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NAICOM urged to conduct review of regulatory policies

By on March 3, 2015

Insurance industry regulatory body, National Insurance Commission (NAICOM) has been advised to conduct a thorough re-examination of some of the recent regulatory steps it has taken to determine their effectiveness and ensure they are not counter-productive to the industry.

Group Managing Director Industrial and General Insurance (IGI) plc Mr. Rotimi Fashola who stated this while addressing insurance brokers recently in Lagos said among the policies made by the commission in recent times, some of the critical ones that needed to be evaluated are ‘no premium no cover’; inadmissible foreign investment; brokers’ yearly renewal of license; investment in propertie;, restriction on insurance investments; recognition of offshore investments and amendment of income tax among others.

On ‘no premium no cover’, the IGI boss noted that many governmental ministries and agencies are no longer insuring their assets because of the delay in the approval of their budget and called for a change in ‘No premium No cover ‘for such agencies.

“We are advocating for these agencies to be exempted from ‘No Premium No cover’ as this will encourage them to embrace insurance.” He argued after all, their receivables are always collected even if delayed.

On inadmissible foreign investment, he noted that the current insurance law makes any foreign investment an inadmissible asset.

He also observed that the law encourages foreigners to invest in Nigerian insurance industry and insisted that the position should be reviewed.

Fashola also spoke on the existing laws that require brokers to be renewing their licenses yearly and argued that advanced countries have dispensed with such practices.

” It is high time we embrace activities that will deepen insurance in Nigeria”, he cautioned.

On investment in landed properties, Fashola explained that the Insurance Act 2003 has pegged investment in landed properties at 25per cent and 35per cent for general business and life business respectively arguing that it needs to be reviewed in the face of the crash in the quoted stock market which made some insurance companies lose heavy investment in the past.

He also pointed at encroachment on insurance business by government agencies, which provides insurance protection to aviation passengers and public liability for nuclear risks as part of the problem.

The federal government in 2007 divested its interest in insurance business when it sold NICON and Nigeria Re, on the understanding that such concerns are better managed by the private sector. But ironically, the same government extracted workmen’s compensation insurance business and transferred it to NSITF as Employee Compensation Scheme.

In similar vein, the federal government transferred pension business from the insurance industry to the pension fund administrators; while it also moved health insurance from the insurance industry to NHIS.

Fashola wished that the income from both sides were credited to the insurance industry in determining its true contribution to GDP, as the income should have been earned by insurance companies if not for government intervention and operation of the law.

Noting that government and its agencies have been paying lip service to the importance and benefits of insurance, without serious patronage and support, Fashola expressed worry that there is hardly sufficient budget provision for payment of insurance premium by government and its agencies.

“Therefore, when insurance services are patronized, payment of the premium becomes an issue, a clear negation of the provisions of the law on “No premium, No cover”. Some government parastatals or enterprises are funded without allocation for insurance. Many insurance policies contracted by the MDAs in the past were not renewed, thus leaving the assets exposed to risk, damage and losses without insurance protection.

“Many of the parastatals are no longer contracting insurance, certainly in breach of some of the compulsory insurances, because of the government budget system. It is my considered opinion that exemption be granted to Government in the strict application of Section 50, ‘No Premium No Cover’. The reason is that government debt is a statutory, sovereign debt which will be paid by succeeding administration, he suggested.

Speaking on the regulation on restriction on insurance investments and recognition of offshore investments, Fashola said there is urgent need to review the current restriction on investment to ensure safe but adequate returns to stakeholders for the viability of the industry.

He also said the provisions of Insurance Act 2003 and regulation of insurance company investments should be amended in line with the realities of business.
“The National Insurance Commission (NAICOM) needs to review its position on off-shore investment for the purpose of solvency calculation and actuarial valuation, which we have started discussing with the commissioner and his team.” He also called on NAICOM to activate the various laws relating to Marine Insurance of refined petroleum products imported into the country, recalling that the Insurance Act 2003, for instance, provides that all imports into the country must be insured with an insurance company registered in Nigeria and that this particular law is only observed in the breach.

 

[ThisDay]