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Growing The National Economy



At the just concluded 3rd National Conference organised by the National Association of Insurance and Pension Correspondents(NAIPCO) in Lagos at the weekend, stakeholders agreed that insurance and pension sectors can be the driver of the nation’s economic growth and development. ZAKA ABD-KHALIQ writes.

The industrialisation era which the world witnessed in the 19thcentury, coupled with technological discoveries of the 20th century further exposed the world and its people to serious danger.

Natural habitats and things gave way for industries and artificial machines to work for man as natural creatures and lifestyle went into extinction.

While this evolution made living comfortable, it comes with it risks that continue to struck at every moment. Tsunami, floods, earthquake,fire outbreak, volcanic eruption, air crash accidents, among others are risks of the 21st century, arising from rapid evolution the worldhas witnessed over time.

When these mishaps struck, the victims were always returned to penury, or unable to be in a financial position he was before the disaster struck. And when a life is lost as a result of this, the members of the  deceased family are made to suffer.

Insurance arises as a succour to those who might be victims of the aforementioned risks and proactive government and people all over theworld have seen insurance cover as the best hope for human race.

Developed countries have taken the front seat in insurance adoption,as every assets purchased are made mandatory to be insured, whilegovernment, on its part, ensure that its assets and human resourcesare adequately protected through insurance.

In fact, it is a crime to evade insurance in developed countries.

However, in developing economies, where Nigeria falls, insuranceperception is negative, people attach religious and traditionalsentiments to insurance that they don’t even want to hear about it.

On the other hand, the enactment of the Pension Reform Act (PRA) 2004( now PRA 2014) which paved way for the introduction of the Contributory

Pension Scheme (CPS), brought great relief to pensioners as they weresaved from the hardship suffered by their colleagues who retired under

the Define Benefit Scheme (DBS).

However, the CPS, within 13 years, grew the pension assets from  adeficit of almost N2 trillion in 2004 to a robust contributors’ fund

of N8.1trillion as at the end of May, 2018, a feat achieved throughproper implementations of regulatory policies and initiatives. Despitethe success of the new pension scheme, there are still some grey areasbegging for serious attention.

For instance, low adoption CPS by States, low funding of RetirementSavings Accounts(RSAs) of workers in public and private sectors, low pension penetration, especially, in the informal sector, whichnecessitated the creation of micro pension scheme, among others, havecontinued to be a bottleneck in the pension growth.

Despth see bottleneck, insurance and pension sectors, according toexperts, can spur economic growth and development.

It was to this end that insurance and pension stakeholders gathered atthe just concluded 3rd National Conference of the National Associationof Insurance and Pension Correspondents(NAIPCO) in Lagos at the weekend to discuss the role of the two sectors in economic growth.

Stakeholders’ Role In Insurance and Pension Growth

At the conference, the Executive Director, Centre for Pension Rights

Advocacy  (CPRA), Barrister Takor Ivor, said the critical stakeholdersin the insurance industry are Policyholders, management and staff ofunderwriting firms, shareholders and regulators.

While policyholders are interested in proper protection and liabilitycoverage, he said, the management and staff looks forward to

Profitability of the company, good career prospects and adequatecompensation, even as shareholders are interested in adequate returns on their equity and solvency of their respective companies. The Regulator, which in this case, is the National Association of Insurance and Pension Correspondents(NAIPCO), he stressed, ensuresthat the interest of policyholders are protected and that they aretreated fairly and ensures that defaulting companies pay fines.

In the pension industry, he said, the stakeholders  are the the regulator, employers, employees and the operators (Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs).

Stating that insurance industry plays a social role by providing financial protection to different segments of the economy, which makesthe industry very sensitive, requiring regulatory scrutiny, he addedthat, the pension industry remains the most rapidly growing industryin the country and will remain so for a long time, noting that thisposition will be strengthened when the micro pension targeted atgetting the self employed in the informal sector to key into theContributory Pension Scheme(CPS) commences.

Similarly, Past President, Chartered Insurance Institute of Nigeria(CIIN), Alh. Bala Zakariya’u, called for the structural reform of the financial services sector and the national economy so as to engender improved investors confidence and attract more foreign direct investments.

In his opening remarks as the chairman of the occasion at the 3rd National Conference of the National Association of Insurance and Pension Correspondents(NAIPCO) in Lagos, he stated that a keycomponent of this reform should revolve around strengthening the inter-regulatory cooperation to build synergy between the various regulatory agencies in the financial services sector.

