Insurance operators more interested in profit than underwriting - Adesanya
IN CONTRAST TO THE practice in advanced insurance countries, operators in the Nigerian insurance industry have been described as being more interested in accumulating premiums, boosting profit and satisfying their shareholders, than in proper underwriting. Onatola Sherrif Adesanya, head, Insurance Department, Ibadan Polytechnic, made the accusation in an interview monitored by Business a.m. where he gave a critical assessment of insurance operations in Nigeria.
Lamenting on the poor state of insurance in Nigeria, the academic pointed out that the industry, which is supposed to serve as the last resort for any loss, is having problems and struggling with low penetration rate despite having resources that could trigger improvement in the sector.
“Looking at insurance as a business in Nigeria, the business is moving backward,” Adesanya said, as he pointed out that players, practitioners and regulators have roles to play.
Drawing inference from the 2001 terrorist attack in the United State, an event which led the state to innovate new insurance for the stock market, he advocated localization of insurance products to fit the needs of Africa. “My expectation is that by now, we should be able to go beyond the issue of insurable peril or non-insurable peril. Using an instance of the 9/11 (11th September 2001) event in America; then, they had a number of insurance companies, but unfortunately for them, the insurance firms then could not take care of the losses after the attack that affected the US economy. But now, they are doing what is known as securitization insurance. This means linking the insurance practice to the stock market; a system whereby you buy what is known as equity instruments”.
He added, “In Nigeria of today, we have 59 insurance companies; putting all together, supposing they are all into composite insurance practice, it means that all the insurance share capital base in Nigeria will be about N2 trillion. Can that take care of the economy? Comparing that to the cost of one refinery in Nigeria, it simply means that the whole insurance company in Nigeria can’t even cover a refinery”.
While commenting on the need for recapitalization of insurance firms, Adesanya asserted that reinsurance firms play a key role by serving as backup for insurers. He, however, added that the risk shifted to other reinsurance is not enough to take care of the exposure. “Insurers should be able to cover any kind of risk at all (fundamental, speculative and particular risk). If you have a basic risk being reinsured to reinsurance companies, we still have what is called excess. It cannot cover everything 100 percent, meaning that you are still throwing back the risk to the insured. In essence, we should be able to accommodate any risk without giving room for any excess or whatsoever. We should be able to take all forms of risk without saying some are excluded.”
Speaking on the low insurance penetration, he noted that there is still a long way to go as even the elites have not totally embraced it. According to him, the way to go is to get information – the name of the insurer and details of products - from those that have been denied claim before so that appropriate measures will be meted out to those defaulting on claims.