Palpable fear has gripped customers of ailing insurance firms across the country, following rising cases of non-payment of claims to policyholders at the expiration of their tenured policies.
It would be recalled that the Commissioner for Insurance, National Insurance Commission (NAICOM), Mr. Sunday Thomas, had in February 2019, expressed concern over the weak financial state of insurance companies that had become unable to pay claims and workers’ salaries.
On May 20, 2019, the commission increased the minimum paid-up share capital requirement for all classes of insurers (insurance and reinsurance companies) doing business in the country in a bid to improve their financial strength.
According to the reviewed minimum capital requirement, Life Insurance Business has its minimum capital base raised from N2billion to N8billion: General Insurance Business from N3billion to N10billion; Composite Business from N5billion to N18billion and Reinsurance Business from N10billion to N20billion.
The insurance and reinsurance companies were required to fully comply with the new minimum capital requirement not later than June 30, 2020.
However, the deadline has been postponed twice, first from June 2020 to December 2020 and from December 2020 till further notice owing to many of the firms inability to meet up with the new requirements.
Some industry experts who spoke to BH on the development lamented that rather than helping the already beleaguered industry, the ongoing recapitalisation exercise has further exposed most insurance companies with respect to unsettled claims, while their continued existence is more threatened than before.
“Not only are they unable to attract new businesses but investors are not ready to put their money into such holes, except consideration is given to the option of converting claims to equity”, a management consultant with specialization in Strategy and Insurance, Ekerete Olawoye Gam-Ikon noted.
Apart from the challenge posed by the recapitalisation exercise, another major occurrence that exposed insurers to liquidity crisis was the huge damage during last year’s protests demanding the disbandment of the Special Anti-Robbery Squad (SARS).
The protests, which brough in its trail, the destruction of private and public assets including bank buildings, vehicles, and malls, overexposed many insurance companies to claims running into several billions of naira, BH gathered,
“It is a huge crisis. The destruction of assets has further deepened what may have been a crisis in the insurance sector in terms of claims, because the sector had been struggling with making people know that claims are being settled. Now that this has happened, it creates more claims,” Ekerete Gam-Ikon stated.
While the President, Lagos Chamber of Commerce and Industry, Toki Mabogunje, said the country lost over N700bn in economic value to the #EndSARS protests, the Lagos State government put the losses in Lagos alone at N1trillion.
Another major hindrance to the payment of claims by insurance companies is the rising insecurity (banditry/herdsmen attacks/insurgency) in the country, especially in the northern part of the country. This has led to the destruction of farmlands and crops. While huge swathes of arable land remain untoiled as farmers and workers continue to flee for fear of being attacked.
Owing to the three major occurrences, demand for claims have been on the increase. But unfortunately, several insurance firms are unable to pay policy holders the assured sum.
Findings revealed that the problem of non-payment of claims cuts across boards, with individuals, privste companies and organisations, as well as governments agencies badly hit.
Several claims, BH learnt, are long overdue for payments, with some left unpaid for over 13 months.
According to NAICOM, unpaid claims as at December 2020 is over N40billion. The commission also said it was compiling the list of insurance companies for necessary sanctions.
“It has been observed that the gains of domestication policy of the government as enshrined in the Nigeria Content Development Act 2010 are gradually losing its meaning for the insurance sector.
“The era of huge backlog of claims should no longer be associated with our companies, and while the commission is profiling companies with huge unsettled claims for necessary regulatory action, companies that are responsive to the plight of their clients in prompt settlement of claims are encouraged to sustain the good business conduct.
“Our focus must shift to service delivery which will make our companies to seek more reasons to settle clients’ claims and less reason for repudiation of claims,” NAICOM boss, Thomas stated.
Particularly affected is the agricultural sector which had been hit by insecurity. Some farmers in Ogun, Oyo, Ondo and Ekiti who spoke with BH, lamented the destruction of their farms by rampaging Fulani herdsmen and their herds, as well as the failure of the Nigerian Insurance Agricultural Corporation (NAIC) to cover their loses despite them paying millions of naira in premiums.
Established in 1987 to provide risk cover to Nigerian farmers, the Nigerian Agricultural Insurance Corporation was floated by the Federal Government to protect farmers from the effects of natural hazards by introducing measures which shall ensure prompt payment of indemnity in order to keep farmers in business after suffering a loss.
