As Insurance Contends with Image Problems
The Insurance industry is bedeviled by image problems, which have created a poor public perception about the sector and retarded its growth, writes Ebere Nwoji
The insurance industry is plagued by image problem that has for decades hampered its growth and development. This image problem has for decades earned the industry poor public perception and poor patronage. The result of this is glaring as the minimal contribution of insurance to the Gross Domestic Product (GDP) of the economy and the low premium income of the industry, currently stands below N300billion after over 90 years of insurance practice in Nigeria.
This is so whereas pension sub sector has in less than twelve years accumulated over N4 trillion Naira.
Insurance currently contributes only 0.06 percent to the GDP of the economy while in South Africa, insurance contributes more than three per cent to the GDP of the country.
How the problem started
Tracing the origin of Insurance sector’s poor image problem, industry sources said it dates back to early practitioners who took over the management of insurance firms from the colonial masters.
According to them, some of the indigenous managers who took over the business from the colonial masters disregarded the ‘utmost good faith’ slogan of insurance through shirking of genuine claims and other dubious and unprofessional practices,a situation which eroded the confidence of the insuring public from the industry and has for long left the industry at the position of poor cousin of banks.
But in developed countries like UK, where Nigeria derived its insurance knowledge and skills from, insurance firms own banks.
Causes of the problem
From observation, the activities of some early practitioners of the industry, in addition to those of fake insurance practitioners who collect premium from the unsuspecting members of the public and issue fake certificates to them only to disappear when claims come, worked together to erode public confidence on the industry.
Also, some present day practitioners who indulge in such unprofessional practices like rate cutting, overriding commission, return premium and other similar sharp practices that end in their inability to pay claims from the little premium they charge in a bid to corner businesses from fellow competitors contribute to the image problem of the industry. This is because after charging such low premium, they will decline to pay claims when risk occurs because the premium they charged from the business will not enable them pay claims and remain in business.
For instance investigations by THISDAY on why some federal government’s buildings that got burnt some years back were abandoned showed that such buildings were insured with an existing insurance firm but during the process of bidding for the premium rate, the insurance company in charge conspired with government officials in charge to price the premium very low and to ignore the claims when it came.
This and other sharp practices perpetrated by some operators of the industry portrayed the industry in a very bad light to the government and the insuring public to the extent that until recently when the National insurance Commission (NAICOM) staged series of enlightenment campaigns that are gradually changing public perception of the industry and its operators , insurance practitioners were seen as set of dubious and non serious business men that are not worth patronising .
Indeed , until recently, many Nigerians believe insurance claims payment is not real.
This situation prevailed in the industry for decades leaving the industry in a state of impoverishment,an industry that could hardly hire graduates and skilled labour as well as one without sufficient capital base to underwrite big and highly technical businesses from the oil and gas and aviation businesses.
Regulator’s action
Irked by this ugly development, the industry regulatory body, the NAICOM has for some years now vowed to tackle the image problem of the industry and restored public confidence in the industry .
Indeed, successive administrations in the commission have fought gallantly to solve the problem. These efforts date back to the regime of Chief Oladipo Bailey as the Commissioner for Insurance to the present regime of Mr Fola Daniel, whose contributions and regulatory
functions gear towards redeeming the industry’s lost image.
Bailey, during his tenure formed a body termed ‘Insurance Industry Image Committee, headed by one of the elders of the industry, Mr. Yinka Lijadu. The committee lasted for a while but could not do much to solve the problem.
This image problem also compelled NAICOM under Bailey’s administration to take the campaign on insurance to the motor parks and licensing offices with a view to sensitising the people on insurance and to stop activities of those fakers of insurance certificates.
Bailey’s successor, Okechukwu Chukwulozie started from where Bailey stopped in this regard.
Fola Daniel’s contributions
Today, Daniel, in his determination to rescue the industry from the state of doldrums has raised his regulatory sticks in his determined to nail any practitioner who through these sharp practices try further to drag the image of the industry to the mud.
Daniel embarked on a major recapitalisation exercise that turned around the image and fortunes of the industry. The exercise, which geometrically pushed up the capital base of the industry from N150 million minimum capital base for life insurance underwriters to N2billion and from N300million capital for general business underwriters to N3 billion came up with a medium term plan tagged Market Development and Restructuring Initiative (MDRI). This has the objective of deepening insurance penetration through compulsory insurances ,creating jobs and quenching the activities of fake insurers.
Also, in an effort to enhance the image of the industry through prompt settlement of genuine claims, Daniel established what he called insurance industry complaint bureau, which mediates between members of the insuring public who have unsettled claims and insurance underwriters.
In his bid to empower insurance firms to settle claims, Daniel in January 2013 implemented an aspect of 2003 insurance act on ‘no premium no cover’which states that an insurance policy buyer must pay due premium for him to get insurance cover from any firm.
Daniel said the essence of this is to empower the underwriters to be able to pay claims without wasting time and salvage the image of the industry.
In his recent review of the performance of the ‘no premium no cover’ regulation, Daniel said it was so successful that the commission has decided not to tolerate any delay in payment of claims by underwriters.
“I think no premium no cover was very successful,we saw that in the financials of many insurance firms.It has a very huge positive impact,the cash flow position was very very good to the extent that we justifiably refused to tolerate non settlement of claims and delayed settlement of claims because the reason for non settlement of claims was the incidence of non payment of premium.So it was very successful “’ he stated.
To further save the image of the industry through prompt claims settlement having told the industry practitioners that the best advertisement they would do is to pay claims without delay or argument, Daniel last year set up a contact centre for the insuring public.
Speaking on how it works Daniel in a recent discussion with the media stated,
“But last quarter of last year,we set up a contact centre that enabled claimant to directly phone in to NAICOM,reporting a particular company.You don’t even need to write us,just give us the details quickly and we try to find out what happened and within 48 hours we will be able to give you feed back as against lodging the complain in writing which takes weeks before we give you feed back.So that endeared us to the general public .Last year also we succeeded in resolving a lot of claims that were subject of arguments between insurance firms and their clients . A good number of them have sent us written letters of appreciation”’ he stated .
All these are efforts on the part of the commission to polish the battered image of the industry and win back public confidence.
Role of practitioners
From recent reports, it seems that the more the commission fights against any ill that will dent the image of the industry especially as it concerns claims settlement, the more the industry operators are frustrating the commission’s efforts through non settlement of claims.
Recent media reports portrayed several pictures of underwriters and policy holders exchanging verbal blows on the pages of newspapers over refusal to pay claims.
For instance, between July and December 2014, the media was awash with reports of hot argument between one of the daughters of the former president Olusegun Obasanjo, Mrs. Morenike Oladunni- Omorodion over non payment of claims emanating from her insured but burnt property by one of the licenced insurance underwriting firms.
The former president who refused to disclose the identity of the insurer also said the company has been doing everything possible to avoid paying the claims.
Oladunni-Omorodion speaking to the media on her feelings about the attitude of her insurers towards her claims stated that she had lost confidence in insurance in Nigeria, adding that since the incident occurred, the insurance firm had been insensitive to her plight.
She said: “The house is insured but the insurance company is trying to play funny. I will tell you that up till now, the only thing I know is that one or two teams have visited the house like three or four times. I am not particularly an insurance literate persons.”
Also recently, a banker working with Mainstreet Bank narrated how he bought a comprehensive insurance cover with Mansard Insurance but when the car got involved in accident, he provided all the documents requested by the insurance firm but the firm