Nigeria Losses N25Bn to Ineffective Insurance Policies
MR. Remi Babalola, minister of state for finance, has said Nigeria loses N25 billion yearly, following non-enforcement of insurance policies like cover for buildings, fire and public liability.
Babalola, who disclosed this in Lagos recently, added that the Federal Government is set to overhaul the insurance sub-sector and put in place a new insurance act that would take care of all the lapses in insurance industry regulation.
The Minister, who spoke at insurance roundtable organised by the BGL Limited in Lagos said the above amount if recovered through effective enforcement of insurance policies, would help to galvanise the insurance sub-sector and ensure that more buildings are insured against collapse and fire in Nigeria.
According to him, “It is important to state that insurers’ continuous payment of claims will continue to build confidence in the market place. On our part, I am pleased to inform you that the Federal Government has just issued a circular to all MDAs (ministries, departments and agencies) on the insurance of government assets, buildings under construction and insurance of public buildings.”
Babalola added that the reformation of the insurance act would include the positioning of the solvency regulations and risk-based supervision to ensure a more market-relevant insurance regulation that would empower the relevant stakeholders to carry on with their business or regulatory concern.
“We will promote a new insurance act and relevant sections that are outdated excluding contents that can merely be provided in regulatory and guidance notes for ease of amendments and oversight of the industry will be extracted,” he said.
The minister noted that a major deterrent to the growth of the insurance industry has remained the insurance act which includes the solvency regulation.
According to him, while the Securities and Exchange Commission (SEC) administers its oversight functions through the use of Sec rules and regulations and thus the ability to amend some specific industry regulations, the National Insurance Commission (Naicom) is handicapped by some outdated fines and contraptions.
He said the solution remains total overhaul of the existing laws, expressing belief that if this is done, it will enhance the confidence of all existing shareholders and prospective investors in the industry.
“The basis is that we must encourage the empowerment of Naicom to administer its roles as the regulator of the insurance sub-sector,” the minister said.
According to him, Naicom has the responsibility of effectively regulating the insurance industry. Babalola added that given the recent experience in the industry, “there are concerns that the regulator of insurance industry is not being adequately positioned to play its role effectively”.
He said there are concerns that they are not proactive, adding that the experience in the recent past reflects that the monitoring and tracking mechanisms of Naicom must be strengthened while the regulatory environment needs to be improved upon.
The minister said as a regulator, Naicom must reposition itself adequately for the challenges of post-consolidation. Babalola noted that another major challenge of the industry is inability to garner public confidence in the prompt settlement of claims.
He said this is a key deterrent to the growth of the industry and therefore challenged operators to use prompt claims settlement as a tool to grow the industry and upscale insurance patronage in Nigeria.