Zakariya’u, who is also the Former Chairman of Niger Insurance Plc,pointed out that such collaboration should reduce regulatory arbitrage and duplication of regulatory requirements, enthrone well coordinated institutional regulatory structure and a more risk-focused regulatory regime built on strong legal frameworks.

The modern tendencies globally, according to him, have been to build synergies, out of institutional regulatory collaboration, to license and supervise insurance, pensions, capital markets and other congruent financial services.

“It is now, more than ever before, a necessity to create the right framework that would enthrone inter-regulatory collaboration and coordination of regulatory functions to eliminate the tendency for regulators to work at cross purposes. This should enhance proactive, efficient and effective supervision of the emergent financial industry conglomerates, offshoots of an obvious market growth, as our economy continue to improve,” he pointed out.

Meanwhile, the Acting Director General of National Pension Commission

(PenCom), Mrs. Aisha Dahir-Umar, said, Pension Assets under the Contributory Pension Scheme (CPS) have increased from N7.52 trillion in December 2017 to N8.23 trillion in June 2018.

She said the increase is attributed to new contributions received, interest/ coupon from fixed income securities and net realised/ unrealised gains on equities and mutual fund investments.

The PenCom boss, who was represented by Lana Loyinmi, Head, Contributions Bond Redemption Department, PenCom, said the number of contributors had also grown from 7.89 million in December 2017 to 8.14 million in June 2018 as a total of 312, 291 employees joined the pension scheme during the first six months of the current year.

Umar, who spoke briefly on recent developments in the sector, also pointed out that as part of efforts to enhance the monthly pension of retirees under the scheme,the commission initiated the Pension on Enhancement Programme.

She said: “It was discovered that the returns being generated by the PFAs on the balances of RSAs of majority of retirees could be used to enhance their monthly pensions.”

Consequently, she added that, the commission sought for and obtained the approval of the Secretary to the Government of the Federation to implement the pension enhancement programme, which resulted  in increased monthly pensions for most retirees receiving pension under the programmed withdrawal arrangement.

She said the implementation of the pension enhancement was one of the significant milestones attained since the commencement of the CPS, stressing that, it confirmed that CPS had workable internal mechanisms to respond to legitimate demands of retirees as they seek a reasonable retirement income.

The Way Forward

To make insurance attractive, Ivor said, insurance Premium should be affordable, shareholders should not be very greedy, urging them to voluntarily plough back some of the profits the company makes back into the development of the company. ‘They don’t have to always wait for it to come through regulatory enforcement. Regulatory enforcement comes with sanctions for non compliance,” he stressed.

In a similar vein, Zakariya’u charged the regulators in the financial services industry to create the enabling environment for mega insurance companies to be established through mergers and acquisitions, adding that “such mega financial institutions are to be tasked with higher capital and solvency, sophisticated information technology infrastructure, best in class human resources and strong brand presence.”

Zakariya’u further said the mega institutions should also have better all-round capacities and connections, as well as cognate strategies to deepen market penetration and enhance finance inclusion.

While fears may be expressed that creating mega institutions may lead to the emergence of ‘companies which may be too big to fail, which, is every regulator’s nightmare,’ he believes ‘this ought to be a preferred nightmare, than what we currently have by default: companies which are too small to succeed.’

However, the Minister of Finance, Mrs Kemi Adeosun, said with the various economic developmental initiatives of the Federal Government and its agencies, Nigerians need to build up a solid financial plan for future through life insurance planning.

Adeosun, who was represented by the Deputy Commissioner for Insurance, Finance and Admin, George Onekhena said life insurance holds the key to wise financial planning and is panacea for poverty alleviation among Nigerians at all levels including grass root dwellers.

She urged Nigerians not to neglect life insurance, even as it is a common habit, noting that this is equal to building one’s foundation on a shallow ground.

She stated that they should rather adding make enquiries on the particular life insurance they want to buy as well as how to go about it. She also said that those in doubt could engage the service of insurance brokers for professional insurance advice, adding that this has become necessary because no body knows the day of his death and it will be disastrous for anyone to leave dependents without benefits.

She said: “Every Nigerian buys one house hold item or the other at any time and you don’t enter the market and start making your purchases.

You make enquiries before going to market, in like manner, in your life insurance decisions, you can take time to ask questions on the life insurance policy you want to buy, no body knows the day of his death so life insurance is critical, life insurance is foundation to every wise financial planning.”

Speaking on the challenge facing insurance and pension operators in Nigeria, she said people hardly tell the public when they get benefit from these two sectors citing instance of quantum of retirement benefits paid on monthly basis by Pension Fund Administrators(PFAs) to retirees  and quantum of claims paid in a year by insurance firms.



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