29042019 - Economy bleeds as power system collapses

20 — Vanguard, MONDAY, APRIL 29, 2019
FINANCIAL VANGUARD
Insurance claims rise faster than premium income
COVER
Continues from page 19
N8.5 billion, but its claims
expenses went up by 46.2
percent to N1.9 billion from
N1.3 billion.
Consolidated Hallmark
Insurance had GPW
increased by 21.1 percent
to N6.9 billion from N5.7
billion, while claims
expenses climbed by 28.6
percent to N1.8 billion from
N1.4 billion.
Leadway Assurance grew
its GPW by 3.9 percent to
N87.5 billion from N84.2
billion, while claims
expenses escalated by 23.7
percent to N33.9 billion
from N27.4 billion.
Regency Alliance GPW
went up by 3.6 percent to
N5.8 billion from N5.6
billion, while claims
expenses increased by 10.5
percent to N2.1 billion
against N1.9 billion.
However, some
companies recorded a
positive balancing of the
claims with the premium.
AIICO Insurance GPW
went up by 17.4 percent to
N37.7 billion from N32.1
billion, while claims
expenses rose by 14.9
percent to N23.9 billion
against N20.8.
Custodian and Allied
Insurance GPW climbed by
15 percent to N36.7 billion
from N31.9 billion, while
claims expenses went up by
10.1 percent to N15.3
billion against N13.9
billion.
AXA Mansard GPW
increased by 26.5 percent
to N33.9 billion from N26.8
billion, while claims
expenses went up by just
4.4 percent to N16.5 billion
from N15.8 billion.
Operators’ perspective
Although some insurers
recorded modest growth on
the GPW, some operators
believe it could have been
better if not for huge claims
settlement.
Efekoha said, “We grew
our premium modestly and
we were profitable which
were enhanced by some tax
savings that we had.
Insurance should be
looking up in some
respect.”
Managing directors of the
companies that had adverse
claims portfolio preferring
to speak on the condition of
anonymity said that underpricing
of risks have been
the undoing of many
insurance operators and the
slow growth in premium
Inadequate
pricing of
risks goes on
in this
industry,
unfortunately,
when the big
claims come,
not
everybody
responds as
expected
income.
He stated: “Many insurers
have undone and keep
shooting themselves on the
foot by under-pricing the
risk they carry, which they
are still doing.
“Some companies
recently went to the capital
•Commissioner for Insurance, Mohammed Kari
market to raise funds. So
after struggling to raise
funds, they will then give it
to some companies that are
richer than them in the
name of settlement of
claims, without any ‘thank
you.’
“For me, I don’t know the
broker who will change our
mindset here. I cannot
enrich someone who is
already the richest man in
Nigeria or Africa because I
sweated for this money.
“If everybody will price a
product wrongly, I will not.
I believe in underwriting
which teaches that when you
have a good risk, you lower
your premium, when you
have a bad risk, you increase
your premium. But what I
see today is completely
different. Unfortunately,
after under-pricing a risk
and paying huge claims,
during renewal, a lower
premium is charged.
“In insurance, if a risk
becomes certain, you
remove it, you don’t cover
it. It is uncertainty that the
insurance industry is made
to cover, it is not made for
certainty. Unfortunately, by
our action and inaction, we
have contributed to the poor
state of the sector.”
Speaking on the issue,
former President of the
Nigerian Council of
Registered Insurance
Brokers, Mrs. Laide Osijo,
said that the concentration
on corporate business to the
detriment of the retail market
has contributed to the
marginal growth in GPW
over the years.
She stated: “We have done
the corporate businesses to
their limits, unfortunately
the corporate businesses can
no longer increase in terms
of insurance budget and that
is why the premium income
for the industry is not
growing astronomically.”
Another top executive of an
insurance firm who spoke on
the condition of anonymity
also attributed the slow
growth in premium income
to inadequate pricing of
risks.
He said, “Inadequate
pricing of risks goes on in
this industry, unfortunately,
when the big claims come,
not everybody responds as
expected. Why is it so?
Because liquidity is not
there.
“You have not built enough
capacity and the claims
keep coming, there will be
nothing left afterwards.”
Also speaking on
condition of anonymity, an
operator blamed the
National Insurance
Commission, NAICOM, for
the under-pricing in the
industry saying that it is the
duty of the Commission to
sanitise the sector.
He said, “I believe that
there is enough
ammunition in the
Insurance Act for the
regulator to use to sanction
companies. If as a company
I can’t settle genuine
claims and the regulator
finds out that I don’t have
capacity, it can stop me
from writing those classes
of business that will
embarrass this market.
Anybody who trades with
you in that class, I equally
prohibit them or sanction
them, so that others can
learn.
NAICOM has the power
to sack the MD and say ‘we
no longer recognize you as
the CEO’.”