Daniel: Reforms in Insurance Industry are Yielding Fruits Already

Mr. Fola Daniel
Commissioner for Insurance
After his eight year-tenure, which effectively ends this month, Commissioner for Insurance, Mr. Fola Daniel, in this interview with Festus Akanbi speaks on issues that shaped his tenure; the Nigerian economy and the future of insurance industry in Nigeria

Sir, could you give us a brief account of your stewardship as Commissioner for Insurance in the last eight years?
I came into this position on August 2, 2007 as Commissioner for Insurance and, at a time when the industry had a lot of chaos arising from the just concluded recapitalisation exercise, which rather than strengthen the insurance industry, it cast a lot of doubts on the entire exercise. That was the time I was appointed.

My appointment also coincided with the appointment of a committee by the Federal Government to review the entire recapitalisation exercise. I was co-opted into the committee from the day I became the commissioner. I am glad we were able to clean the industry with that exercise and put it behind us, culminating in the issuance of licences to companies adjudged to have scaled through. At the time of the release of that list, only five companies failed to make it to recertification. So, that was the beginning of a reawakening and re-strengthening of the insurance industry.
I met an insurance industry that was castrated as a result of negative public perception. There were issues of recurring public outcry against a few insurance companies failing to settle genuine claims on time.  Insurance awareness and acceptance by the populace was very low. These problems were compounded by the issue of fake motor insurance certificates that was endemic. 
These problems were tackled headlong, yielding significant improvement of the situation. The insurance industry is on the path of sustainable progress.

What did you dislike about your job on resumption of duty?
I was excited about a unique opportunity of becoming a regulator from the position of an operator. But the working environment was very repelling and unfriendly. NAICOM operated from an office complex directly opposite a building material market. Our Office was sitting on top of two banks. We overcame the challenge of poor working environment through the acquisition of a befitting office complex presently serving as our head-office in Abuja. Our head-office Annex in Lagos was also made of wooden panels which looked more like a pool office rather than a regulator’s office. The office was completely pulled down and re-built to the modern structure we now have in Alagbon Close Ikoyi Lagos.

How did you succeed in bringing calm to the insurance sector in view of the turbulence in place when you came in?
When I was appointed Commissioner, there were really conflicts; there were huge misunderstandings which were escalated to the courtrooms. We had Nigeria Insurers’ Association (NIA) in court with NAICOM, the Nigeria Council of Registered Insurance Brokers (NCRIB) in court against NAICOM. That was the kind of insurance industry I met and I considered it extremely unfortunate because if regulated entities are taking the regulator to court, how will that regulator effectively regulate the entities that have taken it to court without bias? I did not only find it absurd but very unfortunate and regrettable, so I decided to find a way to reconcile the hitherto irreconcilable issues.

Through dialogue and intervention of Professor Joe Irukwu, the legal actions were dropped un-conditionally against the Commission. You will recall that recently, we went to the National Assembly on the amendment of the NCRIB Act and we spoke with one voice as an industry evidencing unity and amity in the insurance industry. This has strengthened the resolve of the industry to add value to the economy through provision of services comparable to other advanced jurisdictions.

The industry is very lucky and I am particularly blessed to continually enjoy the wise counsel of Professor Irukwu, an erudite Senior Advocate of Nigeria, (SAN) who epitomises commitment to the upliftment of professionalism and good governance in insurance.
How were you able to improve the ranking of Nigerian insurance sector to second position in Africa?
Perhaps you may be surprised to hear that the insurance industry deserves no accolades for coming second in Africa at this point in time. Well, coming from a position of fifth to second within three years could make some people say we have made some progress but, I want to say we don’t have business coming second or fifth position where we were ab intio. This is because if you look at our population and our economy which is now the largest in Africa, where we rightly belong should be number one. As a commission, we have tried to open several windows that were hitherto shut to ensure we have an enhancement in premium income. This had probably taken us from the fifth position to second in Africa but we haven’t arrived at our destination yet. We should be the first in Africa with a very wide margin from whoever comes second on account of our population and on account of our fast growing economy.

How are you able to maintain stability and peace in the insurance industry in view of the overwhelming number of operators?
I agree that the number of operators is large and could be a problem but, we have tried to ensure that all insurance firms play by the rules. The most nagging problem that confronted the industry was indiscipline, rate cutting or inappropriate rating of risk, resulting in the diminution of shareholders value. Non-commercial rate of premium are collected, with the expectations that losses will not occur. Of course losses will always occur, leaving the companies in poor cash flow situations and curtailing the ability to promptly respond to claim settlement. It is however important to state that the situation is improving. The respective Boards of Insurance Companies have a significant oversight responsibility on how their insurance Companies are run, having in mind the quality of their portfolio and the pricing of risks assumed.
How can we effectively get rid of the problem of fake motor insurance certificates?
Stamping out fake insurance certificates has been a collective effort of the industry. We decided to spearhead the campaign as a concerned regulator, as our primary responsibility is the protection of policy owners. We can only protect genuine policy holders and in order for us to enjoy the benefit of insurance, it is imperative that the public buy genuine policies only from licensed operators. Consequently, we are collaborating with all stakeholders –the NIA, NCRIB and the law enforcement agencies in the struggle for an insurance industry devoid of fake insurances. Let me mention that the FRSC has been a very significant player in our efforts to reduce fake motor insurance certificates in the country.

The NIA took a giant step forward some few years ago when they launched the Nigerian Insurance Industry Database (NIID) which has enabled the identification of fake motor insurance certificates as distinct from genuine ones. The NIID also had the added advantage of enabling accurate data on insured vehicles on our roads.

