Underwriting companies that refuse to pay genuine claims risk losing substantial part of their contributions to the industry’s cumulative N30 billion worth of statutory deposits, while their managing directors face sack.
Industry statistics revealed that the 58 registered insurance companies in the country have a cumulative statutory deposits of about N30 billion kept with the Central Bank of Nigeria (CBN). Following various complaints from the insuring public that some underwriters are not paying claims, the National Insurance Commission (NAICOM) has now commenced the process of paying those genuine claims from the statutory deposits of the erring insurers.
Statutory deposits represent amounts deposited with the CBN in accordance with section 9(1) and section 10(3) of the Insurance Act 2003, being 10 per cent of the minimum paid-up share capital shall be deposited with the apex bank. Going by the development, any insurance companies that its statutory deposit is used to pay claims also faces negative image, as the regulatory body has concluded plans to publicize the names of the affected underwriting companies soon.
Moreover, sacking the managing directors of affected companies will serve as deterrent to others that are either fond of not honoring genuine claims or contemplating such behavior. However, It was reliably gathered that aggressive rate-cutting was partly responsible for inability of some underwriters to pay genuine claims, as the charges on policies are below the standards, in a bid to get business from their competitors.
Rate cutting arises in the industry as a result of unhealthy competition among insurers in the process of chasing the same line of business. It was learnt that when premium commensurate with a policy is not charged, claims would become extremely difficult for such insurers to pay, hence, the reason why some of them are not compensating their clients.
A sector operator, who spoke on the condition of anonymity, said in some cases, policy rates are cut by 100 per cent, as underwriters compete for the same business and when claims arise, they begin to make excuses.
Meanwhile, the inability to pay claims by these insurance companies is denting the image of the industry, necessitating the punitive action of the regulatory body to rescue the sector from collapse.
Confirming the development, the Commissioner for Insurance, Alhaji Mohammed Kari, said the regulatory body is alarmed by the incessant complaints of failure to settle genuine claims and discharge claims to policyholders.
“These sad failures include companies’ inability or refusal to settle inter-company balances. These claims and balances have risen to an unacceptable level where again we are now required to withdraw the self-regulation option given operators to total enforcement of the law.
“Our persistent self-inflicted failure has distracted investment from our industry. It has increased skepticism in our consumers and most tragically it has attracted ‘clever and ingenious people’ into our assumed professional undertaking,” he said.
The President of Chartered Insurance Institute of Nigeria (CIIN), Eddie Efekoha, at a forum in Lagos, said “insurance is to ensure indemnity” after the occurrence of the insured incident and the first obligation to our clients.’’