In recent years, the insurance sector has been charging low premium rates on policies but recording rising claims, like never before. The unusual rise in claims is caused by factors, that include insecurity in the country, bad state of infrastructure and natural disasters. NIKE POPOOLA writes on insurers worries over the incongruityONE of the sectors that has been groaning under the pains of insecurity, deteriorating infrastructural facilities and effects of climatic change, which the country has been experiencing in recent years, is the insurance industry.Incidences of bomb blasts in the country, with the resultant killing of both civilians and security personnel, had been forcing the insurance companies to cough out huge claims, like never before.Increasing theft of some brands of cars and the deteriorating state of roads, which are responsible for many avoidable car accidents, have also been increasing claims paid on both life and motor insurance.Although Nigeria is not one of the countries prone to natural disasters, 2011 actually proved to be a bizarre year, due to the excessive rainfall recorded in some parts of the country, which damaged many insured store houses and properties.The floods made the sector to record its highest single claims paid in the history of the industry.Although the primary objective of the insurance industry is to pay claims, the big but is that the underwriters charge inappropriate rates to insure big risks, a major effect of which is taking a great toll on their operations.The charging of ridiculously low rates on business, experts have blamed on cut-throat competition, in which many companies are chasing few businesses, thus, causing them to charge anything, even when the business is being done at a loss.Charging inappropriate rates on business ventures has the tendency to weaken an insurance companys financial capacity and affect its ability to bear risk, if not checked, according to experts.Professionally, before an insurance company must quote for any policy, it should have done a good survey and produced a report on which the quotation of the risk will be based.However, history has shown that Nigerian insurers quote to take a risk without knowing the claims profile, location or anything about the risk.For this reason, when an insurance company wins as the lead underwriter on a policy, he is only celebrated as the biggest winner in the consortium, if no loss is recorded within that period.However, experts have said that the leader usually becomes the biggest loser if a loss occurs, because investigations always reveal that the rates charged on such policies are usually inappropriate.Unlike before, when bomb blast attacks used to be alien to the country, the sector had been paying heavily on victims, such as policemen, military men and civilians, who were under one life insurance cover or the other, undertaken mostly by their organisations or the government.For instance, during the violence that erupted in some parts of the Northern Nigeria during and after the Presidential election, about 27 ad-hoc employees and members of the National Youth Service Corps were confirmed dead and had insurance covers.Some other staff of INEC, who also suffered some injuries during the series of bomb blasts that characterised the election, were to get different insurance claims settlements.Niger Insurance Plc, which led the consortium of underwriters that handled INECs insurance policy for all the northern states, confirmed that each relation of the dead employee would be paid N655,384.According to the insurance contract, other victims of the violence, who were injured would get N50,000 each, while the insurers would compensate victims of the bomb blast based on doctors recommendations, although no fixed amount was agreed upon.The Managing Director, Standard Alliance Life Assurance Limited, Mr. Austin Enajemo-Isire, said that the company had continued to pay huge claims on death toll on many military personnel, who died during the bomb blast.He said, The company had continued to respond to huge claims as a result of security personnel, who had continued to lose their lives in the country.Death from insecurity and accidents are hiking claims from the life portfolio, records have revealed. Life insurance is a contract between the policy holder and the insurance company, whereby the insurer agrees to pay a sum of money upon the occurrence of the insured individuals death or other events, such as terminal or critical illness.Presently, the industry is yet to release most of its 2010 statistics. Figures collated from some firms revealed rising claims.For instance, Mutual Life, a subsidiary of Mutual Benefits Assurance Plc, and LASACO Assurance Plc paid N177.8m and N242.1m as total life insurance claims in 2008,respectively, with the figures rising to N707.5m and N309.06m in 2009.As at the third quarter of 2010, the two firms had recorded life claims of N903.6m and N677.3m, respectively, indicating that the increase in figures from last year