Insurance Industry And Claims’ Payment

There is no gainsaying the fact that the claims’ payment profile of insurance companies received a dramatic boost in May this year and industry sources estimate that billions of Nnaira have been paid as claims since then.

The increase in the payment of claims was due to the increasing public awareness of the operations of the insurance sector and improved supervision by regulatory bodies.

Observers note that every insurance company in the country now uses its claims’ payment and innovation as tool to woo potential clients.

They add that as part of the innovations in the industry, the websites of insurance companies now have provision for claims notification and application form.

For instance, Sovereign Insurance Plc. paid N228.44 million as claims to its clients in the first quarter of  2012.

Also, AIIC0 Plc. released N8.6 billion for claims in the 2011 fiscal year, out of which N3.1 billion and N5.5 billion were earmarked for general and life insurance businesses respectively.

As part of efforts to address delay in claims’ payment, Niger Insurance Plc. recently opened a separate account for settlement of claims and commissions.

The National Insurance Commission (NAICOM), through its Public Complaints Bureau, was able to pay N519.08 million in 2011 and N617.8 million in the first quarter of 2012 as claims, after settling 107 disputes last year and 17 disputes in the first four months of this year.

Besides, the Nigerian Insurers Association (NIA), also via its Public Complaints Bureau, successfully resolved 20 cases and paid out millions of Naira as claims.

Analysts say that the increased settlement of claims was due to the stance of NAICOM and NIA on claims’ payment in their resolve to bring sanity to the industry and reduce the insuring public’s apathy towards insurance policies.

However, Mr Val Ojumah, the Managing Director, FBN Life Assurance, insists that insurance is all about trust.

“Without payment of genuine claims and payment on time too, it will be difficult to reduce public apathy towards the industry,’’ he says.

The boost in the payment of insurance claims is widely attributed to improved regulatory activities of NAICOM and NIA’s self-regulation of its members, particularly in the last one year.

The two agencies had also educated the public through the media, particularly with radio jingles produced in major Nigerian languages.

Similarly, the Chartered Insurance Institute of Nigeria (CIIN) had also carried out massive public awareness campaigns on insurance through radio programmes, a Miss Insurance Pageant tagged Insurance Dance and Fitness Walks/Road Shows.

All these public awareness activities were considered imperative because there was perceptible public apathy toward the insurance industry in the past as some operators reneged on claims’ payment whenever the insured risks occurred.

One of the major factors affecting the growth of the insurance industry is the issue of rate cutting, a plot adopted by operators to outsmart one another to get patronage.

Rate cutting is the under-pricing of insurance products or collecting low premium that would not be enough to sustain payment of claims when the insured risks occur.

To intervene in disputes on claims’ payment between insurance companies and their clientele, NAICOM has set up the Customer Complaints Bureau.

The Commissioner for Insurance, Mr Fola Daniel, says that the disputes’ resolution mechanism of the commission has recorded appreciable achievements.

He notes that the number of complaints has been on the decrease over the years.

“This is an indication that the zero-tolerance stance of the commission on non-settlement of claims by insurance companies has started to yield positive results.

“Companies are now responding well by paying claims promptly,’’ he says.

Daniel says that NAICOM’s Customer Complaints Bureau may handle claims’ settlement totalling over N1 billion by the end of 2012.

To create avenues for insurance companies to increase their premium base, NAICOM recently released some guidelines on oil and gas insurance.

The commission also initiated a campaign for the enforcement of the policy on compulsory insurance products in the six geo-political zones of the country.

An insurance broker, Mr Casmir Azubuike, commends NAICOM for its activities aimed at fostering the growth of the insurance industry in a pragmatic way.

“It is now left for the operators to make use of the various avenues provided by NAICOM to increase their premium base,’’ he says.

On its part, NIA has also set up its own Customer Complaints Bureau to settle disputes on claims.

The Chairman of NIA, Mr Ladipo Ajayi, says that the Bureau has achieved some feats in complaints’ resolution since its establishment two years ago.

“The Bureau has resolved many issues to the satisfaction of all parties. To date, it has handled 20 cases between insured and the underwriters, and everybody was very happy,’’ he says.

Observers assert that the increase in claims’ payment is also due to the tightening of loopholes by insurance companies with regard to insurance contracts.

They, nonetheless, advise insurance companies to be extra careful in the way they deal with their contractual obligations in view of some extraneous factors which include terrorist attacks, militancy, kidnapping and perennial flooding.

It is also important for policy holders to carefully read the conditions stated in new insurance contract forms, particularly those relating to travel insurance, the observers say.

“It will not be unusual if clauses such as ‘this policy does not cover bomb explosions and kidnapping’ appear in the insurance contract papers,’’ some of them add.

Agu  writes for NAN.

Chidinma Agu