Mr. Fola Daniel, Nigeria’s Commissioner for Insurance, is a fellow of the Chartered Insurance Institute, London and the Chartered Insurance Institute of Nigeria as well as the British Institute of Management. In this interview, he tells SONI DANIEL, BINTA ABDULAZEEZ IDRIS and RUTH CHOJI that he has restored sanity to the Nigerian insurance industry and wants to make it the pivot of the Nigerian economic transformation.
With the setting up of NAICOM, would you say Nigeria has got it right in the insurance industry?
I wouldn’t say that. National Insurance Commission (NAICOM) was set up in 1997 by an Act of the National Assembly and it is doing its best to ensure that the insurance industry in Nigeria performs the functions for which it was set up. It is doing its best to meet the challenges of the industry. Before the advent of NAICOM, we had the Nigerian Insurance Supervisory Board as the supervising agency for the industry. However, you should know that setting up a supervisory board is not tantamount to getting it right. But we can rightly say that the Federal Government of Nigeria is determined to get it right with the setting up of NAICOM. Getting it right is a destination and I don’t know at any point in time that anyone can say that we have arrived. It is rather a roadmap and we are making effort towards getting to the destination.
What are the things you are doing to ensure there is sanity in the system?
Once industry is perception. Poor public perception of the industry is still a problem. That problem stems from the feeling that insurance companies collect money and they don’t pay claims. The federal government, in its deliberate effort to restore sanity and public confidence into the system, decided to raise the bar of who becomes an insurer in this country. One of the significant things the government did was to jerk up the entry point capital base for insurers and it has paid off. Before February 2007, all you needed was N350million to set up a composite insurance office. But when we came in, we moved the entry point capital from N350million to N5billion. Similarly, we raised the entry capital base for re-insurers from N350 million N10 billion. This was necessary because re-insurers are bigger than insurance companies. I can say that, by that singular act, the government has successfully eliminated charlatans who had been feeding fat on the industry. We can see the effect of the government action on the number of insurance companies that currently operate in the country. At a time we had 128 companies in Nigeria and virtually every shop around was an insurance company. That number has significantly shrunk to 62. These companies are not stand-alone companies. Many of them are dual companies. If you are talking about insurance companies we don’t have more than 29. That is the effect of the action of government raising the bar of capital and, since then, we have begun to have a semblance of what sanity should be in the insurance industry. We now have the emergence of serious companies that are listed on the Stock Exchange. We have over 30 insurance companies listed on the stock market now, and they are doing very well despite the global meltdown that has affected global investments worldwide.
What is the industry worth in terms of naira and kobo?
I can give you three answers to that question but I will pick one. In terms of the capital base, the insurance industry is worth about N600 billion.
Have you been able to effectively punish defaulters in the insurance industry?
Of course, we have been doing that whenever the need arises. One of the first things I did when I took over as commissioner in 2009 was to sanitise the system and also punish people for not meeting their insurance obligations under the insurance contract. This punishment manifested in our taking over two companies until the perceived aberrations were corrected.
We have punished quite a few offenders. When the ADC Airline crashed and the leading insurance company wasted time in settling the claims, we stopped them from writing aviation business until they settled their claims. As I speak to you, there are two of those claims that have not been settled and the reason they have not settled is that the dependents of those who lost their lives went to court to contest the quantum of money due to them. If not for the protracted legal action, we would have drawn the curtain over those claims and they would have been settled 100 percent.
You have seen it all in the few years you have been here; where do you think the insurance industry in Nigeria is heading, given the state of the economy?
I have a vision of an insurance industry that is potentially bigger than the banking sector. That is the situation you have in advanced countries such as the UK, where most of the banks are substantially owned by insurance companies. If you go to Central London most of the high-rise buildings belong to the insurance firms. Insurance is the driving force of the economy - that is the kind of scenario that I want to see here in Nigeria. I believe we have the capacity and wherewithal to re-enact the same situation here given our huge human resources. Our population of160 million provides a huge raw material for an insurance industry to grow, particularly when you are talking about individual life policies. That is what grows insurance industry. The South Africa insurance industry contributes 15 percent to that country’s Gross Domestic Product (GDP). Their life insurance industry is booming in that country. Two out of four persons you see in South Africa have a life policy, but in Nigeria less than ten percent have a life insurance policy.
So, we have huge untapped area of business in that area. We also have other untapped areas. If you look at the Nigerian Content Act of 2010, you will discover that it confers on Nigerian insurers 70 percent of all insurables in oil and gas - which is a lot of money, and unless we have huge financial and human muscle, you cannot handle it. That’s an area of growth. And as Nigerian insurance is growing, we also must tap into it. The aviation industry is another area we have to look at. It is the largest growing area in the whole of Africa. As a commission, we are looking at what can we do to deepen insurance awareness and penetration in our domain. One of the things we can do to put the industry on a sound state is to fashion out environmentally-friendly policies. I am looking at micro-insurance - to be able to cater for the people in rural areas. The fishermen, the traders, the farmers and so on need one form of insurance or the other. They need an insurance policy that relates to their situation and that they can afford. So, we are focusing on micro insurance right now.
We are doing diagnostic studies with a German development organization and we are focusing vigorously on micro-insurance. We need to take insurance to the grass roots. We also need to look at Takafu, which is simply a non-interest form of mutual insurance. The argument of a lot of people is that, for years, they buy policy which does not give them any form of gain or interest. Takafu is meant to take care of that kind of objection, which is reasonable. I would say if we introduce that policy, everyone would like to take it. We are sure we can use Takafu to take care of the diverse needs of all those who have one issue or the other with our conventional insurance. I want to see a Nigerian insurance industry that is the dominant market in the whole of Africa on the account of huge population and economic potential. We have the wherewithal and it is my will and desire to see the insurance industry that will eclipse all other financial service sectors in Nigeria.