The Nigerian National Petroleum Corporation (NNPC) is indeed a behemoth. Dare it and be crushed! The National Assembly has at several times carried out probes on the Corporation and in each occasion, the NNPC has come out unhurt!! A Federal Minister of Finance once lost his position for alleging that the NNPC was broke!! Such is the power of the NNPC!!.
Ironically, all the allegations levelled against the almighty corporation are always weighty. But the Corporation always comes out on top and in most cases consuming the person person who is alleging. The NNPC seems to be the proverbial Cat with nine lives? But would it be able survive the present challenges facing it regarding its handling of its year 2012 Non- Oil Insurance portfolio?
Investigation has revealed that the Corporation has so many questions to answer regarding its handling of its Year 2012 Non-oil insurance portfolio
1. Late Conclusion of Cover
The NNPC Non-Oil Insurance Portfolio which fell due in January 2012 but extended till March ending is yet to be concluded, eight months into the insurance year. It is true that Renewal instructions were issued to brokers and underwriters less than three weeks ago. However, the insurance rates (especially for the group life assurance) and the premium are yet to be finalised. Therefore, technically, the NNPC does not have a proper cover for its non-oil insurance portfolio for 2012. It is on record that the Oil insurance portfolio had since been concluded, why did the Corporation not conclude the Non-Oil Portfolio when it did for the Oil?
2. Non Payment of Premium
The premium due is yet to be paid to Underwriters and Brokers. Insurance Act requires that premium must be paid in advance. When Premium is not paid yet, how would the underwriters pay claims? How would they make profit when they are expected to invest the funds before claims come in? Already, there is discontent by most of the underwriters on the premium rate being charged for the group life scheme. The NNPC had reduced the rate from what it was in 2011 despite the huge loss ratio of the scheme for over ten years now.
3. Unabated Protests
Protests have continued to pour in regarding the handling of the NNPC Year 2012 Insurance Portfolio. Feelers indicate that over 1,500 petitions had been written on the NNPC Insurance Portfolio for 2012.
Apart from the protest letters from Brokers and underwriters who lost out on the accounts, Professional Reinsurers Association of Nigeria (PRAN) has also joined the fray. PRAN recently issued a strong warning to underwriters who wish to participate on the NNPC Group Life Scheme that they might not have reinsurance backing for the risk. This implies that any insurance company covering the risk does so at its peril as claims would be paid directly from its net account and this has serious implications on its reserves.
4. Pending Claims
The NNPC was one of the organizations hard hit by the ill-fated Dana Air crash of June 3, 2012 where some of its staff died. The underwriters would be expected to pay these huge claims in the face of these challenges. Sources confirm that the pending claims that underwriters would be saddled with are in multiples of millions due to the high sum assureds and the top positions of the deceased The Group Life insurance Scheme has had an adverse loss ratio for the last ten years. It is also on record that the Lead underwriter for 2011/March 2012 still has outstanding claims in multiples of millions.
Given its pedigree, it would not be a surprise to say to the NNPC : “this cup too will pass” But, head or tail, the insurance industry is bound to be the loser!!