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 Daily
Independent Online.
* Wednesday, June 30, 2004.
Insurers’
premium income still below N100 billion
Stories by Bethel Obioma
Insurance Correspondent, Lagos
The premium income recorded by the 118 insurance
firms that transacted business in the industry in 2003 fell short of N100
billion, a mark touted by experts as indicative of appreciable growth for
the under-performing industry.
Insurers, under the aegis of the Nigerian Insurers Association
(NIA), recently announced a projected gross premium income of N50.2
billion for the year ended December 31, 2003, representing a marginal
increase of 19.6 per cent, as against N41.9 billion premium income
recorded in 2002.
According to experts, insurance operators need to drive their
business processes through better service delivery and product
development to jerk up their premium income.
They decried the situation where only about 10 per cent of
players in the industry account for over 70 per cent of the total gross
premium income. They added that most of the players in the industry,
before the recapitalsation exercise, lacked the financial muscle required
for farming out new business lines and playing effectively in the lucrative
oil and gas, and special risks sector. “This has impacted negatively on
the industry’s overall premium income, as the fringe players are forced
to indulge in rate cutting and other sharp practices for survival,” they
said.
However, insurance operators have attributed some of the blame
for its poor premium income on the poor state of the economy, low
insurance awareness and
outstanding premium owed by the government and its agencies.
The government is reported to have defaulted on premium payment
to the tune of N20 billion. Insurers maintain that the industry would
have been able to re-invest the sum to yield much more returns if the
government had settled the premium debts.
Operators regret the fact that the directive from the Federal
Ministry of Finance that insurance premium provision be inserted in the
budget of all government agencies and parastatal was yet to produce any
result.
According to Mr. Ezekiel Chiejina, the industry has only managed
to have “useful” ongoing discussions with the executive and legislative
arms of the Federal Government over the premium debt. NIA’s talks with
the government on the enforcement of insurers’ subrogation rights in
connection with insured claims from the 2002 Ikeja bomb explosion
incident have remained deadlocked, after underwriters paid claims worth
about N500 million.
Speaking on the effects of outstanding premiums on the industry,
Managing Director, Royal Exchange Assurance Nigeria Plc (REAN), Mr. James
Olatunde Ayo, said it
constitutes a threat to the solvency margin of many insurance firms.
Ayo said it also causes major setbacks in the settlement of
claims, being the most important service that insurance operators give to
their clients.
“When premiums are promptly and accurately paid by every client,
the insurer is able to settle claims promptly, as well as engage in other
businesses that will promote profitability,” he said. According to former
managing director, Standard Alliance Insurance Plc, Mr. Yinka Olarinwa,
non-payment of premium robs insurance operators of means of deriving
substantial revenue from their investments.
Bolarinwa said the prompt response of insurers to the settlement
of claims from the disasters that rocked the industry in recent times
showed that the insurance industry had moved to a phase where claims
payment is now common practice.
He added that insurance operators were not getting the same
response form policyholders, as some clients default in premium payment
and expect all-round cover. Going by the returns made by NIA member companies,
the general accident sector of the industry led the industry’s premium
income with N13.99 billion.
Fire insurance accounted for N7.2 billion, motor insurance N12.7
billion, marine/aviation N7.6 billion, and life insurance N8.8 billion
respectively.
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