…Firms deny allegations as analysts back NAICOM
By Henry Uche
Nigeria’s insurance industry is at the center of a heated debate as 46 companies come under intense scrutiny over claims settlement disputes. While policyholders and stakeholders accuse the firms of non-compliance by ‘detaining’ their claims, the insurers have pushed back, citing procedural and contractual complexities. Amid the controversy, analysts have rallied behind the National Insurance Commission (NAICOM), commending its regulatory oversight in ensuring transparency and consumer protection.
As solutions to the knotty issue are being sought, experts have noted that trust and confidence are critical requirements in the insurance business, because policyholders rely on insurers to provide financial protection during times of need.
The National Insurance Commission (NAICOM) recently made public a list of complaints against various insurance companies, publishing the details on its official website. The report includes the names of the implicated insurers, the dates of the complaints, the parties involved, policy types and numbers, as well as the corresponding claim amounts.
An analysis by Daily Sun revealed that a total of 46 insurance firms were cited in the publication. While some companies had as few as two complaints, others were linked to over 300 unresolved claims, highlighting significant disparities in claims management across the industry.
In November 2024, the National Insurance Commission (NAICOM) directed insurance companies to settle all outstanding claims before the year’s end.
Speaking at the 2024 Insurance Directors Conference in Lagos, themed “Board Performance in the Nigerian Insurance Industry: A GRC Approach,” the Commissioner for Insurance, Mr. Segun Omosehin, emphasized the need for insurers to uphold their obligations and maintain public trust in the sector.
He noted that the Commission’s primary focus was on ensuring timely payment of genuine claims, and expected all insurers to significantly reduce their outstanding claims by the end of the year, because unnecessary delays in the settlement of genuine claims would no longer be tolerated.
The publication has ruffled some feathers. Some industry stakeholders have applauded NAICOM’s decision to name and possibly shame them, others have frowned at it, while a few were neutral.
Attempts to reach some of the affected insurance companies for comments were unsuccessful. However, a Deputy General Manager in the Corporate Communications department of one of the implicated firms, speaking anonymously, questioned whether the regulator had conducted a thorough investigation before making the announcement public.
He said: “Did NAICOM do their due diligence before going to press and publishing names? They will be the ones to destroy the industry with the way they are going. So, if a claim is repudiated as a result of fraudulent practice, does that mean that the company is not capable of handling such a claim?
“There must be a balance of equity before you rush to publish names. How many companies did they go to hear their own side of the story before jumping like a frog?” the Corporate Communications Deputy General Manager asked.
Reacting to this development, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, in a telephone interview, said that what is needed at this critical time is regulatory effectiveness.
The economist suggested that, given the publication by NAICOM, if there are proven infractions, then there have to be consequences, and there are no two ways about it.
Yusuf, who was the former Director General of the Lagos Chamber of Commerce and Industry (LCCI), added that if there are no consequences for infractions, the system would continue to degenerate, and the level of confidence in the industry would continue to retrogress.
“I don’t want that to happen to our insurance industry. Restoration of confidence is extremely important, and one of the greatest pillars in the industry is the prompt payment of genuine claims. And if there is evidence of failure on the part of the insurance companies to live up to that very critical obligation, which is really the foundation of confidence in the industry, then there have to be consequences.”
He stressed that it’s not all Uhuru by publishing the names of insurance companies affected, saying, “The issue is not about the publication of names; the issue is about what sanctions have been imposed on these institutions. We want NAICOM to be as strong and effective in regulating insurance companies as the Central Bank is in regulating banks.
“That is the kind of effectiveness we want to see, but if we continue this way, there will be a serious erosion of confidence in the insurance industry, and we don’t want that to happen. Insurance plays a major function in the management of risk in any economy,” he maintained.
Also, an insurance lecturer at Lagos State University, Dr. Abass Olufemi, submitted that it was a welcome development, noting that such a move would keep insurance companies on their toes going forward.
Olufemi, who was the former Head of the Department of Insurance at the university, wished that NAICOM would publish the names of defaulting operators on a monthly basis to let stakeholders know which operators are foot-dragging in claims payment and other statutory responsibilities.
“We cannot overemphasize it. Though the inability or delay in paying claims is often the fault of claimants, the onus rests on insurance companies to thoroughly sensitize policyholders from the outset.
“More importantly, I want NAICOM to conceptualize or define turnaround time. You know—at what point should we start counting that a claim is being delayed? This is because turnaround time from an insurance company’s perspective is far different from the insured’s view.
“The insured starts counting from the moment the loss crystallizes, but to the insurance company, the turnaround time starts when documentation has been fully carried out. So there is a gap regarding when the turnaround time should begin. These are the things causing delays. So to me, it’s a welcome development.”
