NAICOM determines to lift Insurance sector to global standard

By Favour Nnabugw



Undeterred by challenges upstructing smooth development of the insurance industry, the National Insurance Commission (NAICOM) is determined to take in the sector to a global standard.

The Commissioner for Insurance and Chief Executive Officer, National Insurance Commission (NAICOM), Olorundare Sunday Thomas, made the disclosure during the seminar organised by the Commission for insurance journalists at the weekend in Lagos with the theme “The Future of the Nigerian Insurance Sector in a Shifting Landscape.”

The Commissioner said they will do this through continued mutual collaboration with the media and other relevant stakeholders.

“As regulators, we would continue to consolidate on the administration’s cardinal agenda of developing the market and fostering insurance inclusion along with mutual collaboration of the press and other relevant stakeholders.”

Thomas said the Commission will continue its execution of various regulatory and market development initiatives to uplift the insurance sector to a global standard.

“This will be achieved through a 12-point laid down initiatives that will focus on engaging stakeholders including state governments towards ensuring domestication of the laws to ensure compliance with compulsory insurances and improve the business of insurance in their respective states; driving the Market Development and Restructuring Initiative (MDRI) to promote compulsory insurance products; feasibility Assessment for Index Based Risk Transfer Solution in the agricultural sector; financial Inclusion Drive via focused Insurance awareness campaign for the financially excluded.

“Other areas are launch of the Insurtech Accelerator Platforms under the Insurance Market Development programme i.e Bimalab Programme in conjunction with FSD Africa; ongoing synergy with FSD Africa on developing a Risk Based Capital Model for the Nigerian Insurance Industry; promoting the development of products and business models that meet the needs of the financially excluded group; automation of the Commission’s processes; actuarial capacity development programme; risk based supervision regime; regional Integration and setting up of the insurance sector committee on African Continental Free Trade Area (AfCFTA) amongst others.

“Stemming from the theme for this seminar, it is worth noting that insurance over the ages has always been seen as a business that exists for the survival of other businesses.

“At this period of rejuvenation, it calls for the Nigerian insurance sector to develop innovative products and distribution channels, embark upon massive infrastructural development, improvement in social safety nets scheme, rejig business continuity plans and general deployment of technology to meet the expectation of today’s consumers and create new experiences that add value,” Thomas said.

On importance of insurance, NAICOM boss said “The insurance sector plays a vital role in financial inclusion because it reduces the poverty line, assist people to manage their risk and protect them from negative adverse effect of any unforeseeable circumstances as well as increases access to other financial services

“In today’s modern business environment, disruption plays an integral part of any business, hence innovation being implemented by the Commission is geared towards gaining control of a specific segment of the market that have been left untapped by encouraging the introduction of products tailored to the consumers in order to grow insurance businesses.”

Insurance gap: why most floods not covered by insurance

By Favour Nnabugwu

 Many floods cases may not be paid claims due to insurance gap as many who are exposed to flood risk are not covered by flood insurance
Flood insurance is a type of property insurance that covers a dwelling for losses sustained by water damage specifically due to flooding but after simulating the insurance uptake decisions insurance is able to assess the level of flood risk that is not covered, also known as the insurance gap.
Floods which cost the global economy more than $82 billion in 2021, the reason for insurance gap is that flood insurance is a special peril that is covered under a policy extension.
This, the Commissioner for Insurance, Mr Olorundare Sunday Thomas said that if insurers have to pay the enormity of the floods claims, it will shake the financial stand of the companies except the right premium is changed for flooding
But for those who have insurance, Thomas said, their claims would be paid soon for as long as they submit the right document for their claims.
“The enormity of damage caused by flood is massive. There is insurance gap where what is covered and what is not covered also comes in, he said”
“Floods  in the country is certain, it comes year-in year-out. And insurance is not based on certainty”
There are about 18 states of the federation submerged in flood whilst many people were exposed to flood risk that are not covered by flood insurance.
The states are Kogi, Niger, Plateau, Benue, Ebonyi, Kano, Kaduna, Niger, Benue, Adamawa, Jigawa, Taraba, Bauchi, Anambra, Ebonyi, Yobe, Edo, Delta, Kogi, Lagos, Ogun, Ekiti and Plateau
Insurance covers only a fraction of the resulting economic losses. Insured losses from floods have averaged about N600 million yearly.  And the protection gap is widest in emerging markets, where insurance covered just 5 percent of economic losses from floods compared with 34 percent in advanced economies.
In that case, the insured is charged extra premium for this extension, though it could be a small amount added to the original premium.”
Managing director of Tangerine Insurance, Mayowa Adeduro had said during an interview, that the level of patronage by individuals and house owners was still very low as many people were yet to appreciate that climate change is here with us.
Adeduro stated that since after the rains of past years, many corporate organizations and churches are beginning to take flood insurance and we are only hoping that more households consider this risk as a necessity.
For the market to provide cover for this specialised risk, it is important that house owners are included in the package so that payment of claims to affected people can easily be managed, an insurance broker said.
According to him, ‘In a normal traditional insurance, insurers use the economic law of large numbers to charge a relatively small fee to large numbers of people in order to pay the claims of the small numbers of claimants who have suffered a loss, and this makes it a manageable risks
Unfortunately, in flood insurance, the numbers of claimants is larger than the available number of persons interested in protecting their property from the peril, which means that insurers are unable to cover their costs in flood insurance, and this underscores why some insurers do not want to get involved in it, the broker also said.