Nigeria’s insurance industry is expected to generate N60 billion from group life insurance in 2018, LEADERSHIP can exclusively reveal.
The estimated amount would be generated through the enforcement of group life policy rate by the National Insurance Commission (NAICOM) which is expected to cost the federal, state governments and the private sector operators about N45 billion extra premium.
This would be an addition to the initial N15 billion premium earlier budgeted for by both private and public sectors. The N45billion extra premium expected to be generated is 300 per cent increase from the N15 billion expected premium income from group life.
Market analysts confirmed that insurance industry has been generating about N15 billion income from group life annually in the past, but that the figure could increase by N45 billion, bringing the 2018 premium income on group life to N60 billion in the process.
The insurance industry regulator had earlier mandated life insurers to comply with group life rate put at 6-8 per cent per mile, which was 300 per cent higher than market rate and operators were asked to comply with immediate effect.
This move, however, is currently unsettling the sector, as life underwriters are battling to convince their clients to abide by the new policy rate. Most operator, for years, have been charging below this rate through rate-cutting in a move to outsmart themselves for the same line of business, thus, affecting the profitability margin of not only the life underwriters, but, the insurance industry.
Contrary to what some operators’ term as new rate for group life, LEADERSHIP recalled that the Nigerian Insurers Association (NIA) and Nigerian Council of Registered Insurance Brokers (NCRIB) had jointly agreed to this rate during the era of Mr. Fola Daniel as the Commissioner for Insurance, but was not implemented due to rate-cutting from life insurers.
However, enforcement of this rate, it was learnt, has now jerked up 2018 group life policy rate of government as well as private companies by 300 to 400 per cent, even as insurance companies and brokers had already submitted their quotations to public and private sectors, before NAICOM came up with the enforcement circular in January.
To this end, investigation revealed that the federal and state governments as well as private and multinational companies used the old rate given to them by their respective insurers to prepare the budget, only to be told later that the rate has increased significantly.
Currently, the affected firms have now communicated their board about the new increase in a bid to get additional fund to augment what has earlier been budgeted for this insurance. On the other hand, government at federal and state levels may have to readjust their insurance budget upward to renew the 2018 group life cover of their workers.
As at yesterday, it was learnt that some few companies who could quickly sit for board meetings have already approved this increment and had renewed their group life cover, but most firms are still struggling to renew owing to the aforementioned challenge.
Even the 2018 group life cover of the 89,000 federal government workers would be in a serious mess by the time the budget is passed into law as the budget had already gone to the National Assembly(NASS) before the enforcement circular was released by NAICOM and this may push the federal government to continue with its self-insurance policy, which it started in 2016, by not remitting group life premium to insurers, but instead, paying claims by itself whenever any worker died or sustain injuries in active service.
Speaking on this development, the President, NCRIB, Mr. Shola Tinubu, said, the rate, compared to the market prices that have been in existence before now, increased by 300 per cent and in some cases, 400 per cent.
According to him, “This caused a bit of problem and even affected the figure that has been suggested in the 2018 national budget sent to NASS and other institutions, such as; Nigeria National Petroleum Corporation (NNPC), among other private firms who have to approach their boards again for another approval because the figures that were sent were much lower than the figure that is now coming from this new regulation.”
He added that the regulation came out in January and was to take immediate effect and that as the time, government and companies had already submitted their insurance budget for approval, even as most had already had the earlier figure approved by their boards.
“So, many institutions are stuck and in government, you can’t spend what has not been approved for budget and in private companies, you have to approach the board for extra-budgetary approvals and you have to justify the reason for such increase. The figure were significantly increased by 200 per cent and 300 per cent and so it is not something that you can just do from cash flow and petty cash and seek approval later,” he pointed out.
He, however, disclosed that NIA is already discussing with the regulatory body for suitable solutions.
In an exclusive interview with LEADERSHIP, recently, the managing director, Equity Assurance PLC, Mr. Moruf Apampa, said, though, his company is not into life insurance business, he believes this is the best thing to have happened to insurance industry as it would increase the income level of life insurers as well as the profitability of insurance sector.
He said the group life policy has been underpriced by operators for too long, and that the regulatory intervention in pricing came at the right time.
In life business, he said, when a person dies, the claims is always severe, especially, in a situation the operators are not charging the right rate, noting that with this development, underwriting firms have no hidden place, as the regulator would easily know the compliance level of each life insurer, from their statutory returns.
“I think it’s the best thing to happen to the insurance industry if NAICOM can enforce it. It would bring a lot of income to the sector because, as an industry, we are losing a lot to underpricing of policies and now, there is no shortcut, as NAICOM will penalize you if you charge below this rate,’’ he pointed out.
Group Life Assurance policy is compulsory by virtue of the Pension Reform Act 2004(repealed) and now PRA 2014. Section 9 subsection 3 of the Act requires employers to maintain life insurance policy or death-inservice benefit scheme in favour of their employees for a minimum of (3) three times the annual total emolument of the employees.