Govt should diversify the economy, intensify war on corruption, says Okunoren
Emmanuel Kayode Okunoren is the President, Nigerian Council of Registered Insurance Brokers (NCRIB), Chairman, Manny Insurance Brokers Limited, a chartered insurance technocrat. In this interview with JOSHUA NSE, he canvasses diversification of the economy, intensification of war aganist corruption, and strategic focus on the insurance industry, to enable it play its role in the economy, among other issues. Excerpts
Congratulations on your election as the 18th President of the Nigerian Council of Registered Insurance Brokers (NCRIB). What is your policy thrust for the development of brokerage profession and the insurance sector.
I think the most important thing is the fact that we are the professional arm of the industry and are focused primarily as far as insurance brokerage is concerned on professionalism which will lead to improved image of the broker fraternity, of course, the insurance industry generally in Nigeria.
We focus more on improved collaboration as we have been too divided in the past, but we are more or less trying to forge one united family because we are insurers, whatever we say in the public is regarded as insurers voice not minding which arm of the sector you belong to, that collaboration is important to the success of the industry. We want to speak with one voice on matters affecting the public, industry, policyholders and customer as the king.
The focus is on the nine points plan I presented during my investiture basically on professionalism, how we conduct ourselves in the market place, how we relate to the public, the advice we give to the insuring public, and the general service delivery is still part of professionalism. Anything that will promote the council, the insurance industry in particular and the protection of the consumer is what is uppermost in the conduct of our business.
Insurance industry has witnessed significant reforms geared towards improving customer services to enhance the image of the industry. What is your assessment of this restructuring so far?
If you take 2006-2007 as a base year, that was the time when things started happening, it was a good move by the powers that be at the National Insurance Commission (NAICOM), it was always very difficult when claims are made, we find ways to avoid paying such claims without saying we would not pay. We had recapitalization of the insurance companies and the entities became stronger.
They were able to invest on their work processes, they hired qualified staff and management to drive the company. We no longer have this bad stigma called small print in the industry. You cannot find any insurance company that would not respond positively to claims payment. It is no longer thug of war, it is getting better.
Heavy claims that would not have been paid are now being paid without delay. You remember the Nigerian Bottling Company policy worth billions of naira the industry rose up to their responsibilities and paid the claims, the market has changed significantly because of the recapitalization that took place in the industry. In terms of the recapitalization, the commission was the driver of the process, they did it well and in the end, all the insurance companies that wanted to remain in business either funded it or form partnership and merged, there are quite a few of them that pull their resources together and it was good for the industry.
However, organizations should not be dictated to by the regulator on capitalization, the practitioners and the company themselves know the type of risks they write and the funds that are required. Don’t forget they also have additional capacity, by way of reinsurance, when you insure and reinsure you are more or less buying additional capital from the reinsurers to add to the capital that you have on ground so that you are able to meet your claims obligations to the customer.
If you know the risks you are writing, you should be able to know whether the capital that is available to you matched the risk, if that is the case you know how to seek for additional capital either by way of rights issues or any other form of raising capital. It should not be imposed by regulatory fiat, it should be that those running the business should be able to determine the level of capitalization needed to enable them drive the process and market penetration.
Is that the reason NAICOM has transited to risk-based solvency model?
Yes, they should be applauded, that is what the insurers’ committee is working with the regulator. What they are trying to say is that if you are writing big-ticket risks, you needed bigger capital, and then you find ways to achieve the additional capital.
As an investor and professional risk manager in this environment, what are the challenges in the management of business in Nigeria?
As you know, we are going through tough times generally. The fact is that the infrastructural base are not there, things that enable business to fly, good road network, power, friendly business environment, among others, these are business provisions that allow business to function efficiently. The naira devaluation is not helping any business. When you talk of management of business in Nigeria, it is a serious challenge. When investors come into the country they bring in foreign currency to buy the naira, but when you are established you now see all the difficulties that do not allow for effective enabling environment. Corruption is another vital point, it has eaten deep into the fabric of our economic life, but this new government, even if that is the only thing it can successfully tackle, it has a multiplier effect on other key components of business. There are however, detractors here and there, let the government be focused, if corruption is properly dealt with, managing business in Nigeria will be better. The cost of doing business in Nigeria is too high, it makes it impossible to make effective returns on investment.
We have the issue of taxation. The value of our single commodity oil is going down seriously and you discover that it is not easy to effectively handle anything. I know that the government is going to widen the taxation net for additional internally generated revenue. Of course, the government is also trying to diversify the economy and agriculture is the vital sector to start. We have all the resources – fair weather, fertile soil, all you have to add is mechanized farming. All you do is control the environment and make it conducive for large-scale mechanized farming.
