Nigeria’s Commissioner for Insurance, Mohammed Kari has placed blame on inappropriate pieces of laws which often brew disharmony among Industry Regulatory agencies to dilemma being faced by the insurance sector.
Kari insists that if the insurance industry must grow, it requires those laws that conform to modern practice and laws that takes into account the potential role or impact of insurance on policyholders, insurers, regulators and government, stressing that as the society faces huge challenges, the role of insurance becomes ever more vital.
Speaking at the 2nd National Conference on Insurance and Pension, organised by the National Association of Insurance and Pension Correspondents (NAIPCO), in Lagos, the commissioner said, “Suffice it to say that our experience with insurance legislations in Nigeria could best be described as sweet and sour.
The insurance industry has fallen victim to legislations over the years and the scars have remained very visible to date. In recent years, we have had legislations in Nigeria which have inadvertedly inhibited the growth of insurance and its contribution to the nation’s Gross Domestic Products”.
Giving instances, kari who was represented by Pius Agboola director Authorisation and Policy in the agency recalled, “Only a few years back, the workmen compensation which is a product of the insurance industry anywhere in the world was severed by a legislation, notwithstanding the resistance and position of insurance operators to the new legislation. The conflict of interest created by that legislation still lives with us. Of course, we are aware of the legislation that equally severed pension from insurance”.
Continuing, he said, “In spite of the good working relationship that exist between us and our pear regulators – PenCom, CBN, SEC, NCC, etc, there exist conflicts created by legislations in certain areas where interpretations of sections of the law is viewed differently. In the implementation of these legislations, regulators whose duty is to implement the provisions of the law are wont to rely on their respective interpretations which often creates conflicts and lead to impasse between regulators.
I must say here that NAICOM has had its own fair share of this organised confusion in the past and recently with the PenCom over the issue of Custodians for annuity funds where the two Agencies have both relied on their respective interpretations of the same legislation.
The sad truth is that while the regulators bicker over whose interpretation of the law is superior, the consumers of these products and the operators suffer. In the process, lives, income and businesses may be lost. No thanks to certain legislations that overlap and seemingly look ambiguous and almost impracticable,”.
He observed however that it is perhaps for situations like this that the Financial Services Sector deemed it imperative to establish the Financial Services Regulatory Consultative Council (FSRCC) to mediate between Agencies with these sort of conflicts.
He advised that financial agencies with conflict over interpretations of legislation should in the interest of consumers approach the FSRCC for amicable resolutions rather than allow legislations destroy the mutual relationship that exist between them, adding that the Commission has had several attempts to review the Insurance Act 2003 without much success.
“At the birth of this administration, the Federal Government in February 2016 through the Minister of Finance, Mrs. Kemi Adeosun constituted a ten-member committee to review the Insurance (Consolidated) Bill, a move that seeks to make the bill conform to the ideals of contemporary insurance practice and also aimed at ensuring an efficient and effective insurance industry in the country. The Committee concluded its assignment in June 2016.
The proposed insurance bill when passed would ensure that policies are up to date and implemented in a timely fashion, maintain high standards in the authorisation, supervision and good conduct of insurance business, maintain a cost-effective support system which appropriate to needs, is sufficient to support the regulatory and other responsibilities of the Commission without compromising regulatory impartiality” he said.
Kari, however, stated that in the meantime and within the ambit of the existing laws, the Commission has widened its regulatory and supervisory roles on insurance entities with the aim of building the trust and confidence of policyholders and at the same time promote the safety and soundness of the insurance industry., assuring that, “We will continue to work closely with the industry and other stakeholders, especially co-regulators in the financial services sector to promote a healthy insurance industry in Nigeria within the existing legislations,”.
He said that the last decade has witnessed a significant wave of reforms governing the regulation of financial services across the glob and that then Nigerian insurance sector in particular has been rapidly evolving towards more risk-based requirements for capital, accompanied by an increased emphasis placed on internal risk management processes, structures, and controls with an increasing emphasis on qualitative elements with respect to risk management and risk-based supervision.
“As the economic power of private sector business continue to grow, so also the number of laws regulating business activity. In broad terms, these laws typically serve one of two objectives: to promote market competition and control the market power of financial institutions over customers, or to mitigate the adverse effects of business activity on individuals and other organizations,” he said.