Olawoyin: Delay in Claims Settlement is a Sign of Inefficiency of Insurers
Mr. Oluwagbemiga Olawoyin is the Managing Director Prorisk Insurance Brokers, formerly Wema Insurance Brokers. In this interview with Ebere Nwoji, he critically assessed the performance of the insurance industry in 2014 and the first quarter of this year.
Can you give a critical review of activities in the insurance sector in 2014 and how the industry has fared in the first quarter of this year?
Year 2014 is a year of consolidation of various reforms which the National Insurance Commission, (NAICOM), has been rolling out in the insurance industry. 2014 represents a year when the structure was put in place and you will see the fruits of these reforms going forward. For example, NAICOM effected implementation of the International Financial Reporting Standard, IFRS, in 2012 and only very few companies had their accounts approved within the statutory period of on or before 30th of June.
Quite a lot had their accounts rectified and approved very close to the end of that year. However, in 2014, when 2013 accounts were submitted and approved, tremendous success was recorded and that tells you that it is a year of consolidation. If the IFRS challenge could be surmounted,that means that you are going to see a very good industry in terms of financial reporting. Once the financial reporting is good and robust, every other thing can follow, in terms of performance, utilisation of shareholders’ funds, creation of shareholders’ value and every other thing that surrounds stakeholders of companies. All will receive proper focus because these are things companies have to report under the IFRS.
Also in terms of performance, the ‘no premium, no cover’ policy of the regulator recorded a very huge success and compliance which made organisations to be more liquid because it reduced greatly issues of default, trade receivables and debtors. Companies were able to get cash for what they sold. So, that made more money available for investment and to also meet obligations both in terms of claims, reinsurance costs etc.
Can you give a brief review of the sector’s activities in the first quarter of 2015?
To review the performance of the insurance industry in the first quarter of 2015, we have to review the entire economy of the country because insurance business is a part of the whole of the economy. So how has the economy of the nation been in the first quarter? There is no gainsaying that this is an election year, so things are going to take a bit of slowness to pick up. Also there are global economic issues associated with terrorism and low oil prices and Nigeria, being predominantly a mono product dependent economy, which is oil; it means that economically, Nigeria will struggle. If Nigeria will struggle, quite a lot of business activities will also struggle. Recall that the International Monetary Fund, IMF, reviewed the GDP earlier and forecasted for Nigeria downwards. These are pointers that things are going to be slow.
However, be that as it may, I strongly believe that it is during this period that insurance should take center stage and do well. Let’s look at it this way, when the economy slows down; the first thing that happens is that money becomes scarce. So if money is scarce, the only tool that you can use to hedge against loss of whatever asset you have acquired before now is insurance. So this is the best time to purchase insurance and for us, we see opportunities.
Though, it has not been officially announced that the naira has been devalued, but we all know it has been devalued and that tells you that the value of assets are bound to go up. So, we are knocking at peoples doors and this has been our message.
Sometimes, people may not be fully aware of things they can do at a time like this. So when you explain it to them, then you will be surprised the kind of responses you will have. We are getting responses here and there. With the fear of insecurity around, and people not sure of the direction of the election, they are being conscious of a need to buy one form of insurance or the other especially to hedge against these perceived risks.
To what extent has the public embraced builders insurance?
The Insurance Act 2003 talks about the duty of the owner of a public building. The Act also defines what a public building is. Currently, we have a class of insurance that talks about the care, and duty of individuals and businesses that owns buildings. this is called public building liability insurance. For insurance operators, the public building liability aspect of the 2003 Act gives it more impetus to drive home the product for us and to say to owners of public building, ‘you have a responsibility to ensure that whoever comes to your premises do not suffer injury or death while in your premises.’ So that is the high and low of that aspect of the Insurance Act 2003. However, people are buying but the rate of purchase is still low. The purchase is low because awareness is low. But as we move on, things are going to pick up. Why will things pick up? Naturally I believe things will pick up because Nigerians are becoming very aware now. Within that awareness is a society that is becoming more litigatious. People are very conscious of their rights and are beginning to pursue it. So, the purchase is a bit low, but as we move on I believe things will improve. Every time we present this to people, it is always ‘we didn’t know, how can we go about it’ and the pricing is always right.
Do you support the idea that there should be a window of exemption for government on ‘no premium, no cover?
I don’t support the idea that there should be a window for government on ‘no premium, no cover.’ In terms of nonpayment of premium in our industry, I think the government will probably be the greatest culprit by sheer number and quantum. Every time government wants to do insurance, it is in billions. So if there is default in paying that billions, the effect is also going to be big on the sector. So I would rather want a window to be given to private concerns and individuals because in terms of payment, the rate of default both in terms of numbers and quantum is low. There is higher rate of integrity on the side of individuals and private organisations because they pay their premium. Although they can struggle to pay due to cash flow issues but once you are able to sit down and discuss it with them, they can arrange a payment plan. However, default in the first instance can be traced more to the doors of the government. So if insurers are saying that government no longer insure their assets because of ‘no premium, no cover,’ I will say that government is not doing insurance because they don’t consider it as one of the top priorities and not because of ‘no premium, no cover.’ Insurance is supposed to be a top priority issue. For example, the Pension Act says that an employer must have a compulsory group life policy in place for workers in addition to the contributory pension scheme. Now, if a civil servant dies and there is no compensation at the end of the day, will government come to say that no premium was paid for the compulsory group life insurance. So, if no premium was paid, is government saying that there was no insurance in place for the staff? Now, for such a staff that died, where lies the effect of the Pension Reform Act that compels every organisation including government to have compulsory group life insurance. So for me, it is all about compliance and respect for the rule of law. Therefore if there is going to be any window at all, I would rather push that the window be given to individuals and private concerns because they are the drivers of economic growth. If they can get flexibility as regards ‘no premium, no cover’ we might likely record a lot of success. Government should just be encouraged to pay rather than look for windows of exemptions.
Can you tell us your experience on claims payment?
Claims payment can be better. Claims payment goes beyond the cheques. It also centres around timeliness, turn around time. It encapsulates what we sell. When claim is settled, promises are delivered. So if promises are to be delivered, then timing and amount paid will be great factors to be considered. We can still improve on whatever successes we have recorded so far but be that as it may, we have moved from where we used to be but I am saying that we can still moved further. Some underwriters are doing very well in terms of turn around time in the area of claims settlement but others still have areas to improve on.
Why do underwriters delay in payment of claims?
Insurance is a contract. It is our responsibility as practitioners, professionals to educate people on what we are selling and what people are buying from us, our clients the insuring public have the right to know. They need to know that insurance is a contract and for every contract you have terms and conditions that bind the contract. Insurance is not an exception, infact, it is said that the evidence of the contract of insurance is the policy document. In That policy document,all the terms and conditions upon which that particular contract or purchase of insurance is made is already tied in in that policy document. Therefore, when there is a claim - which I call crystalisation of the risk- can occur under whatever circumstance. Whatever the circunstance it may be, the policy document