Experts see Insurance Bill review revving industry 

EMEKA EJERE|     It was a dream come true for insurance industry operators penultimate week when the Federal Government announced the setting up of a committee to review the Revised Insurance Bill in a bid to make the bill conform to the ideals of contemporary insurance practice.

Since the revised bill has been there since 2010 with no headway explained the industry-wide jubilation that greeted the pronouncement. The Nigerian insurance sector has for a long time been one in which operators as well as the regulator have had no option than to continue to use the obsolete Insurance Act 2003 to carry out their duties even with its many limitations.

The Insurance Act 2003 is so obsolete that helpless insurance operators now resort to persuasion rather than compulsion for people to subscribe to insurance products and services, a step contrary to what obtains in developed and some developing economies, where someone can be detained for not having insurance cover.

Speaking on the ugly situation, former Commissioner for Insurance, Mr. Fola Daniel said: “The (current) legislations are not only weak but sometimes difficult to enforce. The regulatory framework is ‘compliance-based’ rather than ‘frame-work’ as is the case with most advanced jurisdictions. This arrangement hardly gives the commission the capacity to take regulatory initiatives in urgent and critical situations.”

He stated that it was desirable that the various pieces of legislations constituting the existing legal framework be consolidated, recalling that the Insurance Law Review Committee appointed by the Federal Government to review the existing insurance laws completed its assignment since 2010.

It would be recalled that in March 2009, the Federal Government appointed an Insurance Law Review Committee to review all laws and regulations relevant to insurance under the chairmanship of Professor Joe Irukwu. Although the committee submitted its work in 2010 and a draft revised Consolidated Insurance Bill which has been reviewed by the Office of the Attorney General of the Federation and Minister of Justice was to be submitted to the Federal Executive Council, but it ended in the Federal Ministry of Finance cooler.

However, the setting up of the review committee, experts believe, shows that there is light at the end of the tunnel, for the passage of the insurance bill into law, hopefully, in the current year.

The impending review is expected to form the basis for a new draft bill, which will be sent to the National Assembly for consideration.
The Minister of Finance, Mrs. Kemi Adeosun, who made the disclosure, said the review committee with members drawn from the public and private sectors was to submit its report within three months.

A statement by the Director (Press), Federal Ministry of Finance, Mr. Marshall Gundu, disclosed that the Review Committee, soon to be inaugurated by the minister, is chaired by Dr. Omogbai-Omo Eboh, a renowned expert in Insurance Law, while Dr. Talmiz Usman (Head of Legal Department, National Insurance Commission (NAICOM) is the Secretary.

Other members of the committee include a representative of the Ministry of Finance; a representative of the National Insurance Commission; a representative of Nigeria Insurers’ Association (NIA), and a representative of Nigeria Council of Registered Insurance Brokers.

Members of the committee also include a representative of the Institute of Loss Adjusters of Nigeria; a representative of the Attorney General of the Federation; Kamar Raji and Dr. Ladi Hamalai of the National Institute of Legal Studies. The minister said the activities of the Review Committee would be fully funded by the NAICOM.

According to the minister, the terms of reference of the review committee include a critical review of the draft Insurance (Consolidated) Bill, with a view to making it a framework or principle-based legislation; a comparative review of the bill to align it with the powers of other financial regulators in the country as well as a thorough examination of current market problems and recommendation of appropriate regulatory powers to allow the insurance regulator act appropriately.

The review committee is to undertake a review of all other insurance laws and update the draft Insurance (Consolidated) Bill to align with international best practices. The committee is also to make other recommendations as it deems fit for the overall interest of the nation’s insurance industry.

Kudos from industry:

Insurance stakeholders have expectedly commended the Federal Government for setting up the bill review committee, describing the move as a confirmation of the fact that the Insurance Act 2003 was long overdue for review to meet the present day realities.

In his reaction, the Chairman of the Nigerian Insurers Association (NIA), GUS Wiggle, said it is a welcome development for the insurance industry because of the significant role it will play in the development and growth of the market.

He said: “It is a welcome development for the insurance industry in Nigeria because it is a confirmation of the fact that Insurance Act 2003 was long overdue for review so that it will meet the challenges of the present day business environment, to initiate laws that are in tandem with current realities.”

Pointing out that the United Kingdom passed in 2015 a new revised insurance law, while Nigeria is still operating the 2003 Insurance Act, Wiggle, who is also Managing Director/CEO, Linkage Assurance Plc, said, “We hope the review will be done quickly. The NIA will be represented. We hope this new attempt will not suffer the delay the Consolidated Insurance Bill report went through for more than eight years in the cooler.

