In this interview with NIKE POPOOLA, the Commissioner for Insurance, Mr. Fola Daniel, explains the major factors that may shape the insurance sector, especially under the current reforms in the financial sector.
Why did the National Insurance Commission set up the Anti-money Laundering and Combating the Financing of Terrorism units?
The financial sector in Nigeria is a key element in the fight against money laundering and financing of terrorism. So, what we have done is to key into what other financial service regulators have done: to bring the issue to the fore so that, together, we can permanently take Nigeria out of the non-compliant nations’ list. We were non- compliant and we were rated non-compliant. In the last three years, we have been removed from that list. But all hands must be on the deck to ensure that we no longer return to that black book on non-compliance. What we have done is to integrate insurance industry into that project.
Under the new arrangement, what are the duties of directors?
The insurance directors are supposed to actively supervise their managements. They need to know what is happening. There is an erroneous belief that when you are a board member, the management runs the show. What we have done is to highlight the duties, responsibilities and expectations from insurance directors. They need to know what is happening in their various insurance companies. But more importantly, we have to make them know that they can have legal liabilities for any wrong doing that is derived from the insurance business. We are creating awareness so that they will wake up to their responsibilities and thoroughly know what is happening. It is important for a country not to be branded a non-compliant nation, and the Federal Government in the last two years, has been working assiduously to ensure that it is removed. What we are doing right now is to ensure that we sustain our new status as a compliant nation and stay on the list.
How will you assess the first eight financial months of insurance companies?
The insurance industry has been moving. The industry, in the last eight months, has been jogging, and it is now poised to run because it really needs to run. We have the opportunities and we have the potential in terms of population and we have a lot of insurance gap (many people have yet to embrace insurance as a means of managing their risks). Really, the insurance companies have woken up to the reality that unless they run, they will not bridge this gap. Besides, operators have realised that the capital they have gathered will not be utilised properly in doing the business and they will be under- performing, unless they run.
In recent time, NAICOM, in company with its task force has been arresting fake motor certificate vendors. What do you intend doing with those arrested?
All those arrested will be subjected to normal legal due process. The police raided them and I believe they are preparing charges against them. So, we will take them through the normal court process and if they are found guilty, there are appropriate penalties in the law, and that will be applied. But I think more importantly, it is a twin message. We are saying to Nigerians ‘do not buy fake insurance and do not go to unorthodox places to buy your insurance products. The message is: buy from insurance companies. We are also saying to the insurance industry: ‘you need to be more visible in Nigeria.’ The reason is that if those who are tempted to buy fake insurance can see five insurance companies around them, why would they want to buy fake? So, the insurance industry needs to be more visible. We need to establish more branches so that Nigerians can take their eyes away from fake operators.
What guidelines should we expect from the committee on divestment established by NAICOM to monitor banks’ exit from insurance business?
The guideline is just a modality for those businesses (insurance firms) transiting from present owners to new owners, especially where they want to sell to other entities (investors). And where some companies have opted for group holding, we will spell out the modality for running the business, especially for corporate governance issues.
Are the investors coming in to buy the banks’ insurance subsidiaries being screened?
All foreign investors are screened, wherever they are coming from. Anyone bringing in capital is screened to be sure it is not money derived from criminal activity but brought to do business here. The country, as a whole, has a mechanism for sifting potential investors in the country.
At the outset of the repeal of universal banking, there were high expectations of mergers among the companies. But now, we are seeing more of foreign investors coming in. Why are the companies not really adopting the merger option?
Merger is a commercial decision that different companies will have to take. It cannot be regulatory- driven, except when it becomes extremely necessary for regulators to make suggestions. But you know, individual companies will have to take the decision as to whether to merge or not. However, silently, there are some ongoing mergers and takeover discussions within the insurance industry, and we are monitoring them closely. We are quite satisfied with the progress that they are making. A lot of companies and bosses are seeing the need to build bigger and vibrant companies, rather than the small individual players available at present. So, a number of mergers are going on quietly.
What is the percentage of Nigerians insured?
I don’t want to give you a figure, but we have a huge insurance gap. That means majority of our people are not insured, and that is one of the reasons that we are driving awareness campaign and sensitising Nigerians on the need to embrace insurance as a means of managing their risks. Also, we are making insurance companies to deliver so that people can see value.
Since the local content guidelines on oil and gas insurance business were released, what has been the percentage of risks domiciled in the country?
We released the guidelines only in January. So, we have only utilised the guideline for some months. It may be too short a period to begin to give percentages. We need to allow this guidelines to run for, at least, a year. Then, we can look back and take stock. One year can be a reasonable period to gauge and see how much impact we are making. However, the compliance has been very encouraging because we have actually inspected all insurance companies that are engaged in oil and gas business to see the level of their compliance and to see how they are utilising the opportunity. In all, the report reaching us has been reasonably encouraging.
How many government houses have been insured since compulsory insurance was introduced in 2008?
The biggest customer that the insurance industry has is the government. The government has shown leadership: they are embracing insurance. It is the ordinary Nigerians that we need to showcase the value change to; so that when they see value, they would see the need to buy it. The government has been very compliant. One of the compulsory insurance aspects is the group life, which the government started in 2008. You know the National Pension Commission Act was enacted in 2004, but in 2008, following the pronouncement by the then, office of the Secretary to the Government of the federation, government has been compliant. We have seen yearly succession of this group life been taken.
What should we expect in the insurance industry in the next four years of your second term in office?
Expect more of development-driven regulations; more enforcement on the Market Development and Reconstructing Initiative; and on market discipline. The market must be disciplined. Where one cannot have discipline, one cannot have progress. We are poised to move rapidly, so there is going to be more stringent market discipline.
Source: Punch
