Claims Settlement: Insurance companies face sanctions after Sept 30

The National Insurance Commission (NAICOM) may soon reel out sanctions against insurance operators who failed to comply with the directive to settle all claims in their books by 5pm on Wednesday.

 

A source told THISDAY last night that the regulator would any moment from now announce punishment for erring operators.

 

The proposed crackdown followed investigations by the regulator as well as confirmation of accusations that some insurance companies had not been paying claims.

 

Several companies are likely to be hit because most of them were already experiencing financial difficulties occasioned partly by the near collapse of the Nigerian capital market-a development, which had eroded the balance sheet of insurance companies, which had significant exposures to equities.

 

A source who confided in THISDAY last night said several insurance companies including Unity Kapital, Law Union,Sovereign Trust among others were currently on the sale block in a desperate effort to inject fresh capital.

 

Some operators particularly the smaller insurance firms had failed to have the NAICOM extend the deadline.

 

The source added that many insurance firms were alleged to have paper-capital base while their real income are stacked in fixed assets, making claims payment difficult because of lack of sufficient liquidity to meet their obligation.

 

However, given the widespread complaints on non-payment of claims, NAICOM had directed all insurance companies in the country to pay all outstanding claims by September 31, 2015 or face punitive measures.

The commission had threatened to invoke the full application of punitive sections of the Insurance Act without further recourse should any insurance company be found wanting after the expiration of the deadline. The insurance regulator in a circular to all insurance companies further directed that henceforth, all claims must be handled strictly in accordance with the provision of the Insurance Act, 2003.

 

The circular, signed by Deputy Commissioner for Insurance (Technical), Mr. Mohammed Kari. (now commissioner for Insurance), had noted: “As a palliative gesture, the commission shall allow for a grace period until the 31st September, 2015 for companies to clear all backlogs of outstanding claims as provided by the insurance Act.”

 

The commission had said: “From 1st October, 2015,  the commission shall evoke the full application of punitive sections of the Insurance Act including but not limited to sections 8(1) (m), 70(1) (b), and 70(2) without further recourse.”

It said the directive represented a last warning to insurers who fail to settle genuine claims on the consequences of their action.

Source: thisday