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Monday, 10 December 2012 00:00
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Insurers’ sanction: Will this correct the ills in insurance industry?

To ensure that insurance operators strictly comply with insurance guideline in the discharge of their duties, the National Insurance Commission (NAICOM) came up with series of sanctions recently. But to what extend will these penalties correct ills in insurance industry? KAYODE ADELOWOKAN writes.

Long before now, the National Insurance Commission (NAICOM) was too relaxed on especially sanctioning erring underwriting firms.  Because of this leniency from the regulator, most of operators diverted their shareholders’ fund into private pockets, some mismanaged their companies, while others lacks good corporate governance, as they turn insurance firm into a one-man show. The consequence of this is a tarnished image for the industry, a feat that discourages many Nigerians to do business with underwriting firms.

And because it has the mandate to protect the insuring publics by ensuring that the insurers operate strictly with insurance guideline, the commission recently continues to punish offenders, especially those found to have violated ethical insurance practice.

However, some operators who spoke to Nigerian Compass feel NAICOM is too harsh on them. But the Fola Daniel-led NAICOM has come out to say that the commission will continue to sanction operators, until they totally comply with insurance policy framework. If operators could do business as they ought to, NAICOM believes the market should be one of the top insurance markets in the world.

Earlier in the year, NAICOM sanctioned some brokering firms that failed to comply with the industry’s rules. To this end, it urged the public not to transact businesses with them until they are let loose of its hook. Some of the affected firms include; ADS Insurance Brokers Limited,  APL Insurance Brokers Limited, Aso Solid Insurance Limited, Bambi Insurance Broker Limited and  CIB Insurance Broker Limited. Others include, Cachet Insurance Brokers Limited, Clown Field Royal Insurance Limited, Cobal Insurance Brokers, Col-Val Insurance Brokers, Commercial Marine Brokers, Consolidated Insurance Brokers, among others.

The Commission in its regulating capacity also penalised Alliance & General Insurance (A&G) Plc, A&G Life and Fidelity Bond for infractions ranging from non-rendition of accounts; misrepresentation and non-disclosure of liabilities; non-remittance of premiums and commissions, and corporate governance abuses.

A fortnight ago, NAICOM instituted an interim board to take over the management of Goldlink Insurance Plc. The previous board was said to have mismanaged the company. The interim board was to oversee the affairs of the company for six months. James Ayo, was made the Chairman while Gbolahan Olutayo is the Managing Director and Adeyinka Olutungase is the Chief Finance Officer.

While the last of sanctions may not have been heard, Daniel, Commissioner for Insurance said the protection of policyholders’ interest will remain paramount during his administration.

Daniel has said NAICOM will continue to expose and sanction errant operators to serve as deterrent to others.

He said the commission would never sweep activities of errant operators under the carpet or shield them from sanctions, adding that sanctions meted on them are largely remedial to ensure safety of policyholders and shareholders.

Daniel said the commission gives priority to the protection of the industry in imposing sanctions, adding that it would not be deterred by the outcry of high-handedness by some operators.    

Daniel said the commission will continue to sanction erring insurance operators and if it is important for the public to know, they will let them know.

According to him, “Our sanctions are largely remedial. What is upper most in sanctioning a company is the protection of policyholders. If I sanction an insurance company and put it on the papers of newspaper, without obtaining a remedy, how does that help the policyholder?  But if I can effectively sanction an operator and the interest of policyholder is fully served, that mean we are doing the right thing.”

The commissioner said his commission is not shielding any operator adding that “As a matter of fact, for some months now, I think there has been shout and cry from the industry about our sanctions. We are acting as it become expedient and appropriate; we are not going to mimic any regulator so that the public will say we are doing something that would not be necessary.”

Meanwhile, the Director General, Nigerian Insurers Association (NIA), Mr. Sunday Thomas during a chat with Nigerian Compass said that the penalties are meant for checks and balances from the regulator on erring operators. 

“The sanction is meant to punish those who have done wrong, those who have erred and if the regulator says sanctioning them will bring sanity into the industry, then, it is good for the system. A system without checks and balances is not a good system,” he said.
Contrary to some operators who believe NAICOM is too harsh in its judgement, he said “Those who think these sanctions are too harsh on them should just answer this question.

Have they defaulted? And if they have defaulted, then, they have no point. And as a matter of fact, I am not aware that any licence has been withdrawn, I am not also aware that any company has been asked to wind up. So, whatever the commission is doing should be seen as corrective measure and if that is the case, if any company is not doing quite well as it ought to, and it is been subjected to correct itself, I think it is a good development,” he said.

The measure taken by NAICOM, he said, will instil more confidence in the market and the public will patronise insurance companies, just like banks. The measure is to safeguard the asset of the insured and if that is the case, they (NAICOM) need to reinforce the confidence that we should have in the system, Thomas stressed.

On his part, the Managing Director, Industry and General Insurance (IGI), Mr. Rotimi Fashola, said that the regulatory body did not just come up with the sanction overnight, it must have warned the concerned companies on several occasion before it took its decision. According to him, “I know there must be ongoing issues between the affected companies and NAICOM before they were sanctioned. The concerned companies must have seen the sanction coming anyway. It is not that the sanction just comes over night.

They must have been battling issues for a certain period of time, before NAICOM took its decision. It is not a decision that is just suddenly taken. Probably they (affected companies), were penalised because they could not do what NAICOM asked them to do.”

Other experts who spoke to Nigerian Compass said though the measure taken by NAICOM is good to enhance ethical insurance operations, they appealed to the regulatory body to be lenient in its judgement, as those sanctioned companies in the long run have their credibility at stake, a development they said will only demolish what the commission intends to build.