Like a bolt out of the blues, the Federal Government, last week, announced it will no longer give subventions to the insurance industry regulator, the National Insurance Commission (NAICOM) as from next year. MESHACK IDEHEN examines the implication of the government's action on the sector, even as stakeholders remain undecided on the issue.
Insurance industry stakeholders appear divided over the recent announcement by the Federal Government that it was phasing out all forms of subvention to the National Insurance Commission, NAICOM, come next year. For a critical industry like the insurance sector, stakeholders told National Mirror that they are at loss as to why the Federal Government made such a move.
Industry expert and Bancassurance practitioner, Mr. Obasi Ngwuta, told our correspondent that the development has the potential to either drive the sector forward towards growth, or set it back, depending on how well the regulators are able to adapt to the new development.
"Generally speaking, no government agency wants to be left out of annual funding, irrespective of whether they are capable of surviving on their own or not. In the case of this (insurance) industry, it is like a passing a vote of no confidence on the commission, particularly when the challenges and complaints that has come to be linked with the sector is considered".
That view coming from an industry stakeholder and analyst notwithstanding, and despite what experts described as the acknowledgement by the regulators that the decision of the Federal Government will not affect the activities of NAICOM, is that the commission's claim may not be altogether accurate.
Managing Director of City Insurance Brokers Limited, Mr. Luck Igunbor, said the country's administrative peculiarities, which makes it almost impossible for all but a few agencies of government to survive without subvention, that it becomes reasonable to question why the commission did not react when the Minister of State for Finance, Mr. Yerima Ngama, said few days before making public the stoppage of subvention, said the government was stopping NAICOM from issuing any fresh insurance license.
Igunbor said the Federal Government's decision to stop NAICOM from issuing new operating license to insurance businesses was the first sign the regulators should have seen that all was not well.
He explained that the government was probably no longer comfortable with the activities of the regulators, particularly as it concerns the unending rules and regulations the insurance sector was being subjected to.
According to the industry operator, "NAICOM's emphasis on reeling out new policies at every turn and twist, instead of focusing on growth and consolidation of the little gains that may have been made in the sector may have compelled the government to act the way it did", Igunbor added. However, a member of the Chartered Insurance Institute of Nigeria, CIIN, Mr. Tope Awosegba, disagrees.
According to him, the decision of government on NAICOM will go a long way to reduce the gains already made in the sector, and that the quest to boost insurance penetration will become hampered.
While calling on the government to rescind its decision, Awosegba said no amount of money generated by the commission as internal revenue will be enough to pursue and secure the long term objective of NAICOM for the country's insurance sector, noting the move may compel the commission to begin to compromise on some of its tough rules that are supposed to sustain and drive the industry forward in the right direction.
Attributing the move to cease funding NAICOM to the emergence of a new governing board for the commission, insurance broker, and member of the Institute of Loss Adjusters of Nigeria, Mr. Daniel Ikom, said the new NAICOM board for reasons best known to them, advised the government to stop supporting the commission.
He speculated that the Hon Chibudom Nwuche led recently inaugurated NAICOM governing council, may have also urged the government to order the regulators to advise present and potential investors in the sector to acquire some of the existing insurance companies, rather than issuing new licenses for new ones.
Insisting the new board adopted that stance alongside promises to the government that the commission can do without funding when they (the new board) comes on stream to secure their new appointments, Ikom said, it would be recalled that it was immediately after the constitution of the new council, that the minister of state for finance went public to say that any investor desiring to own an insurance company in the country should acquire some of the existing companies.
"And then, few days after making such profound industry pronouncements, the minister again went public to declare that NAICOM was now on its own funding wise. Is it not obvious that the new authorities in the place have something to do with the latest developments?, he wondered.
According to Ikom, the reasons suggested by the minister as responsible for the drastic decision such as having so many insurance companies that are just on the shelf and distressed, though valid enough, may just be an excuse to publicly hang NIAICOM and crucify it.
"Even the comparism to the banking sector in the past having so many distressed banks is out of place. There is no basis for the comparism.
The insurance industry has its own peculiar challenges and peculiarities and must be treated as such". Commenting on expectations that NAICOM will make returns to the Federation Account as directed by Ngama, analyst and executive member of the National Council of Registered Insurance Brokers, Mr. Matts Iseghome, said that expectation was not feasible, especially now that revenue generating institutions like the Nigeria Customs Service, the Nigeria National Petroleum Corporation, the Department of Petroleum Resources, Power Holding Company of Nigeria amongst others are struggling to remit their own generated revenues to the Federal Government.
He noted that even if the commission was set up by the Federal Government with all its capital and overhead expenditure financed by it, that it was not enough to take such steps against the regulators.
"Does NDIC, NCAA, FAAN, NNPC, CBN, PenCom and the others generate revenue for the government? How old and viable is NAICOM compared to these other institutions? Government should slow down in these things, and not take action that will drown the entire industry", he explained.
At the inauguration of the new NAICOM board, the Minister of Finance, Dr. Ngozi Okonjo-Iweala said that the government expect the insurance companies to be strong enough in order to be able to ensure that they can handle the expanding business in the economy, be it in the oil sector, shipping, aviation and all those other industries that usually go offshore. "We expect that the new board members will produce results, both financial and value added to the economy and act like a strong regulator," the finance minister had said.
