Q: How has the ‘No premium, no cover’ policy affected the Nigerian insurance sector, how has it generally improved everything about it?
Thank you very much for that question. I believe that the ‘no premium no cover’ policy has fundamentally changed the structure of the Nigerian insurance market in the sense that before now, companies used to post a lot of receivables in their accounts that is premium uncollected when they make their submissions to NAICOM or regulatory authorities but since year 2013/2012 when this policy became operational companies now know that there is no room for them to have receivables in their accounts. Every business written must be collected and that is ‘no premium no cover’. Companies have been smiling to the bank. They love it, the underwriters love it, and the brokers love it because whatever business you write, you get your money for it.
Q: There are still challenges in the industry so what other measures can be put in place to curb them?
Some of the challenges that we have are with the operators, I mean the consumers especially the government’s side. We are still having some challenges with the government because the process of approving the budget it takes some time, the insurance budget from January to December would not be approved until around March/ April so that still gives us a lot of challenge because by the time they pay their premium it would be half year maybe around June/ July before they pay their premium where as this premium supposed to have been paid in January and you know the principle behind premium competition is that the premium should have been paid early and then you invest the premium and get some investment return from the premium.
It is this return that you use to make your claims. So because of that there are still some challenges in terms of big spenders and buyers of insurance from the government’s side. But with corporation and businesses they have found a way round it. those of them that cannot pay full premium annually what they do is that they break their policies into segments maybe they take six months policy and then another six months. At the end of the six months they extend for another six months and they pay the premium. Or they can even make it quarterly, once you don’t default in payment, you stay within the law.