The above collaborative efforts added to consumer awareness campaigns which have culminated in reduction of fake motor insurance patronage. We are on the right path to complete elimination of the problem.
Can you explain the present increase in the number of foreign insurance firms participating in Nigeria?
I feel very proud that during my tenure as Commissioner for Insurance, all the major international insurance firms are coming into this market. The likes of AIG, AXA, Old Mutual, Metropolitan Life , Sanlam have shown interest in the Nigerian market.

The cleansing exercise we did also began to enhance the integrity of the sector and the international community did not fail to notice what has happened in the insurance industry in Nigeria. So, in the last five years, we have been having increasing enquiries and attempts to enter. The results are the significant entries. I’m very happy that the  reforms we have carried out in the Nigerian insurance industry have not just attracted foreign investors but have enthused the local investors to become buyers of insurance stocks by choice.

My excitement is derived from the value addition their entry will bring to bear on the market, particularly in area of new products development and technical capacity.  The new entrants are coming from well developed markets where good governance has become an imperative and not an option.  It is therefore expected that their experience will impact the local market. Consumers are also provided with wider choice of service providers. It is already generating positive competition.
The No Premium No Cover policy of NAICOM is widely acclaimed by industry players as a masterstroke. Why was this necessary?
I need to give a background to the No Premium No Cover policy. It was not really a NAICOM guideline but law of the nation as embodied in the 2003 Insurance Act. This law has been tested up to appeal court validating the position that unless you pay your premiums in advance, there is no valid insurance cover.

We invoked the above provision of the law at the beginning of 2013 as a response to the potential destruction of the industry arising from poor cash flow position of most operators and the attendant inability to settle claims and other operational liabilities. We are happy to note that the enforcement of the provision of the law has removed a major impediment to prompt settlement of claims.  From information reaching us, shareholders are also happy to receive dividends arising from real income as against previous situation when most of the reported assets of insurance companies largely reside in receivables.
How will you describe the industry’s response to the issue of claim settlement now?
The issue of claim settlement has   been a recurring decimal in the industry. In 2007, we looked at the insurance claims redress mechanism in NAICOM and we decided to strengthen it. We reinvigorated the Complaint Bureau Unit and almost escalated it to a full-fledged department. All the complaints we received were decisively and satisfactorily dealt with. To further resolve the issue of claim settlement, we established a contact centre in 2014 which enabled aggrieved consumers to pick their phones and report erring insurance companies. The Commission also sponsored a live television Programme called Insurance and Claims running on Nigeria Television Authority (NTA) aimed at educating the masses on their rights and obligations under insurance policies.

We also encourage insurance companies to self-regulate in the area of unsettled claims and I’m very happy that the Nigeria Insurers Association took advantage of this challenge and established an ombudsman in NIA where a retired appeal court judge was brought in to be the chairman. The essence of the ombudsman is to resolve issues instead of going to regular courts.
As a result of these efforts, it is comforting to say that the incidences of unpaid claims have been consigned to insignificance.
How well has the industry been taking the advantage of provisions in the local Content Act?
The Nigerian Content Act of 2010, which among other provisions, vested seventy (70) per cent of all insurable assets and liabilities in the Nigerian registered insurance companies through Nigerian Brokers. Thus, the Oil & Gas, Aviation insurances are retained in the local market. The objective of this law is to reduce outflow of businesses that can be done locally. It also encourages building of local technical capacities. Insurance industry is a major beneficiary of this law resulting in enhancement of our retention capacity from about 5 percent to over 40 percent. In some cases, the market is able to retain 100 percent of risk falling within certain value at risk.
Sir what is the biggest challenge you have faced as the Commissioner for Insurance of the Federal Republic of Nigeria?
I will say the Dana crash which was a national calamity, was very challenging. I felt distraught about the huge casualty. I had apprehension about response of insurers to such a huge loss given the untidy circumstances surrounding the insurance protection of the aircraft. But today, am proud to say that the industry acquitted itself most satisfactorily, culminating in rancor free settlement of liability which accrued to the local market.

What was your most difficult decision to take whilst in office?
Well, several decisions were taken from time to time in the course of my duty. I wouldn’t say any particular one is the most difficult. On reflection however, the quest by the owners of the defunct Globe Reinsurance was indeed a tough decision I was confronted with. You will recall that I was the Managing Director of Globe Reinsurance Company which went into merger arrangement with Nigeria Reinsurance prior to my appointment as Commissioner.

As a result of the re-verification exercise of capitalisation in 2007, it was discovered that the major partner in the merger did not qualify for recertification. The owners of Globe Re anchored by application to repossess their licence on the strength of being misled to merge with Nigeria Re. There were merits in the argument, but to revalidate the licence in my opinion could scuttle the entire recapitalisation exercise. It could set in motion similar requests by companies that were unable to qualify to remain as Insurers.

The other important factor was my association with the company and my present position. People were bound to read meaning to the validation. Globe Re had significant sympathy for their application at the highest level of government at the time. I simply weighed all the pros and cons and came to the conclusion that the request be declined. This decision obviously generated loss of friends for my person, particularly from owners of Globe Re, some of whom were my industry mentors. No regrets because a decision needed to be taken, and I took one looking at the larger picture and national interest.
To what extent will you say some of the goals and objectives you set eight years ago when you were appointed as Commissioner for Insurance have been met and also what will you want to be remembered for?
I had aspirations, I had objectives and I had goals that I set for myself when I became commissioner. Looking back, I will say to God be the Glory. I will want to be remembered as a Commissioner for Insurance that had a unique opportunity to make some impact and I will ask: Did he make the impact? My response is let posterity answer that question.
Source: Thisday