Recapitalisation for insurance companies at this time will backfire on the long-run – Chilekezi

Obinna Chilekezi is a consultant, researcher and publisher having worked in different areas of the insurance industry since1988. He is also an examiner on insurance to a quite number of bodies, and a visiting lecturer on insurance to two institutions within the West and Central Africa. In this interview with Modestus Anaesoronye reviews the insurance industry, pointing the way for greater market. Excerpt:

The National Insurance Commission (NAICOM) recently increased the capital requirement of insurance companies, what is your take on this?

Let me begin by asking this question, can NAICOM do that, yes of course they have the legal backing to increase the capital base of an insurance company to N5 trillion if they like?. But the question is, should they do so at this time, taking into consideration the economic reality, vis-à-vis the gross premium income of the market using the Nigerian Insurers Association’s figure of N365 billion. And also the reality that in most advanced markets,  you still have specialist companies with less than N1 billion as their capital base operating alongside side companies with over a trillion naira in dollar or pound sterling equivalent?. I will say that the idea is totally wrong and will back fire on the long run.

How do you think insurance companies will be able to meet this new capital requirement?

I can’t answer this, but as someone who had invested in the industry without any returns for such, the last thing I can do is to repeat same. But I cannot talk of other investors.

Do you think mergers and acquisition will help the industry?

It may be it, but it’s always better when it is voluntary than forced, of which it will have the same effect like a forced marriage of couple.

Despite all the efforts to increase insurance awareness, many Nigerians still do not believe in insurance, what can be done about this?

The issue of awareness is a serious one. Most Nigerians do not know much about insurance, even the educated ones. I teach pension and insurance to HR managers who in some companies are in charge of the insurance of their organizations and you will be shocked as to their individual opinions on insurance. On the part of the industry, not much has been done to positively create this awareness. Let me give you an instance, it has been more than five years that WAEC started conducting exams on insurance as an SSS subject, what has any insurance institution done to encourage the effective studying of the subject in the secondary schools. Answer, none. What stops a company to adopt a school so as to encourage SSS students to take insurance as an option than office practice?. What we have is operators always want to advertise their products in trade journals, and just like a person talking to himself.

Implementation of compulsory insurance in Nigeria has been difficult, what do you suggest?

I did a study recently and I found that Nigeria has the largest number of compulsory insurances and what this would have entailed is that the Nigerian insurance industry should have been having the largest insurance penetration and density, but incidentally the opposite is the case. As my people will ask after a dog has been killed, why has it refused to die? I don’t know.

Loss adjusting arm of the insurance industry is at the point of extinction, what can be done to rescue that area of the business?

For the practitioners,  I feel they should change their focus and start specializing in more complex aspects of their risk.. So there is need for retraining of the practitioners in more complex claims areas if they are to survive in the near future.

Looking at the syllabus of the Chartered Insurance Institute (CIIN) and given your exposure teaching insurance in Institutions outside the country, do you think the Institute is still in position to serve its purpose as a manpower source for the industry.

 We have to be fair to the Institute, there are limitations to the areas they can train professionals as a professional body; so the main challenge is on the professional, how are we developing ourselves as financial practitioners and not just insurance people. The institute can offer some training courses to complement what the professional has learnt while writing the exams.

Speak on any topical issue of your choice? 

 I will say that the Insurance Act 2003 has become too obsolete as a law for the market. I don’t want to mention that of the Motor Vehicle (Third Party) Insurance Ordinance 1945 which has been the law guiding motor insurance in this country. I think we should be ashamed of ourselves as a nation, still having that law in our statute book guiding an important aspect of our life – transportation.

Also on the issue of regulation of the insurance business in the country, there is need for total overhauling of the whole system starting from the Commission down to the laws. Come to think of it most countries including African countries like Kenya are taking principle based regulation based on Solvency I and the more advanced markets are based on Solvency II, and here we are still on compliance base, a very primitive way of regulating modern insurance business. Finally, I am optimistic that the Nigerian insurance industry has a lot of opportunity if the right reforms are carried out in the industry.