The insurance industry in Nigeria like its counterparts across the globe is witnessing increasing regulatory reforms that not only force compliance, but put operators on their toes against monetary sanctions.
This trend has become more severe in the last four years since after the global economic crises that came hard on the financial services market, not necessarily insurance.
Today players are grappling with issues of transition to International Financial Reporting Standard (IFRS), ‘No Premium No Cover Policy’ as well as risk management issues. Like a chief executive office said, the fear of NAICOM is now the beginning of wisdom.
This encapsulates why about 50 percent of the insurance companies could not get approval of their 2012 accounts six months after June 30 deadline when audited accounts of insurance companies ought to be submitted to the National Insurance Commission. So, for the companies that have not been able to submit put at about eight, each is paying a daily fine of N5,000 to NAICOM.
NAICOM had said that it was not ready to lower its standards of approval of insurance companies’ accounts which must comply with IFRS format.
Fola Daniel, Commissioner for insurance, had insisted it would not approve financial reports of insurance companies that failed to meet the International Financial Reporting Standard. IFRS presents proper way of presenting financial accounts, as such; the commission will rather delay clearance of financial accounts submitted by some insurance companies than approving deceitful statements. It will be bad if the commission allows non-worthy account to be put out in the public domain, Daniel stated.
Another one is the ‘No premium No Cover’, a policy that commenced January 1, 2013, intended to end era of credit policy where insurance covers were given out without premium backing. What this policy has done is to strengthen value of insurance cover to the insured as well as the insurer, because payments are now made before commencement of policy.
The policy has really enhanced the premium base of the industry, as operators have witnessed increased liquidity and smiling to banks. Though the policy is presently contending with the issue of compliance especially with government businesses, it is expected that such challenge and others observed in the first year of implementation will be addressed this year. Improvement on compliance will help attract much income into the industry thereby helping operators meet claims obligations and contribute more reasonably to economic growth.
“Our regulator is doing quite a lot because things have to be done the right way. Though it is tough for the market, but it’s in our own interest,” an industry player told BusinessDay.
Since the financial crisis a trend towards regulatory complexity and conservatism has emerged, said Olav Jones, deputy director general and head of economics and finance at trade body Insurance Europe.
There is a tendency for over-engineering, unintended outcomes and increased cost of compliance, he said. New layers of regulation are a spill-over from banking, said Philippe Brahin, head of governmental affairs and sustainability at Swiss Re. Reforms are also being introduced in a challenging macro-economic environment, he said.
He urged insurers to engage with regulators in order to secure a better outcome. The time in which to respond to these changes is very short-the regulatory clock is ticking, he warned.
By: Modestus Anaesoronye