“We pray that in the spirit of change of the new government, the committee will carry out its assignment speedily for the industry to have a new insurance legislation that will promote and grow the industry. It is a welcome development and we are delighted and fully in support.”

An insurance technocrat who pleaded anonymity said, “We appreciate the Minister of Finance understood the importance of a new legislation for the development of insurance institutions as backbone of the economy. There is a strong link between development of insurance and economic development. In developed economies, insurance institutions are a major source of long-term capital and have dominant share in total financial assets”.

He called on all agencies of government to support the committee to come out with good draft report that will assist the industry to carry out its primary role of risk bearer.

On his part, Director-General, Nigeria Insurers Association (NIA), Mr. Sunday Thomas, said the move is a good one, stressing that the industry really needs a law that is implementable.

He noted that the bill would be properly examined before necessary actions would be taken on it, adding that it is too early to state whether new things would be introduced and some things obliterated.

“It remains a pain that in spite of the compulsory insurances in place, government and its various agencies and some big corporate institutions have continued to circumvent the law to the disadvantage of the insurance industry, without any form of punitive measure meted out to the culprits. All these should be taken into cognizance, holistically,” an insurance broker, who does not want his name mentioned noted.

The National President, Association of Registered Insurance Agents of Nigeria (ARIAN), Mr. Gbadebo Olamerun, is not fully satisfied with the development as his association was not included in the review committee, despite the fact that the agents are prominent drivers of insurance products and services. He said though, the underwriters may contribute on their (ARIAN’s) behalf they (underwriters) can never represent the full interest of the agents.

“There is one or two deficiencies when it comes to agents of insurance. We are not carried along in it. We will appreciate if we are still given opportunity to add one or two things into it, so that the bill can be encompassing. If the bill is passed, definitely, it will change a lot of things in the industry,” Olamerun pointed out.

Journey of legislative reforms:

As the insurance industry grew, amendments had to be made to the existing laws to accommodate the situation of things at the time. The first legislation in the insurance industry was the Insurance Companies Act of 1961 which required that insurance companies be registered with the registrar. This Act was, however, quite ineffective and had a number of lacunas, making it easily breached.

In State v Daboh (1977) 5SC 122, for instance there were some irregularities as regards insurance but because the Act did not provide for punishment, the defaulter had to be punished according to criminal law.

This Act was amended in 1964 by the Insurance (Miscellaneous Provisions) Act 1964 and by 1991 the Insurance decree came into force. The decree re-enacted the provisions of the Insurance Special Provisions Act of 1988 on insurable interest, assignment and statutory reinstatement on fire insurance.

The Insurance Decree of 1991 was replaced by Decree No 2 of 1997. Presently, the Insurance Act of 2003 is the major legislation that governs the insurance industry in Nigeria, alongside the National Insurance Commission (NAICOM) Act of 1997.

Enactments were made which made certain insurance compulsory. This was a very welcomed reform as the insurance which were made compulsory were rather necessary in human endeavours. The Road Traffic Act of 1945 made motor vehicle (third party) insurance compulsory so as to protect innocent victims of road accidents when the defaulters cannot pay for damage suffered.

The second compulsory insurance is the insurance of all deposits made in banks by Nigeria Deposit Insurance Commission (NDIC). This gives depositors a level of safety that they will not lose out totally if the bank becomes insolvent. Presently, NDIC pays all customers a sum of N250,000 in case of insolvency of the bank.

The third compulsory insurance was introduced by the PenCom (Pension Commission) Act of 2007. It made it compulsory for companies to have pension schemes supported by compulsory life insurance for everyone in employment.

These provisions increased the awareness of the people in insurance and its relevance in human activities.

Steps were taken to actualize certain provisions of the Insurance Act 2003 to ensure an increased efficiency of the industry. Section 72 of the Act, for example provides that no one shall transact insurance or reinsurance business with a foreign company in respect of life, asset, interest or other property in Nigerian business which has been classified as domestic insurance unless with a company registered under the Act. The objective of this section was to bring about the domestication of insurance business in Nigeria.

Section 50 (1) of the Insurance Act 2003 was also fully and rigorously implemented by January 1, 2013 to prevent the non-payment of premium. The implementation of this section was in an attempt to ensure that insurance companies have enough capital to run as required. Thus, the new policy in operation now is “no premium, no cover”.

The enactment of the Nigerian Content Act of 2010 may also be seen as a reform of some sort as it positively impacted the insurance industry. It increased the participation of Nigerians in insurance and in getting Nigerian insurance companies to participate fully in insurance.

The implementation of the provision of the Act gives Nigerians about 90 percent of insurables in oil and gas. It ensures that Nigerian companies are given priority in the insurance of things that pertain to the oil and gas sector and it was estimated that it would boost insurance income and yield about $400 million in two years.