…as stakeholders share divergent views
…Insurance to soon emerge as major driver of our economy-Rep Nwokocha
The House of Representatives Committee on Insurance and Actuarial Services on Monday vowed to properly exhaust and streamline the Third Party Act of 1945 to fit into modern day reality in the proposed 2020 Act.
Speaking at a two-day Public Hearing organised by the House committee on Insurance and Actuarial Services, Chairman of the House Committee, Hon Darlington Nwokocha said:
“Having taken time to study the insurance Act 2003 and other pieces of insurance legislation in Nigeria, we can confirm that much of the provisions of the insurance laws are out of tune with modern realities.
“In particular, the sanctions regime is weak. In some cases, as with the Motor Vehicle (Third Party Insurance) Act 1945, the prescribed fines are stated in pound sterling instead of Naira.
“Also, the amounts stated as fines in the various laws are grossly insufficient. Some provisions prescribed something as low as N2 and N5 respectively. In the modern time, the philosophy of penal punishment advocates effective and dissuasive sanctions”.
Nwokocha also explained saying, “we’ll consolidate it with other existing insurance laws, introducing changes that can make the insurance sector become a real growth driver for the Nigerian economy.
“The essence of this public hearing is to collect and collate all sheds of opinion to ensure that the outcome represents the views of all stakeholders. We have invited all relevant stakeholders and we hope that everyone is here for this important deliberation. We are going to do our best to ensure that this objective is attained.
“Having said that, I want to observe that the Insurance sector in Nigeria has come a long way. Despite the glaring poor performance relative to other jurisdictions, we are confident that given a robust regulatory and institutional framework, the insurance sector in Nigeria will soon emerge as one of the major drivers of the Nigerian economy.
“Furthermore, the extant insurance laws are written in a prescriptive form. Following the global economic crises of 2009, the financial regulatory world has moved toward risk-based supervision. Most jurisdictions have successfully gone risk-based. Even in Nigeria, all the sister financial sector regulatory bodies, including CBN, NDIC and Pencom have all implemented risk-based supervision.
“The structure of the extant insurance regulatory framework has made it impossible for Nigeria to implement risk-based supervision in the insurance sector as required. To move with the rest of the world, the time has come to provide for risk-based supervision in our insurance laws.
“The challenges of public confidence must be addressed. The regular courts appear to be over crowed and do not seem to have the time to attend to insurance cases which ought to be treated with dispatch. Besides, the Complaint Bureau established under the provisions of Section 8 of the Insurance Act 2003, is grossly inefficient and indeed incapable of addressing the dispute settlement needs of the emerging insurance sector.
“At the same time, the insurance regulatory personnel require structured training to be effective with work of regulation and supervision of the insurance sector in Nigeria, matching their counterparts in other jurisdictions. This underscores the need for a proper regulatory academy that is devoted to training and retraining regulatory and supervisory officers as is the case with CBN and NDIC. Relatedly, the regulator should have its operations automated to remove unnecessary bottlenecks in its licensing and approval process.
“I think, it is important to expand the reach of insurers and intermediaries in Nigeria. As it stands, some states in the country have neither access to insurance companies nor intermediaries. It might be necessary to liberalize insurance licensing regime so as to increase the ration of insurers and intermediaries with the population. In addition, licensing more insurers and intermediaries has the prospect to create employment for the teaming youthful population, whether as professional or as casual workers. In particular, newly discharged corps members can take up initial jobs as insurance agents, and may even consider making a carrier in the insurance industry. On this note, we are happy to note that a total four new insurers and reinsurers were issued with operational license by the Commission.
“Some of the proposed amendments to be made on existing insurance laws include;
“Stamping out of fake insurance through reform of Motor Vehicles (Third Party) Insurance business and Marine Insurance business;
“Having a robust framework for the enforcement of compulsory insurance;
“Having an enduring framework for the implementation of risk-based supervision;
“Creating suitable a mechanism for the effective resolution of insurance dispute;
“Having a mechanism for providing robust training for regulatory staff;
“Restructuring the ECOWAS Brown Card Scheme;
“Improving claims settlement procedure by reducing timeline and the extent of documentations required by the insurers”.
Also, during the hearing, key stakeholders expressed divergent views as to how the proposed piece of legislation can address the many challenges in the sector.
The Central Bank Governor, Mr Godwin Emefiele who was represented by the Director of Legal Services, Mr Adedeji Lawal expressed the position of the apex bank.
He said: some sections are quite vague particularly in licensing of insurance companies and there is need for upward review of medical insurance from N100,000.00 to N500,000.00.
Lawal further explained that “share capital should be left with NAICOM and sanctions should be minimum and not maximum”.
On its part, the National Insurance Association (NIA) debated that “Section 16(1) and (2) of NAICOM Act 1997 provides that resources of the Commission shall comprise: One percent levy on every insurance institution; in the case of an insurer or a reinsurer, on its gross premium income.
“This is a multiple charge on all the operators. We propose that provisions should be made in this Bill to read as follows:
“That the 1% levy should be on the net premium income and not gross premium income taking into consideration intermediaries commission and reinsurance.
II. INVESTMENT OF INSURANCE FUNDS
Section 24
(1) An insurer shall at all times, in respect of insurance business transacted by it in Nigeria, invest and hold invested in Nigeria, assets equivalent to not less than the amount of insurance funds in the account of the insurer.
(2) Subject to the provision of subsection (1) of this section, the insurance funds shall be invested in such assets as may be prescribed, from time to time, by the Commission.
Earlier, Speaker of the House of Representatives, Femi Gbajabiamila in his opening remarks said, “we begin this difficult but rewarding task of conducting Public Hearing on the Insurance Bill 2020.
“I understand that the broad objective of this Bill is to amend the Insurance Act 2003 and consolidate it with other extant insurance legislation in Nigeria.
“This process is expected to deliver a robust regulatory framework that will change the face of insurance business in Nigeria and position the insurance sector as a major growth driver for our national economy.
“This would be highly desirable, especially in light of our rapidly contracting national economy. As you are aware, in the current year, the Nigerian economy has been badly affected by the COVID 19 pandemic.
“Government is currently battling, through various economic intervention programs to bring the economy back to its feet. Although we are optimistic of emerging stronger from the present recession, current efforts are yielding only limited success.
“Therefore, both the federal and state governments, at this time, should be interested in virgin sectors that can be explored to national economic advantage. One of such sectors is the insurance sector”.
The hearing was attended by major stakeholders which include: apex insurance regulator, NAICOM, NIA, CBN, TUC, NLC, Budget office, Ministry of Finance, AGF, AuGF, Civil Defence Corps, NSCDC and others.