The insurance teacher implored NAICOM to start publishing the names of defaulting companies monthly or at least quarterly. He explained that it may not necessarily mean insurers do not want to pay claims; rather, they may be foot-dragging and requesting excessive documentation, further causing delays and making the process bureaucratic.
“By these publications, let’s know them and their pattern—that in every quarter, an insurance company is reported to NAICOM for foot-dragging on certain classes of insurance. We need to know who these people are.
“So if you ask me, I will say it is a welcome development and should be sustained periodically. We need to know who is supporting the growth of this industry and who is frustrating its progress,” he posited.
On his part, a former Chairman of the Nigerian Insurers Association (NIA), Mr. Gus Wiggle, in a telephone interview, spoke on the implications of the public disclosure of complaints on the reputation of the affected insurance companies, particularly those with a high number of complaints.
“NAICOM should first be commended for this bold step in bringing sanity to the industry. The trust issue has been the Achilles’ heel of the insurance industry and a major factor in its poor penetration.
“So for me, NAICOM is only addressing customer concerns and proactively resolving complaints. For every policy action, there will always be both positive and negative effects on the reputation of affected insurance companies.”
Wiggle, who was a former MD/CEO of Linkage Assurance Plc, stressed that some of the negative impacts on companies with a high number of complaints would include loss of customer trust and loyalty, decreased customer or broker patronage, and increased regulatory scrutiny.
“For those who still want to be in business, the publication of their names could just be the wake-up call they need to improve their services and help such companies identify areas for improvement in their operations while ensuring compliance with regulatory requirements and industry standards.”
Speaking on possible penalties or regulatory actions for non-compliant insurers, the former NIA Chief opined that those who fail to settle policyholder claims in a timely and fair manner should face various penalties, including fines, penalties, and possibly the withdrawal of their operational licenses.
Asked whether the publication in question would strain the finances of insurance firms, especially those with a high number of unresolved claims, and whether it would force companies to adjust their underwriting policies or premium pricing to accommodate these claim settlements, he affirmed, “Yes, this move could potentially strain the finances of insurance firms, especially those with a high number of unresolved claims.”
He continued, “In most cases, their payout will always be more than their revenue. Premium pricing could help, particularly if they feel their pricing has not been competitive.
“What is more important is for them to improve their risk management strategy to mitigate the risk of increased claims settlements and their associated impact on financials. Insurers in this category may need to review their reinsurance arrangements to ensure they have adequate coverage for potential claim settlements to cushion their bottom line.”
On what NAICOM stands to gain or lose in the long run, Wiggle, who is the Principal Consultant at Carefirst Consult, added that NAICOM’s move to enforce outstanding claims was a step in the right direction, but its impact on confidence in the insurance sector is a mixed bag.
On one hand, the directive demonstrates NAICOM’s commitment to protecting policyholders’ interests and ensuring that insurance companies meet their obligations. This can boost confidence among existing policyholders and potential customers.
On the other hand, the fact that NAICOM had to intervene to settle outstanding claims exposes deeper weaknesses in the insurance sector. It highlights the industry’s struggles with claim settlements, which can erode trust and confidence among policyholders and industry observers.
“The move may also raise questions about the financial stability and risk management practices of insurance companies. Furthermore, the settlement of claims may not necessarily address the underlying issues that led to the disputes in the first place. It may not improve the overall efficiency and effectiveness of the claims settlement process or prevent similar disputes from arising in the future,” he explained.
Looking forward to the implications of this exposure on Nigeria’s insurance industry and the systemic changes needed, the insurance expert emphasized that the high number of complaints against insurance companies reveals several underlying issues within the industry, including a lack of trust, poor claims settlement processes in some companies, and weak corporate governance.
However, he noted that NAICOM cannot completely absolve itself, as these complaints should have been noticed during regular inspections. Failing to address them at the primary stage raises concerns about the regulator’s oversight capacity or its ability to investigate and penalize misconduct effectively.
He suggested systemic changes, including strengthening the regulatory framework to enforce compliance, fostering a culture of corporate governance, and prioritizing policyholders’ interests.
Additionally, Wiggle, who is currently the President of the Risk Managers Society of Nigeria (RIMSON), anticipated further regulatory interventions to strengthen consumer protection and claims settlement processes in Nigeria’s insurance industry.
“I expect NAICOM to align with international best practices, provide adequate consumer protection, and establish stricter standards for claims settlement, including clear timelines and procedures.
“I also expect NAICOM to drive improved consumer trust through education initiatives and establish an independent complaints bureau to handle consumer grievances and provide an alternative dispute resolution mechanism,” he added.