• Friday, May 24, 2024
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BusinessDay

“No Premium No Cover” ‘last chance to rescue industry’

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As the impact of the policy on “No Premium No Cover” starts to become visible in the insurance industry since commencement of its enforcement January 1, 2013, there are clear indications that the market may have began the right step to come out of its biggest problem.

Critical among these problems are the unprofessional practice of selling insurance without collection of premium, the impact of which has not only derailed the growth of the industry but has frustrated its responsibility to meet certain obligations and support the country’s economic growth more properly.

Aligning with this policy and supporting its full implementation as being championed by the industry regulator, the National Insurance Commission (NAICOM) therefore, is the last chance to rescue the sector and make it a professional business, Olusola Ladipo-Ajayi, managing director, LASACO Assurance plc said.

He stated that the industry across board must take advantage of the relationship with the regulator to make this policy work, because insurance in Nigeria has been driven by lack of knowledge as result of competition among players.

“We must take advantage of our relationship with NAICOM to make it work because it is for our own advantage” and so anybody that is not supporting this policy is undoing the industry and we must not allow this to happen, Ladipo-Ajayi noted.

According to him, the industry’s loss ratio has been enormous as a result of product pricing and subsequent provision of cover without collection of premium, which has resulted to huge unpaid premiums.

“A company to company analysis of this trend reveals that we have all shot ourselves in the leg, meaning that we have been running our businesses with shareholders’ fund, and so we must begin to address this going forward. Loss ratio here means we have been using our shareholders fund to support businesses that are not yielding profit.”

The LSACO boss cited the case of group life insurance in the office of the head of service, nothing that it is completely unprofitable at its current pricing, lamenting that it was as result of the firm stance by a few that denied his company the right to participate in the accounts in 2013. As we speak premium for the policy has not been fully paid and claims came out of this, meaning double tragedy for the participants and the industry, so this industry must not continue to be run like this, he noted.

“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 I, 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.