However, the aggrieved farmers blasted NAIC for abandoning them in their times of need. A maize farmer in Ekiti State, Oludare Babalola, said he lost over N50million he invested in the business after cows destroyed his farm four times between 2019 and 2021.
“It was as if the herdsmen deliberately planned the attacks as they always occur during harvest time. The first time it (destruction) happened was in 2019, I lost over N15million.
“After the attacks, I was advised to insure the farm against future attacks and destructions. I complied and obtained a policy from the Nigerian Agricultural Insurance Corporation.
“This emboldened me to invest heavily again in maize farming, with the belief that I am covered against further losses.
“Unfortunately, the herders and their cows came again during dry season harvest in November 2019. I promptly complained to NAIC but was told that working out my claims will take time.
“In 2020, herders and their cows also destroyed my ready for harvest yields twice, thatis the rain and dry seasons toilings.
“I also approached NAIC demanding for compensation. The last destruction happened in Octobber 2020. And this is June 2020, 8 months after I filed for compensation. I have not heard from the company.
“This is double jeopardy. I lost my investments to cows and also my money to NAIC. I don’t know where to start again. Government should please come to my aid”, Babalola begged.
Another cassava farmer in Saki in the Oke-Ogun area of Oyo State, Akeem Busari, said he had lost over N15million to destructions wrecked on his farm by herders.
According to him, he used to report at the police stations, but that nothing usually comes out of the visits
“My farm have been attacked more than five times in the past and I usually report to the police who does nothing until I was advised to insure my farm.
“I eventually purchased a comprehensive plan with NAIC with the hope that I will be reimbursed fully in the event of another attack on my farm.
“When the last attack happened in August 2020, I reported at the corporation’s office in Ibadan, while demanding for compensation.
“I was given forms to complete and the firm’s inspectors visited the farm twice. I was told after the second visit to wait for up to 60 days for my claim to be processed.
“In May, after waiting for 9 months, I was told by officials of the insurance firm that my policy covers only drought and not destructions by cows. They claimed insurance did not cover the attack because it was not a natural disaster.
“They didn’t tell me this while I was trying to obtain the policy which I purposely obtained because of the menace of herdsmen.
“I have lodged a complaint with NAICOM and my lawyer has also filled a case in court. It is totally unfair the way they have treated me”, Busari lamented.
Meanwhile, the Managing Director of NAIC, Mrs Folashade Joseph, blamed the delay in claims payments on brokers who fail to remit premiums to the firm.
She argued that that the payment of claims will be prompt if brokers on their part could deliver as expected.
“Unremitted premiums by brokers is one of the major issues, as premiums that are supposed to be remitted by brokers are not remitted. If these brokers don’t remit, it becomes a problem for insurance firms to pay claims to farmers,” Joseph said.
Another challenge in agricultural insurance, the NAIC boss noted, is the issue of awareness on the part of farmers.
She, however, said that in its efforts to increase trust, NAIC has made itself open to all forms of partnerships that would boost agri-insurance in Nigeria.
Apart from the agriculture sector, policyholders in the life assurance, mutual, annuity and general insurance are having problems accessing their claims after the expiration of their policies.
For instance, a customer with Standard Alliance Life Insurance, Mr. Shola O’Neil, said he invested in an ‘Income Assurance Plan’ package with the company in June 2010, with a maturity period of 10 years.
“The policy was obtained in June 2010 for 10 years and expired in May 2020. As the name implies, it is meant to protect my income.
“However, over one year after maturity, I am yet to get my payment, despite several efforts and visits to the company’s office in Effurun-Warri.
“On my first visit, I was told it could take up to three months to process my claim. I felt it was irresponsible to have me wait for three months when the company knew from the first day that the policy would mature in May 2010.
“Up to date, I have not been paid. I have also engaged NAICOM via their Twitter handle, but that too has failed to yield any result. My experience with Standard Alliance is a very painful and sad one and it is the same for many others like me who besiege their offices daily”, O’Neil said.
Another policy holder of Standard Alliance Life Insurance based in Akure, Wunmi Chroma, said she also contributed for 10 years but had not received a dime since the policy expired in 2020.
“Now they are nowhere to be found in the state. Their number isn’t going through. God will punish all of you thieves,” Chroma cursed.
IGI, which used to be a market leader in the insurance industry is also enmeshed in the non-payment of claims saga. A customer of the bank, Abidemi Aladelola, admonished the management of IGI to pay up his claim which he said is long overdue.
