According to our investigations, most of the players (brokers and underwriters alike) are being cautious of breaching the rule. Some underwriters who confided in Insuranceadvicenigeria confirmed that they do not want to be the sacrificial lamb or scapegoat. The situation is such that some insurance companies cannot even conclude the renewal of their company assets insurances because they are required to pay upfront to their insurers.
A large volume of insurance businesses in Nigeria are renewable in January. But due to the directive, most renewals are inconclusive as underwriters have refused to issues documents to the brokers except premium payment is made in advance in line with the directive. The new directive stipulates that underwriters cannot issue documents except premium has been paid in advance or the broker notifies the underwriter (to the effect that premium has been collected by the broker) within 48 hours. The directive also forbid payments in installments.
In the past, the underwriters issue documents (motor certificates, Cover notes, Group life Certificates, Marine certificates etc) well ahead of the renewal dates. Insurance industry players are being cautious so that they would not breach the NAICOM guidelines and be liable to pay heavy fines.
Most underwriters who spoke to Insuranceadvicenigeria believe that it is the right thing for the industry. They are of the opinion that the scourge of outstanding premium will soon be over and underwriters would become stronger as they would have funds to pay claims faster. Also, unethical practices in most public sector insurances would become extinct.
Brokers, on the other hand, feel that the implementation would be challenging given the low level of insurance penetration in Nigeria. They reasoned that the industry premium income may reduce in 2013 if the directive is fully implemented. They posited that there would be lull in insurance business early in 2013 as companies would be cautious.
It is instructive to note that industry premium in 2010 was N200 billion up from N178 billion recorded in 2009. Also, insurance penetration in Nigeria is less than 1%.