would be substantial at the end of the current year.In 2008, the life business arms of Goldlink Insurance Plc and Crystal Life Assurance Company Limited paid total claims of N340.2m and N285.32m, while the figures rose to N577.8m and N386.91m in 2009, respectively.As at the third quarter of 2010, the two companies had paid N557.8m and N243.4m in life claims respectively.Also, the bad state of Nigerian roads and the recklessness on the part of drivers have been making insurance companies to pay heavy claims through losses from accidents.According to the underwriters, the increasing rate of motor accidents on Nigerian roads and high incidence of vehicle thefts have led to an alarming rise in the claims portfolio of insurance companies.Although the Nigerian Insurers Association has no claims record for the entire industry, figures obtained from 11 insurance companies showed that N3.2bn was paid on motor insurance policies in 2010, representing 43 per cent of the N7.5bn overall claims portfolio for the period.The Managing Director, Anchor Insurance Company Limited, Mr. Ademayowa Adeduro, said that brands such as Toyota and Honda products, have topped the list of stolen vehicle insurance claims.For instance, Goldlink Insurance Plc paid N1.3bn as claims in 2010. Claims on motor insurance, however, took the lions share of N542.1m, followed by marine and fire policies with N79.4m and N58.1m, respectively.For the same period, Sovereign Trust Insurance Plc paid N357.5m as claims on motor insurance. Claims on general accident, fire and peril policies were N173.4m and N107.9m, respectively, out of the total of N851.8m.Mutual Benefits Assurance Plc paid N461.6m as total claims last year with motor insurance having the highest figure of N296.3m, while accident policy followed with N115.9m.The Chairman, Nigerian Council of Registered Insurance Brokers, Port Harcourt Area Committee, Mr. Dele Kareem, blamed the development on the bad condition of roads in the country, which had continued to trigger vehicular accidents. He also blamed the rising claims on the motor insurance policy on insecurity on the roads, which he said, had made it necessary for motorists to be more safety conscious.The floods, caused by excessive rainfall in Lagos in July, did extensive damage to individuals, commercial and corporate premises and belongings in most parts of the state and resulted in the loss of no fewer than 10 lives.Insurance companies, which provided cover for some of the losses, estimated that the value of the losses was over N30bn, although they admitted that less than half of the risks were actually insured due to low level of insurance awareness and patronage.The Managing Director, Linkage Assurance Plc, Mr. Gus Wiggle, whose company also paid claims to some property owners in the highbrow area of Ikoyi, said many losses were recorded as a result of the floods.The floods damaged many warehouses and goods stores, business premises, household properties and vehicles, he said.After the flood, the underwriters estimated a claim of N7bn to be paid to FrieslandCampina WAMCO Nigeria, for both the flood and consequential damages.Insurance operators said the claims that followed the massive losses were the highest recorded on flooding incidents in the country, though the figure had yet to be concluded by loss adjusters.A consortium of 10 insurance firms led by Royal Exchange Plc underwrote the business and had already paid N1bn as interim settlement to the company. It was also gathered that the premium earned by the insurance companies was less than N50mThe Group Managing Director, Mutual Benefits Assurance Plc, Mr. Akin Ogunbiyi, who confirmed the figure in an interview with our correspondent, said the Friesland Campina WAMCO Nigerias loss was a major one.Ogunbiyi, who worried that the premium charged in the industry was largely inadequate for the businesses, blamed this on unhealthy competition.He said, About 50 per cent of premium recorded in the industry are usually on credit and the premiums are never paid again, yet claims and administrative expenses are incured.The Former Managing Director, Unitykapital Assurance Plc, Mr. Mohammed Kari, observed that most of the companies were not making profit the way they were doing business.He said, The companies dont have to be involved in all businesses, but they must be professional in what they do.According to the insurers, most of the claims that had been filed with the insurance firms by those who suffered losses as a result of the floods are from corporate organisations that understand the essence of insurance and had taken out insurance against disasters.The President, Chartered Insurance Institute of Nigeria, Dr. Wole Adetimehin, warned on the hazards of charging inappropriate rates on business.He said, It could make an operator to continue to record underwriting losses, when you are not generating enough premiums to meet your commitments, and claims occur; then you pay heavily.
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