“I subscribed to an investment policy with the firm in order to save up for rainy days. But it seems the aim had been defeated. More than six months after the expiration of the policy, I have not been paid by the company. I pray NAICOM should wade into the matter”, Aladelola pleaded.
Other customers of the ailing insurance firm who purchased different policies from the company also lamented the failure of IGI to honour its commitments to them, while calling for the intervention of NAICOM and other regulatory agencies.
In its response, IGI appealed to affected policy holders to exercise patients as efforts are being made to clear their dues.
The spokesperson of the firm, Mr. Steve, said: “There is no doubt that we have some challenges. What we have been doing is to get investors to inject fresh funds into the company.
“We have also been trying to sell our assets but we have a challenge in getting buyers due to the economic challenge. We keep giving all our claimants confidence that we will pay and we are not running away. They should please be patient with us,” he pleaded.
Stakeholders in the insurance industry blamed the current travails of the company on the untimely death of its founder and Executive Vice Chairman/CEO, Remi Olowude, who died in 2014.
Another company finding it difficult to pay its investors is Niger Insurance. The firm, it was learnt, had not been fulfilling its obligations to its customers after the expiration of their policies.
For instance, a policy holder, Eka Esang, alleged that the company is owing him N1million in unpaid claim since 2019. BH reliably gathered from sources in NAICOM that hundreds of customers of the firm have lodged complaint against Niger Insurance with the commission.
Speaking on the development, the Managing Director of Niger Insurance, Edwin Igbiti, said that owing to liquidity issues, the company had tried to sell off its real estate and investment property valued at N15 billion since 2019 to improve its liquidity and ensure reserve adequacy for better business operations.
“We were paying the claims. But the accumulation of claims on the ground has continued to rise and that is why it looks as if we are not paying at all. The delay in claims is due to the challenge of getting buyers for the assets that we aim to sell.
“Presently, investors are doing due diligence. But the best option we are looking at is to sell the assets quickly because the asset is our money and once we dispose of them; the money will be at our disposal to unlock our liabilities”, Igbiti assured.
Also affected are insurance companies formerly owned by banks. Hitherto flushed with cash, many of the companies can now hardly honour their obligations to their customers after the Central Bank of Nigeria (CBN) ordered banks to pull out of insurance busy.
Most of the former bank-owned firms, sources said, are still looking for investors to replace their previous owners. However, owing to their inability to find credible investors, they have not been able to honour huge claims, mostly denominated in US dollars.
BH gathered from some workers of the ailing companies that agitated customers have been bombarding their offices around the country to demand for the payment of the dues.
Due to the constant harassment, agents, marketers, managers and top officials of the firms across the states, it was learnt, have gone underground and are picking their calls.
A management consultant with specialization in Strategy and Insurance, Ekerete Olawoye Gam-Ikon, mentioned the failure of insurers to treat claimants like new customers they are soliciting accounts for as one of the factors working against the growth of the insurance industry.
“An impressive claims experience is the only proof to policyholders that the insurance policy they bought was a good one. The failure of insurers to understand this and treat claimants like new customers they are soliciting, accounts for the condition which they operate today”, Gam-Ikon explained
The Commissioner for Insurance, Sunday Thomas, said he is deeply pained by the inability of the companies to pay claims to aggrieved policyholders.
“We are concerned about all the stakeholders. The law requires us to be concerned about the policyholders and other stakeholders. I can feel the anger and pain of all claimants and I assure them that we are doing everything in our power to address the issue.
“We don’t want a situation that will bring about a run on the insurance sector. Imagine today, if somebody complains that he cannot get his money from the bank and CBN pays from the bank’s deposit.
“What do you think will happen to even those who don’t have issues accessing their funds? There is a likelihood that they will think that something is wrong. People will run to both healthy and unhealthy companies to withdraw their money and the company will die even before its time.
“But beyond this, the statutory deposit is mostly small and may not be able to pay off all liabilities. So how do we approach this?
“The most likely thing is that we are going to have to do it on a first-come, first-serve basis. Will this be fair to all? The largest amount in their statutory deposit is probably around N300 million for life and non-life companies while composite companies have N500 million.
“So how many claims can we pay with this? If, for instance, a corporate concern like Mobil Oil applies to the deposit for an outstanding claim, what will be left to use for small policyholders that have smaller claims to collect? What are you going to tell them?
“The option is there to be used and we believe that some of the steps that we are taking when what will be in the statutory deposit will be big enough, things will be different,” Thomas stated.