. As insurance struggles at 1% in Nigerian market
. Aggrieved policyholders go personal on defaulting companies
By Bakare Olatunde
RISE in the rate of claims denial by insurance companies is seriously unsettling the sector in Nigeria and fast pitching the insured against the insurers.
Already, some of the aggrieved policyholders have threatened to take it personally with insurance agents, who sold policies to them but could at the expiry of the contract, not stand by them to get their claims paid by the insurance firms.
Findings in the industry showed that some policyholders have gone to the extent of threatening the lives of such agents if their insurers deny them their claims.
Checks by The Orimix throughout 2024 revealed that some of these non-claims-paying insurance firms have weak financial bases while some are even the big players but they might have some internal challenges in the industry.
The Orimix gathered that no fewer than eight insurance firms have defaulted and owe policyholders N38.5 billion claims and in annuity payments as of the second quarter of 2024, according to the industry data, the sector reported claims of N297.9 billion and paid claims of N259.4 billion. But rising from what was owed as of the second quarter of 2024 till date the industry is owing insurance policyholders approximately N50 billion considering from the second quarter to today.
Indeed, the concerned companies had earlier collected yearly premiums from policyholders. Still, they became illiquid and failed to compensate policyholders.
Moreover, those selling annuity plans among them were equally denying annuitants’ payment and if at all they were to pay, it was usually late after several protests from customers.
The most abused insurance policy by these underwriters is Third Party Motor Insurance, which is being sold at N15, 000 per annum. This is because most motorists, especially, commercial vehicles don’t request claims because of the bureaucracy involved, these companies see these premiums as free money, which they have been surviving on for years while some of their managing directors and top officers live extravagant lives.
Moreover, for years, investigations revealed that these firms have not been briefing their shareholders through yearly general meetings nor filling their yearly financial statements to the National Insurance Commission (NAICOM).
Nigerians are concerned that if this continues in the sector, the issue of trust that has been the challenge for the sector will not allow prospective customers to accept insurance products and in return, will make the sector lose its economic value.
This has been a major challenge in the industry and those insurance operators will keep telling policyholders, who have huge amounts of claims that they can only attend to claims of N100, 000 and N200, 000, leaving others to struggle for years, and along the line, many policyholders have lost their lives.
While the erring underwriters mostly claimed they were looking for foreign investors that would invest in them to make them financially stronger and stable, the regulator kept mum, tolerating their excesses despite several complaints against them, thereby, violating the stipulations of the Insurance Act 2003, which mandates NAICOM to close down defaulting companies after six months as well as evidence of five complaints of failure to pay claims promptly.
Checks showed that this nonchalant attitude went on for years in the industry until recently the commission after years of tolerating the occurrence, ordered African Alliance Insurance Plc to resolve and ensure the settlement of outstanding claims and submit turnaround plans to the commission.
This follows complaints by annuitants and insurance claimants against the insurance company regarding the company’s delay /inability to fulfill its obligations as and when due.
The commission had earlier summoned the Board of African Alliance Insurance Plc to its headquarters in Abuja and ordered the company to settle outstanding payments due to complaints from their customers.
In addition, the Board of Directors of the company was equally directed to immediately submit a turnaround plan for addressing the challenges currently faced by the company, which necessitated putting the company under the Commission’s Regulatory Order.
Given the heightened challenges, NAICOM said the company should expect further actions if they fail to address the issues within the timeline the company has been given. Until recently the commission sacked the board of the underwriting firm and replaced it with a new set of people and gave them a year to address the immediate challenges of the company.
Market analysts, who spoke to The orimix, confirmed that many of such insurance firms are busy selling products to Nigerians, particularly third-party motor insurance in license offices and local government across the country.
This, stakeholders in the sector are worried and called on the NAICOM to act to redeem the image of the industry.
For Goldlink, NAICOM took over the board in 2012 as part of moves to set the company back on track, but the move did not yield any tangible result.
For IGI, NAICOM restricted the daily spending to curb the mismanagement of funds in the firm. The move was, however, not productive.
Also in 2012, NAICOM suspended Alliance and General Insurance Company Limited and A&G Life Assurance Plc from transacting further business for six months, citing non-rendition of accounts, misrepresentation, and non-disclosure of liabilities. It listed other offenses of the companies to include non-remittance of premiums and commissions and corporate governance abuses.
But NAICOM’s plan for interim managers to take over the management of both firms was met with litigation that dragged on for several years while the fortunes of the companies continued to nosedive.
Speaking on the development in the industry, the Chairman Emeritus of the Independent Shareholders Association of Nigeria (ISAN), Sir Sunny Nwosu, said that there are no insurance companies taken over by the NAICOM that survive later on. Even the commission does not know what it takes to manage them.
He noted the fear in the sector now is recapitalisation, stressing that the way is going in the banking sector and it is coming back to the insurance sector.
According to him, some of the insurance firms do not have enough data to convince investors, who will come and invest in their companies.
Nwosu therefore, called on the NAICOM not to compromise the quality of managers in the industry.
Policyholders of one of the erring companies, Sunday Akinduro, who spoke to The Orimix, also urged the new leadership of the NAICOM to sanitise the insurance industry.
He said that some of those redundant insurance-earning companies allowed to sell insurance products in the market are de-marketing the sector when they cannot pay their claimants.
Observers in the industry said the case of some insurance firms not paying claims is cheering news because never in the history of insurance practice in Nigeria has it been heard that insurance firms invited policyholders to come for their claims.
