…… charges insurance companies on compliance to 2003 Act 

 

Amaka Obiefuna

An insurance expert from the National Insurance Commission (NAICOM), Mrs. Augustina Onojake Steve, has maintained that the problem of the Insurance Industry in Nigeria is bad image which dates back to the early 19th century when Nigerians took over insurance business from the early British managers.

The bad image according to her was caused by the way the Nigerian managers carried out insurance business transactions especially in the area of claims payment which made the public to see insurance as a scam.

Steve revealed this in her paper presentation entitled, ‘Re-awakening the Nigerian Insurance Industry Through Claims Settlements’ at the annual training for Insurance journalists in Uyo, Akwa Ibom State, recently.

She described claims as the heartbeat of insurance being the most critical contact the insuring public has with the industry, thus, a commitment to prompt claims settlement would restore the public confidences on the industry.

The Expert noted that claims are so significant because most of the times, loss situations awake the minds of the insuring public towards their insurer, as many consumers pay little attention to their insurance coverage until they have a loss.

Further explaining that the image problem which the insurance industry has today is because of poor claims handling procedures, she noted that to an insured, claims payment is the end product of insurance service.

“Once an insured pays the premium, all he or she expects from the insurer is to be indemnified at the critical time. Ability to pay claims is the real test of a solvent insurance company.

“The quality of claims administration can make or mar an insurance company. All genuine claims must be paid promptly,” she stated, hence the importance of claims to the growth of the Insurance Industry in Nigeria.

She said: “Claims settlement is an important part of insurance contract for the following reasons: It drives Policy holder’s loyalty to the insurance company: An unhappy policy holder may not take insurance contract any longer, and is likely to tell others about their negative experiences while a happy policy holder will share his or her positive experiences with others.

“It boosts Policy holder’s acquisition and recurring revenue of the insurance company: Great customer service is not just important for supporting existing customers, it is a key to attracting new ones too, thereby assisting the company to make more revenue.

“It publicises the company: Policy holders’ satisfaction and loyalty are important for publicity. Policy holders talk about their experiences with the companies to other people.

“It improves trust and promotes insurance market development. Ideally, insurance business is all about claims payment, since claim is the main reason a policyholder takes up an insurance policy.

“Without claims being paid by insurance companies, people are not likely to take up insurance policies, and the insurance company will not maximise profits, thus Claims payment in insurance contract serves as spice that attracts potential policyholders to insurance patronage.”

However, she said experience has shown that some policyholders are dissatisfied with how they are treated by the insurers when loss occurs, thus they complained about such treatments.

She highlighted some of the complaints by claimants about insurance claims management as: “Insurance companies request for too much evidence and documentations to prove a loss.

“Some claims are not settled because the insurer refuses to admit liability. When claims are settled, they are not paid in full.

“Some claims are rejected on purely technical grounds and at times the insurer argues that the claims are fraudulent. Claims are generally unduly delayed.”

Steve pointed out that the above complaints cause disagreement between the claimant and the insurer, and this may lead to objections to insurance sales.

In any case, she said insurance companies also have reasons for delays in claims, citing some of the reasons as delay in notifying and submitting the claim form to the insurance company, losing the insurance policy document, non-submission of necessary documents, making a claim after the deadline has passed and timely premium payment.

While saying that all these anomalies lead to delay in compensation, Steve explained that timely payment of premium is key to claims settlement, stressing that there was need for a policy holder to communicate if for any reason he or she could not pay the premium. “When a policy is lapsed as a result of late payment of premium, such claims may not be settled by insurers.

“Additionally, if a policy holder cannot continue paying for any reason, there is need to inform the insurer before the policy expires. Most insurers may consider genuine circumstances and offer necessary arrangements, such as converting the policy into a paid-up policy to assist the policy holder,” she stated.

Continuing, she noted that claims settlement is the activity of insurance companies that truly portrays what they are there for, because claims settlement is the reason for insurance contract. The Insurance Act 2003, she quoted, requires the insurance companies to settle all admitted claims within a maximum time frame of 90 days, and where claims are repudiated (turned down), the insured should be communicated by the insurer within 90 days from the date the claims are delivered to the insurer.  

She therefore stated that for the Insurance Industry in Nigeria to be re-awakened and gain a positive image, indigenous insurers should adhere to the ‘Revised Market Conduct and Business Practice Guidelines For Insurance & Reinsurance Companies 2022′ which requires the insurance companies to deal with customers’ complaints in a fairly manner.

She regretted that some insurance companies still default in paying claims despite Article 4.0 to 4.6.11 of Revised Market Conduct and Business Practice Guidelines For Insurance & Reinsurance Companies 2022 which stipulate claims handling procedures by insurance companies.

According to her, the default often occur due to reasons of weak capital base, insolvency, poor underwriting and others.

The Insurance Expert urged insurance companies in the country to tighten the loop holes to ensure claims are settled as and when due, to restore the eroded confidence of the Nigerian public.   

“Despite the provisions of the Extant Laws, claims settlement has remained a mirage by some insurance companies. Experience had shown that some insurance companies were unable to settle claims due to Weak Capital Base, Insolvency, Poor Underwriting etc.

“Lack of trust and confidence in the Nigerian insurance industry resulting from non-settlement of claims constitute one of the biggest challenges of the industry. 

“Non settlement of claims have negatively impacted confidence in the industry. Thus, insurance companies should endeavour to settle claims promptly because Claims payment in insurance contract serves as a spice that attracts potential policyholders to insurance patronage.

To achieve this, she therefore advised insurers to consider increasing their capital base to assist them to meet their obligations, create awareness on claims notification and documentation because most of the policy holders lack awareness on claims notification and documentation.   

She further averred that to revive the Industry through Claims settlement, insurance companies should beef up claims reserve to cater for claims settlement when loss occurs.

She also charged the insurance companies on compliance with the Insurance Act 2003 regarding Protection of Policy holders Funds, stating that the Act stipulates protecting policyholders fund by directing the insurers on how to invest policyholders’ funds.

“Insurance companies should strictly comply with this provision of the Act at all times to enable them mitigate the risk of not been able to perform claims obligations when loss occurs as a result of inadequate investment of policyholder’s funds,” she warned. 

On the role of the Regulator in re-awakening the Industry, Steve noted that NAICOM was established by NAICOM Act, 1997 to ensure the effective administration, supervision, regulation and control of Insurance business in Nigeria, while also empowering the Commission to establish Complaints Bureau to which complaints against the insurance institution may be submitted by members of the public.

Steve pointed out that the Commission had taken several steps in this regard but however, charged that “the Regulator should not relent in their functions. 

“They should continue to make rules and regulations to enhance fair customer treatment as well as supervise the compliance of the regulations to ensure robust claims management system. This will assist to re-awake the insurance industry through claims settlement.”