The National insurance Commission (NAICOM) has expressed its displeasure over the huge expenses of insurance companies as the 58 insurers in the industry spent a whopping N264 billion on management in six years.
As a result of this, the industry regulator has put a limit on the spending of some of the firms. According to NAICOM, from the observation made on financial accounts submitted by some companies, those with huge expenditure profiles have been mandated not to spend beyond certain limits.
The Commissioner for Insurance, Alhaji Mohammed Kari, said the decision was taken to ensure that companies do not spend unnecessarily to the extent that they would not be able to attend to claims settlement. He expressed his sadness over the continuous increase in management expenses of underwriting firms across the country, stating that this was affecting their ability to give good returns on investment to their investors.
The huge expenses by the 58 insurance companies translates to about N45 billion annually spent on the management of underwriting firms across the country, at a time the industry is struggling to reach N350 billion annual premium income.
This means that out of the income by the firms, about 15 per cent of it has been spent on management. This expenses include: underwriting expenses; salaries; rent; and others, excluding commissions paid to agents, even when some of them have refused to pay dividend to their teeming shareholders within this period.
A data sourced from the umbrella body of operators, the Nigerian Insurers Association (NIA), disclosed that in 2012 financial year, N48. 22 billion was incurred on management expenses, N48.59 billion in 2013; N52.12 billion in 2014; N53.83 billion in 2015 and N61.39 billion in 2016, bringing the total spent as management expenses to N264.15 billion in six years.
Moreover, four insurance firms in 2016 financial year had their management expenses higher than the gross premium generated. The firms are: Old Mutual Life Assurance Company Limited which had N1.30 billion as gross premium and spent N1.83 billion (1.41 per cent); SpringLife Assurance Plc which had N32 million and spent N105,282 million (3.29 per cent); UNIC Insurance Plc had N38.7 million and spent N244.9 million (6.32 per cent) and Investment & Allied Insurance Plc had N4.3 million and spent N169.4 million (38.53 per cent).
He had warned them to slash their respective management expenses, but it seems this warning fell on deaf ears of the insurance operators because the management expenses in the last financial year has been the highest the industry has recorded so far.
However, the coordinator, Independent Shareholders Association of Nigeria (ISAN), Sir Sunny Nwosu, differ. He believes that the huge expenses are duly incurred in a bid to get good hands. According to him, any company that wishes to attract best hands and retain them, should be ready to pay.
He noted that the acclaimed huge management expenses is often incurred in a bid to engage capable personnel to drive affairs of organisations, stressing that good services are not cheap anywhere in the world and that organisations that want to be at the top should be ready to pay for the services of professionals.
“If you want the best, you have to pay for it. If any regulator is coming to take up an executive job in some of these companies, you need to know how much such person would earn and the salary becomes personal to that person,” he said.