NAICOM orders disclosure of insurance transactions By Joshua Nse
Apparently to check some of the unethical practices which include inadequate rating, withholding of premium/commission, claims falsification, deliberate creation of information gap between the management and board as well as falsification of returns, the insurance regulator said it was ready to remove the chief executive of any insurance firm that engaged in such unethical practices.
For instance, NAICOM said it would no longer condone a situation where the managing director of an underwriting firm owns a private broking firm or loss adjusting firm on the sideline to which it directs businesses to the company.
This practice, it said, has been the major cause of outstanding premiums in the industry.
Director, Inspectorate of the commission, Mr. Olorundare Thomas, told The Guardian that the agency was aware of cases where the chief executive officer of an underwriting firm owning a broking firm gives businesses to the company where he is CEO, thereby compounding the problem of outstanding premiums and bad debt in the industry.
According to him, the success of the managing director’s privately-owned companies depend largely on at least 80 per cent of his time and energy, which he said, was a clear case of conflict of interest and divided loyalty.
He said: “Any CEO that must own a broking firm or loss adjusting firm would be compelled to disclose this to the board of directors of the company, so that if there are issues of outstanding premium arising from such broking firm, the board would be able to know the source of their problem.
Specifically, the commission in this regard has also enforced guidelines this financial year, which require underwriting companies to make general allowance for outstanding premium and bad debts. For instance, for outstanding premium/bad debts of up to three months and one year, the underwriting company will be expected to make allowance of between 25 per cent and 100 per cent in their book of accounts within the financial year, which must be written off in the profit and loss account when the extent of loss has been determined.
He disclosed that under the on-going reforms in the industry, fines would be made very stiff and could be as high as N100,000 per day, while the deadline for filing the financial results would be made shorter than obtains at the moment.
An industry chieftain, who spoke to The Guardian on condition of anonymity, said the latest action by NAICOM was a welcome development that would enthrone an ethical culture in the industry, particularly in monitoring all practitioners in the industry to ensure they follow laid down rules for underwriting, brokerage and loss adjusting business.
According to him, “the guidelines on the provision for outstanding premium have impacted negatively on the profit of insurance companies, meaning that we have to return to the accepted rules of ‘no premium no cover’ in the underwriting business. Also, it will restore discipline in the conduct of insurance business, as well as boost the confidence of investors and customers in the industry.”
Also, the President of the Nigerian Council of Registered Insurance Brokers (NCRIB), Chief Dede Ijere, told The Guardian that insurance brokers to the best of his knowledge were not owing insurance companies, describing the claim as a mere allegation.
“I know that insurance companies have been feeding the commission with false figures, which they cannot substantiate. You realise that the problem of premium payment has been a long-standing issue in the industry and the NCRIB and the Nigerian Insurers Association (NIA) have been meeting in order to resolve this issue. I believe our discussions will resolve this problem in the best interest of the industry,” he said.