An average of 80 per cent of the total income of insurance companies  in Nigeria is expended on management financing, which makes them to have the highest operational cost among their  counterparts in Africa .

The Deputy Commissioner, Technical, National Insurance Commission, Mr. Ibrahim Hassan, disclosed this during a workshop with the theme, ‘Improving investment attractiveness of the Nigerian insurance industry,’ for executives of shareholders association and independent  directors of insurance companies in Lagos.

He said, “There is nowhere in Africa where management expenses are as high as it is in Nigeria . Many companies spend huge part of the funds, sometimes eighty per cent, on management expenses.”

According to him, there was the need for the owners of the companies and shareholders to question huge abnormal expenses of the firms.

While condemning frivolous expenses, he said any expenses that would be unproductive or not generate funds to the insurance companies should not be incurred.

Hassan said, “Some of the things they expend money on are frivolous, some of the trips are not even necessary; they don’t need to embark on trips that are not value-adding. You need to tie every spending to something that should generate income to the company.

How can you create surplus when you are not spending to invest or expand or make the firm attractive.”

The deputy commissioner said that NAICOM would improve financial reporting in the industry through the adoption of the International Financial Reporting Standard.

Source: Punch (By Nike Poopola)