If we are able to feed ourselves and don’t rely on imported food, we are 50 per cent there. When the economy is diversified, we don’t need to rely on one mono-product. Look at what we have now seen from over $100 per barrel of oil, we are now talking under $30 per barrel. Do you realize that the cost of producing one barrel of crude oil is now more than the price of crude, in a way it is zero income you are producing at a loss. If you compare the amount you have put into producing a commodity and you are selling less, it is mind boggling, therefore the way out is diversification of the economy.
With the present infrastructural challenges in the country, do you foresee inflow of foreign direct investment?
This market is massive with our population it is an attraction by itself, if anybody is able to come in here and know that as long as attention is given to the consumer, we know that it is a goldmine. There are other schools of thoughts that when things are bad that is where people make their money. If you have the capital and there is friendly enabling environment, they would want to come in with their capital because of our size and population, it is God’s-given endowment to us and people would like to exploit it for mutual benefits of all. The other challenge is the element of policy summersault, it is not encouraging for investors. They want to see a stable economic policy of government, it is not new policy today and different policy tomorrow, these are the drawback in foreign direct investment. When you are able to get this basic policy framework in place, they would want to come into the country.
NAICOM recently delisted 108 members of your council for infractions. What has been the response of the commission on your appeal for a soft landing?
Most of the things we are doing are on-going following our intervention and engagements with the Commissioner for Insurance, there has been a lot of dialogue with him and he has been magnanimous to say those licences that have lapsed can now be re-registered with their existing names, because if they are not allowed to re-register with the old names, it would be a difficult task for them because the goodwill that name has got over the years have to be rebuilt. If they are allowed to re-register with old names, they will begin from where they stopped, but then there is a price to pay, that is the process that NAICOM has put in place. We are still appealing to the commissioner to give them soft-landing, I mean the amount of money they are expected to pay to get re-registered.
Although we are not condoning those infractions that led to their discipline, but I can tell you that they have shown remorse, we have spoken with them, set up a help desk because in a regulatory environment you have obligations, the returns you have to file these are the things that constitute infractions. In their magnanimity they have given some conditions which they have to fulfill, there must be some parameters that has to be fulfilled before they come back although it looks punitive
Operators believe that small and weak brokerage firms form majority of those delisted, and suggested merger of their operations to form mega firms. Do you encourage this option?
There is nothing wrong in coming together if you are of like minds because some of the problems of merger is that if you have different values before the matter is consummated it is fallen apart. The matter of trust is a serious issue in our environment because if you don’t have trust you will be suspicious of the other parties, it does not augur well for the establishment you are trying to form. It is a novel idea which should be encouraged for the like minds. For instance, the option that this man is a specialist in oil underwriting, another is a specialist in marine, the other man is a specialist in general insurance, you can bring in any other aspect of our business, this will form a good union if there is trust, the way you pool the resources that is when it can be strong.
It takes time in doing that because the mentality of our people is that everybody wants to be managing director, that is not the end by itself you can still be number two or number three in a strong establishment, what is the point in being managing director of a business that is not producing N20 million premium, you better be number four in a company that is producing N100 million premium, these are the issues. You cannot force mergers by regulatory fiat, it would not work and it would just grumble.
Your council, we understand ,is putting in place a national security alert. What does it mean?
It is a slogan we have coined for ourselves, it is in relation to the insurance of national assets. You see fire outbreak here and there, flood disaster, the idea is that government should concentrate on governance, and should not bother about spending money in the areas where insurance can play its role effectively. If a building in Nigeria is gutted by fire and is uninsured, it is a loss to the national economy because at the end of the day the government will now have to take the resources from the existing budget to assist the victims. In fact it has not been budgeted for, they have to find a way to rebuild, whereas if it had been insured, the insurance company having got the premium paid for the risk, they will rise to the occasion and do the rebuilding, the whole thing will be restored without any input from government, that is the principle of insurance.
Insurance organized a pool, everybody put in something there to have a fair share of the risk that they present to the pool, the field that has incidences that admit losses, the pool will take care of it, that is how it has been working all over the world in the place insurance started. If it had not been working, the world insurance would not have existed today. It is because it is working and it is an effective mechanism for risk management that is why we are using that slogan to call attention of government on the need for them to take care to ascertain the risk especially in the area of uninsured losses. Remember government always rise up to create funds to take care of those mishaps, if they change and resort to insuring those assets, there would be no need for government to be setting up relief funds, the funds which they could use for other sources of governance, insurance will take care of, that is the essence of insurance in the first place. There is still a lot of work to be done, if the government can assist us whether federal or state governments, if they devote some funds to buy insurance, rather than having to provide funds to take care of those incidences, it would be a good thing for the economy.
What is the progress made in the local content policy as it affects insurance in the oil and gas sector.
