Sometimes exchanging pleasantries could veer off, unintentionally to some serious and sensitive matter that may become unpleasant to one party and a revelation to the other. Such was the case when I met an insurance chief executive at a function. After the usual banters about the industry, the socio-economic space and how everyone is managing to keep fit, then I asked about life as an ex-CEO of Xyz Company. Immediately, he retorted, “I am still there as the CEO.” On seeing the surprised look on my countenance, he volleyed yet one more, “Am I too old to still be the CEO.” Out of politeness, I assured him that he was still very agile and in fact and at his best. Case rested!
However, as I rolled over this information quietly, I realized how many careers had become stagnant as a result of one man remaining a CEO for more than two decades. Movement is essential in life. Without movement, stagnation is inevitable. This holds true also for corporate existence. The freshness that comes with constant change and exchange, the ebbing of the old and the budding of new talents are as essential to productivity as blood circulation is to keep the body healthy. Many insurance companies are no longer creating because the impulse from external that could inspire such have been resisted. The sit-tight syndrome seems to be more pronounced in the insurance industry and the result is multidimensional stifled growth.
A jaundiced Corporate Governance
Supposedly, six years ago (precisely July 1, 2016) the Code of Corporate Governance which incubated the tenure limits regulation for boards of directors should have been in force. It failed to kick in for the insurance industry because powerful CEOs downed its implementation. The major challenge of the regulation was that being driven by the Financial Reporting Council and Securities and Exchange Commission, it thus required to cross regulatory buy-in and adoption by different industry regulators. In addition, some BODs with their CEOs had resisted compliance viewing it as meddlesomeness.
Overall, this governance code entails a reengineering of corporate governance processes and structures. The code seeks to strengthen the boards of companies so they can perform their policymaking and oversight functions more effectively and without hindrances. Compliance with the demands of this regulation will definitely bring about increased value for shareholders. There is a caveat here! Shareholder value will only accrue to companies which seek skills for board positions and not those that comply with patronage and seek to hold self-serving control and influence over board activities.
As of 2016, at least 2 out of each company board member of the 58 underwriting companies would have been affected. Most incumbent CEOs would have also vacated their positions. This postulation excludes major brokers and loss adjusters. Indeed compliance with the spirit of the regulation will aggregate the best skills for the industry and a factor of differentiation. A lot has since changed since then – Mergers and Acquisitions have changed the board landscape. Yet some CEOs who have acquired tremendous financial power and control of their firms are holding strong to their positions.
Proactively, some enterprises in leading positions across sectors did not wait for this code because these entities are building on international best practices. Many such firms started earlier to implement frameworks that enhance corporate governance like Corbit5, Balanced Scorecard, and so on. However, implementing governance principles only may not be helpful if the presiding CEOs have run out of ideas. It must be a top-down holistic process embracing all the enterprise tentacles. Aside from process innovation which the Code enforces, business innovation is key to insurance survival. Therefore, ventilating the market and allowing fresh ideas to flow in is key to growing the market.
Talent, Skills Competition
Naturally, competition for the best talents to occupy the highest corporate positions should drive every enterprise’s talent and skills acquisition policies and processes. Incidentally, all corporate organisations registered under CAMA are required to implement the 10-year tenure limit for directors including CEOs. Had all organisations taken off at the same time six years ago, this would have driven a very refreshing competitive talent and skills acquisition hunt to fill vacant positions. For insurance, industry-specific guidelines for succession are too restrictive to acquire fresh hands externally except the same market environment. The insurance market will be looking for skills in the market alongside the banks and others whose remuneration is far more attractive than that of insurers. However, if insurers redefine the role and functions of each director as well as carry out a thorough skills gap analysis, they need not fret over the apparent dearth of skills and possible competition with other ‘’better paying’’ institutions.
The Companies and Allied Matters Act, Cap. C20, states; “The board should develop a written, clearly defined, formal and transparent procedure for appointment to the board of directors. The board shall specify and document the criteria for appointing directors. Such criteria should embrace the strengths and weaknesses of the existing board, required skills, and experience as well as current age range and gender diversity.”
Viewed from the above provision and the entire requirements for board appointments, the law intended to strengthen the selection process and the appointment of an independent director consolidates this.
Now a new shot at exiting old CEOs, Execs
From January 2023, NAICOM has issued a one-year transition guideline for the disengagement of CEOs and executive directors who have overstayed 10 years. In exercising “its powers under the National Insurance Commission (NAICOM) Act 1997 and in line with the Nigerian Code of Corporate Governance 2018”, the regulator indicated a fresh push to implement maximum tenure limits for executive directors of insurance and reinsurance companies operating in Nigeria. It believes the action is essential to “sanitize the industry and ensure the sector continues to operate with international best practices.”
“There shall be a transitional period of 12 months from the effective date of this circular in respect of existing appointments; all CEOs and EDs who have served for 10 years shall cease to continue in such capacity, after the transition period of 12 months; henceforth, all insurers/reinsurers shall give consideration to the provisions of the circular in their future engagement of CEOs and EDs and the circular takes effect from 1st of January, 2023,” the regulator pointed out.
Mandate to Freshen the Board
No doubt the quality and independence of any board play vital roles in the success or failure of the enterprise. The national code of corporate governance underscores the importance of this perspective. A board membership that is composed of persons representing the interests of major shareholders will only do the bidding of the benefactors. To a large extent what one has been acquainted with over time are boards’ compositions that reflect only the ownership structure, and thus such directors’ roles are ‘as directed’ and are unable to influence the growth of the company. This situation has periled so many businesses in the country either as family businesses or organizations set up with capital market funding.
Thus the requirement for enterprises to seek requisite skills for board positions and tenure limits imposed thereby will breathe some freshness into Nigerian companies. An adjunct to this requirement is the continued need to put processes in place so that resource misallocation, mismanagement, fraud and like vices in the workplace would be minimized.
Job Creation through process reengineering
To replenish the insurance market with new creative talents should be a task the industry should take seriously. Intelligent and brilliant graduates of business, marketing, insurance and actuarial sciences must be targeted to create a new pool of talent for the market. Engineering, statisticians, data analysts and other specialized fields hold the future of a more inclusive talent for the industry. These are the ones to bring growth initiatives that can expand the market and create more jobs. The widespread absence of career progress due to constricted movement at the top, middle and lower levels of employment is not creating room for expansion. Although the economic downturn may be blamed for the current inability of organizations to hire, the insurance market’s hiring capacity has stagnated for a long time already.
Innovations in Insuretech are providing a new window for insurance to expand and this now presents a justification for the wider net of professionals. The talents to operate these models are the younger tech-savvy generation. And they are here waiting to be tapped. To complement this wave of technology, old talents need to give way. A new generation is required to change the course of insurance in Nigeria. Beyond tenure limits for directors and CEOs, insurance business owners may have to implement a complete talent cleanup. In addition, the Chartered Insurance Institute of Nigeria may have to revolutionize its syllabuses to bring it up-to-date with current realities. Underwriting is now tech-driven! It (CIIN) should now look in the direction of transforming into an Insurance Business school or its courses would lose relevance.
