Insurance companies’ balance sheets are buoyed now with increased liquidity since the implementation of the “No Premium No Cover Policy” guideline five months ago. This policy industry analysts said have seen positive trends in companies’ cash flow, meaning healthier business and more stability.
Unlike the previous year of 2012, when about 28 percent of premium on businesses were outstanding, the current year has recorded almost zero outstanding in the event of full enforcement of the policy by the National Insurance Commission (NAICOM).
“No Premium No Cover” is an import of section 50 (1) of the 2003 Insurance Act which 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.”
Implementing the law which became effective January 1, 2013, NAICOM warns that any insurance company found in its book unpaid premium for policy granted to clients would be sanctioned or license revoked on extreme cases.
Sunday Thomas, director general, Nigerian Insurers’ Association (NIA) said the first quarter being renewal period in insurance saw increased cash flow from business generation among member insurance companies.
He said the report so far seem consistent with expectation of the industry, as many of its member companies are testifying to the positive trend.
Thomas stated that this premium will be invested to meet future obligations in the area of claims payment. Though he was quick to add that volume would likely drop but the available risks are healthier and better for the business.
Laide Osijo, president, Nigerian Council of Registered Insurance Brokers (NCRIB) said it was delightful to note that the initial apprehension about the workability of the rule was gradually being laid to rest as many of our members and underwriters could testify given the level of cash flow in relation to volume of business.
“There is no doubt that with the level of compliance, the industry would benefit significantly from the rule.”
Osijo lamented the position of the industry before the policy in January, calling on the Federal Government to release 59 percent of premium outstanding on group life insurance of its workers in the federal civil service.
This situation, Osijo noted, has made many insurance companies to discountenance claims under the year in review in view of the now existent premium policy.