Local content law as we know is like a protectionist law for local payers in the oil and gas industry. It has been working, it is not only on insurance alone, for instance, artisans, welders, electrician, have their role to play in the oil industry. The local content came primarily from the oil, gas sector, that is why it has its own rules and guidelines how it can be tapped into, for instance, when it started, we were estimating 40 per cent participation of insurance and gradually it increased to 70 per cent. Fortunately, recapitalization also came at the same time this local content law came in, and if you ask anybody, there is no insurance company today that does not partake in the oil and gas business. Of course, subject to five per cent of your shareholders’ fund that would be your retention, they are all participating.
Corruption is another vital point, it has eaten deep into the fabric of our economic life, but this new government, even if that is the only thing it can successfully tackle, it has a multiplier effect on other key components of business. There are however, detractors here and there, let the government be focused, if corruption is properly dealt with, managing business in Nigeria will be better. The cost of doing business in Nigeria is too high, it makes it impossible to make effective returns on investment.
Insurance goes beyond national boundaries, we have reinsurance and insurance, the best form of reinsurance is the one that is done outside your economy because if anything happens to your economy and all your insurance and re-insurances are retained there, you have a problem in your hand when it comes to claims obligation, where are you going to pay for this devalued naira to be able to pay for the huge risks you carry, that is why foreign reinsurers come in, but what the local content is trying to do and succeeding largely is to see that the local capacity of the insurance companies are satisfied before recourse to external insurers. Don’t forget that without the insurances that are placed off-shore, fire insurances and its subsidiaries, that cannot stop by the very nature of insurance, you cannot bottle everything in, you must spread the risks that is what insurance is all about, you take sizeable proportion of what we can chew, and as soon as the capacity improves, you are increasing marginally, over time the percentage of what we insure outside will be lower, but to completely exclude off shore, we are doing disservice to insurance. As it has existed even in United Kingdom where insurance started, they still insure in continental Europe, there are so many companies who insure risk that are insured outside of the UK, outside of Lloyds so we would not be an exception. Insurance has to remain true to the name, which is the principle of spreading risks.
What is the relationship of brokers with the underwriters in the conduct of business?
It is to ensure that there is effective collaboration so that we will be speaking with one voice in the aspect of image making and promises to our customers. In this direction, we have formed the insurance industry consultative council which involves not just brokers and underwriters, it includes Institute of Loss Adjusters (ILAN), insurance companies under the Nigerian Insurers Association (NIA) and Chartered Insurance Institute of Nigeria (CIIN) who takes care of the professional training and education of the industry.
With that, we are able to discuss issues of common interest within us. We also have recently the commissioner’s creation of the insurers’ committee which primarily is for the CEOs of all insurance companies, but as stakeholders NCR|IB is a member, CIIN, ILAN and it is only for one thing whatever is discussed, we are in the picture if anything affects our sector of the industry, we will voice it out and in that committee things will be sorted out, be it technical, policy, lobbying, government relationship, we have opportunity to sort out our differences and forge a common goal for the industry. These are to build and strengthen our collaboration as insurers, it is for the interest of all of us, the aim is to work and collaborate to make the industry better than we have met.
How is your council looking at the challenges of competition and threats to intermediation in the industry.
By the very nature of our profession, insurance brokers are unique by our training and expertise, the council continues to encourage professional conduct of brokers to enhance their relevance, to that extent, there is nothing to be afraid of because brokers have what it takes, we are involved in designing covers, brokers are available in the market, brokers know the market within and outside, what you get from threats are may be agents, they also have a role to play in penetration, there is no way they can be a threat to brokers because of professionalism, experience, training to ensure that we promote the relevance of insurance brokers and that is what will stand us out any day. We must improve on our knowledge, that is why we arrange various training abroad so that brokers can also tap from what they see outside this clime, for personal development and enrichment of knowledge to be able to deliver the desire of the customer.
The Nigerian economy is in recession and there is the belief that this is not the best time to insure. Do you agree?
The reverse is the case. It is when things are so hard that you must ensure that you put a little amount to make sure that you insure. Insurance must remain in place either during boom or decline. The little assets you have must be protected because you don’t know whether you will be able to replace the assets because the economy has declined. We continue to insure in time of recession.
If you take an overview of the insurance market, what are the prospects?
We should continue in the effort we are making to diversify the economy, they should continue in widening the internally generated revenue that can be used to develop the infrastructure, and the most important thing is to focus on insurance. In fact, this administration is trying to bring back that long awaited consolidated insurance bill by constituting a committee to look into it and come up with a review, fortunately my humble self is representing the NCRIB in that committee and for the first time, all stakeholders are included in the committee, we are in the right direction because they know that insurance in other climes are the sector driving the economy, at least it can happen here too. We have started by increasing the premium that we generate, if everything is done properly, opening of new frontiers, developing agriculture all these will have insurance backing, it will produce more income in the industry to employ more, it will be creating values to the farmers by protecting them when they have loss incidences. There has to be more focus on insurance, the government is on the right track, let them just forge ahead, this is not the time to look back.
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