We must enforce compulsory insurance in Nigeria—NAICOM chair

President Muhammadu Buhari recently appointed a new board for the National Insurance Commission (NAICOM) chaired by Dr Abubakar D. Sani, who in this exclusive interview, speaks on a number of issues bedevilling the industry and the way out. Excerpt

What informed the president’s decision to appoint you as the chairman of NAICOM?

Over the years, I have passed through different stages in life. From secondary school, I held positions of responsibility right from class monitor, to school prefect and crowning it with school head boy in 1975/76 at Sardauna Memorial College, Kaduna. After that, I secured admission into the School of Basic Studies and after the mandatory one-year, I got admission to read Actuarial Science. After that, on my own, I had a professional qualification as a chartered insurer.

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So, I believe with my other experience in the industry and then working as an insurance and pension consultant, possibly, that might all be the reason the president found me suitable for this appointment.

Also, my vision is to ensure that we entrench a code of good and corporate governance in the National Insurance Commission, which will help the stakeholders, market players and employees to realise their potential and to have a very robust industry for their own betterment.

So, at the end of my tenure as the chairman, we will have a change that will positively affect the industry and contribute more to the GDP. Consequently, we will be a big player just like other similar industries, like banking. In other climes, insurance industries own banks but here, it is the other way round. So, I believe that after our tenure, that vision will be realised.

What do you think are the reasons for the low penetration of insurance when compared to other climes and what can we do to change the narrative?

In the insurance industry, there is still a lot to be done to change perceptions and perspectives and it has to do with good regulations to ensure that the players conform to and comply with the existent laws that establish the regulatory authority. Then to confirm, invite and respect all the objectives that are mainly the legal framework of the regulatory authority. If that is done, it will help shape up the industry viz-a-viz their performance to the public as against what is now the case of complaints emanating from non-payment of claims.

In our own tenure, we will ensure that the culprits are brought to book and we will make an example of some of these companies that renege on honouring their obligations so that at the end of the day we will trust in the industry.

Would you say that the reason for low penetration is just about the claims?

There are a lot of things to be done to deepen insurance penetration and one of them is to ensure compulsory insurance, be it third-party liability, or public insurance. These will help to deepen penetration.

Where there are people sceptical about insurance because of their faith, in the industry today, we have a substitution to the conventional insurance, which might meet up with their expectations in terms of faith, like the Takaful insurance.

Also, there’s this annuity, which is part of insurance and should take the place of pension, whereby people after service, when they could have earned a capital sum will be encouraged to buy an annuity and this is for life.

By and large, we have the responsibility for publicity. It is important to create awareness for people about it because there is a lot of ignorance about what insurance is. So, we have to educate people to buy insurance. Possibly, with this, we will deepen penetration.

In other climes, it is a matter of law that if you do certain things, you must have them insured. In Nigeria, is it the absence of the law or enforcement that is responsible for our situation?

I can say the absence of enforcement; it is done but not in totality. You will find that over the years, the police have enforced the laws pertaining to insurance and it is successful.

Today, people have it at the back of their minds to have insurance, even if it is the lowest, which is the third party. Although the third party is a big insurance because the cover is large – it covers third party liability, death and personal injury. It is a big cover but because of ignorance, people are forced to take it because of the policemen they will meet on the road, but it is more than that.

So, when you look at the aspect of insurance enforcement for vehicles, it has achieved some desired effects. However, there is a lot to be done on the aspect of compulsory insurance like contractor all risk, public building liabilities and health insurance so that if there is the need to co-opt police in enforcement, it will go a long way in aiding insurance penetration.

I think what should be done about insurance is both enforcement and publicity. Again, looking at the kinds of products we have in insurance, there must be the need to have new products that will conform to our environment. So, we encourage the practitioners to come up with products that are in tandem with our way of life.

If you travel out of this country, you can purchase insurance on your phone, whether car insurance or others and within a few seconds some kind of certificate is generated.

Why is it difficult for us to offer IT-enabled insurance products using fintech as we see in other climes?

Competition is forcing Nigerians to digitise insurance; so all that you are saying is happening in the comfort of your bedroom. Nigerians are very innovative and competitive, but it is just a matter of time as the banking industry is being developed over time and a lot of changes have occurred. Likewise, in insurance, the board of NAICOM is going to assist any kind of insurance company that is coming up with new ideas to move insurance forward; they are encouraged without delay in their requests.

One other problem with our insurance companies is having the pocket to undertake some of the big-ticket transactions in the country. What is happening to the recapitalisation exercise?

The recapitalisation is ongoing and when you look at its history, after NAICOM came onboard in 1977, there have been a series of recapitalisations that have taken place. It happened in 2003, 2007 and there is a bill right now in parliament which is awaiting the normal legal process to be passed as a law and the highlight is capitalisation.

Right now, too, there is capitalisation enforced by the commission. Unfortunately, we are having legal issues as the practitioners have taken NAICOM to court, but the issue is being resolved gradually.

Insurance has to be in a position to take up a lot of risks, but that will only happen if the capital requirement is very high. Very soon, we will have capital to the tune of N10bn for some certain insurance, followed by N8bn and N2bn.

Also, we are in contact with the local content board to ensure that some of these things are not taken overseas but are done here to increase the capacity for the recapitalisation to be achieved.

Also, we are talking about risk-based capital, where people will be licenced to operate at their own level for them to decide on where they want to serve. So, all these will deepen insurance penetration and encourage more people to come up. We will have technical provisions to avoid taking the risk ourselves.

How will you evaluate the different product offerings, and in what areas do you think we are not doing very well?

I think compulsory insurance needs to be enforced because it covers third-party liabilities. For instance, if a contractor is forced to take up insurance for third-party liabilities for people working for him, passers-by and other things, then he will do it.

These are areas we have to lay emphasis on. You can imagine a situation where somebody is passing by a construction site and a forklift malfunctions and some of the blocks if fall on him. It is going to cause an accident or death. So, what happens if there is no third-party liability on that? Possibly the owner of the site will give out a little compensation that is not commensurate but of his own volition. But if there is a law saying that there is a specific amount to be paid, it will be better for us.

Don’t you have the mandate by the law to show up at those construction sites to stop work or enforce such insurance?

We just had our first meeting as a board and these are some of the things we are seeking. Where they are not in place, we will make sure that we bring them on board.

So, what should Nigeria expect from NAICOM in the short to medium term?

We are going to provide good and effective regulations so that by the time you see any insurance company opening or in existence, people will be free and have the confidence to do business with them because they have confidence in the regulator.