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Late submission of financial results characterised insurance sector in 2013

By on January 2, 2014

The insurance sector witnessed some positive developments in 2013. However, inadequate infrastructure continued to plague insurers all through the year which resulted in the late and zero submission of financial results by some companies to the National Insurance Commission and other regulatory bodies.

Events that shaped 2013

Year 2013 in the  insurance sector saw  the implementation of the ‘no premium, no cover’ policy of the National Insurance Commission, NAICOM;  enforcement of the International Financial Reporting Standard, IFRS; inauguration of the Insurance Industry Consultative Committee, IICC; introduction of the microinsurance guideline and so on.

No premium, no cover

It will be recalled that NAICOM had on January 1, warned that any underwriter that provides insurance cover without collecting the premium would be liable to a penalty of N500, 000 or lose its license.
According to the Commission, all insurance covers shall only be provided on a strict ‘no premium, no cover’ basis. It maintained that only cover for which payment has been received directly by the insurer or indirectly through a duly licensed insurance broker shall be recognised as income in the books of the insurer.

NAICOM said any insurer who grants cover without having premium in advance or premium receipt notification from the relevant insurance broker shall be liable to a penalty of N500, 000 in respect of each cover so granted, and in addition, may be a ground for suspension of the license of the insurer. It said irrespective of period of insurance, insurers shall ensure that at any point they have received directly or indirectly, through the insurance broker the full premium in advance for cover being granted.

NAICOM noted that all brokers should within 48 hours of receiving premiums on behalf of any insurer; notify the insurer in writing in each case of the receipt of such premium, adding that all such notification shall be accompanied by the broker’s credit notes, acknowledging indebtedness to the insurer.
With the implementation of the ‘no premium, no cover,’ mandate, business in the insurance sector dwindled considerable as both consumers and stakeholders  waited with folded arms to see if the mandate will succeed.

Implementation of IFRS
In the course of the year, the International Financial Reporting Standard, IFRS, became operational in the insurance sector. Accordingly, all insurance companies were to submit their financial results using the IFRS format. Unfortunately, the year has ended; some companies are yet to submit their 2012 financial results to the regulatory bodies while a few only got theirs approved at the tail end of the year.

Highly vexed by this development, NAICOM said that these insurance companies failed to reciprocate all efforts it made towards ensuring a smooth transition to IFRS by submitting poorly prepared 2012 financial statements.
NAICOM stated that it made series of efforts to ensure that insurance companies buy into the IFRS mandate but the indifferent attitude of these insurers frustrated all their efforts, stressing that insurers refused to be carried along by the Commission in the transition to IFRS.

According to NAICOM, it took time to train insurance companies on IFRS but they still did not get it right when they started submitting their financial statements.

Inauguration of IICC

Also in the course of the year, NAICOM inaugurated the Insurance Industry Consultative Committee, IICC, to fashion ways of returning the insurance industry to its rightful place as a catalyst for national economic growth and development.

According to the Commissioner for Insurance, Mr. Fola Daniel, “The IICC is a body whose time has come. In line with the objective behind its establishment, the committee has been entrusted with the following mandate: To serve as a unifying voice for the industry; to represent the industry on national issues such as budget formulation; make input to national economic matters and any other issues affecting the industry; act as a body for resolution of intra and inter sector conflicts and take up and assume any other roles that will serve the best interest of the industry.”

Daniel urged the committee to take necessary steps towards uplifting the profile of the industry, improve public confidence in the profession and enhance the fortune of the industry.

Introduction of microinsurance operational guideline

NAICOM, within the year, introduced the operational guideline for microinsurance business in the country. According to NAICOM, the introduction will set the pace for qualified insurance personnel to float microinsurance firms which will serve the grassroots.

According to the Deputy Director,  Authorisation and Policy, Mr. Leo Akah, microinsurance is not a conventional insurance that is expensive but affordable and to the reach of low income earners.
He noted that the industry had no choice than to embrace micro insurance in order to tackle low insurance penetration in the country.

Deputy Commissioner (Finance and Admin. Mr. George Onekhena said  that the commission in 2014 will  be focusing on deepening insurance penetration through microinsurance and takaful insurance and for that reason will need the input of all stakeholders.

Continuation of other reforms

In the course of the year, NAICOM continued with other reforms to develop the insurance sector such as the enforcement of the anti-money laundering law, risk based supervision, market conduct, claims settlement reform; financial inclusion etc.

According to NAICOM, the various reforms taking place in the insurance sector are all geared towards developing the Nigerian insurance industry and improving the general perception of insurance.

However, for Managing Director of Linkage Assurance Plc, Mr. Gus Wiggle, the insurance industry grappled with inadequate infrastructure and unstable weather which exposed insured assets to natural disasters such as floods.
According to him, the performance of the industry within the year, was not sufficient for it to reach the critical mass necessary to make the desired impact on the economy.
 

 

[Vanguard]