Having spent over a decade and a half in regulatory oversight, what are the biggest changes you have witnessed in Nigeria’s insurance industry, and what key regulatory improvements do you believe are still needed?
Having spent this number of years on regulatory oversight, the implementation and enforcement of Section 50 of the Insurance Act 2003 in 2012 remains the biggest change that has impacted Nigeria’s insurance industry. Section 50 of the Insurance Law 2003 simply emphasises the issue of ‘No Premium No Cover’, which at that time had bedevilled the Nigerian insurance industry.
This provision of the Law which came to being in 2003 was not being followed by operators that would incept insurance policies prior to receiving premium from insureds. This left the operators with bogus premium amounts on their books without cash backing.
Secondly, the establishment of the takaful and microinsurance frameworks has improved financial inclusion from the insurance perspective through non-conventional insurance products that meet the needs of takaful and microinsurance customers. Today, we have 12 microinsurance and five takaful operators with well over two million policyholders generating well over ₦3 billion in premiums, while claims of about ₦800 million has been paid out.
While regulatory frameworks set the foundation for governance, gaps in enforcement and oversight can still leave room for misconduct. What are the most pressing corporate governance challenges that require stronger regulatory intervention, and where should companies take more initiative to self-regulate?
From a regulatory view point, I believe corporate governance starts with the appointment of fit, proper and suitable persons both on the board and key positions in organisations. Therefore, the most pressing corporate governance challenges that require stronger regulatory intervention should revolve around appointment and approval of members of the board of directors, as well as key officers in the organisation.
The insurance regulator NAICOM has put in place measures to ensure that proposed candidates have the requisite job experience, qualifications, character and financial soundness prior to granting approval. When you have the right persons who understand what must be done, it addresses a whole lot of issues.
Ownership influence is also an area that requires stronger regulatory intervention. While corporate governance tries to ensure separation of ownership from management of the entity, the owners of the business still seem to have some influence on the business. However, to water down this influence, the regulator should put in place measures such as mandatory disclosure requirements, encourage whistleblowing, mandate independent auditing and sanction identified defaulters.
On the other hand, companies should take more initiative to self-regulate by establishing frameworks to strengthen internal control measures such as internal audits, risk management and compliance functions amongst others, as well as to ensure its implementation. Establishing a robust system for appointing board members and key officers would be a good start.
Compliance is often viewed as a box-ticking exercise, but true governance goes beyond policies and regulations. What practical steps can insurance companies take to develop ethical leadership and decision-making at all levels, ensuring compliance is driven by values rather than just rules?
According to Parker and Evans, ethics is deciding what is the good/right thing to do with the moral evaluation of our own and other’s character and actions. For insurance companies to develop ethical leadership and decision-making at all levels and to ensure compliance is driven by values rather than just rules, they have to make a conscious effort to infuse ethics into the company’s culture by encouraging accountability, open communication, walking the talk, inclusiveness – and put in place clear ethical guidelines with a system to ensure compliance, while also discouraging unhealthy competition and nepotism to mention a few amongst its staff.
In addition, companies should establish training programmes that centre on ethics. Insurance companies should intentionally put in place training and re-training programmes centred on ethical values and decision making, which should be followed through at all levels or cadre of staff in the organisation. These programmes should be reviewed periodically to ensure they are in tune with current realities. And finally, the recognition of employees that have displayed a high level of ethical behaviour in the course of carrying out their duties is equally important.
With the rise of InsurTech, AI-driven risk assessments, and blockchain applications in insurance, how do you see regulation evolving to keep pace with technological advancements while ensuring consumer protection and market stability?
It is difficult to regulate what you do not understand, hence it is imperative to pursue knowledge in these areas to at least be on par with the operators prior to establishing regulations to address issues that will evolve from these technological advancements.
Again, sharing knowledge and understudying climes that have the experience in regulating these new areas will no doubt be exceedingly useful in keeping pace with the regulation of technological advancements, in a bid to ensure consumer protection. In the interim, such IT-driven developments can be allowed to operate through licensed operators, hence they will be controlled through the licensed operator.
Given the increasing globalisation of financial services, how can Nigeria’s insurance regulatory framework align with international best practices while addressing the unique challenges of the local market?
The Nigeria Insurance Regulator understanding that it cannot operate effectively and optimally without collaboration with other insurance regulators in other climes has become a member of the Insurance Supervisors’ Association within and outside the African Continent, such as the West African Insurance Supervisors Association (WAISA) and National Association of Insurance Commissions (NAIC) and International Association of Insurance Supervisors (IAIS).
These associations share information and experiences as well as minimum standards or principles that members are expected to adopt in their various climes, in order to ensure some level of uniformity and alignment in regulation.
The Nigerian Insurance regulator has, in its attempt to align the operations of the local market with international best practices, issued guidelines on certain areas such as: IFRS, Corporate Governance Guidelines, Risk Based Supervision (RBS) and Risk Based Capital (RBC). These have assisted the Regulator to align most of its regulations to international best practices while also domesticating a few of the international best practices to address unique challenges of the local market.
As the insurance industry evolves with new risks, technologies, and market dynamics, how do you see the future of insurance regulation developing, and what key trends will shape the industry’s trajectory in the coming years?
Given the new risks, technologies and market dynamics brought about by InsurTech, which has impacted on practically the entire value chain of insurance business, it is expected that insurance regulations will have to adapt to these changes. Insurance regulation will focus on the manner in which these new technologies will be applied through the insurance value chain and consumers’ data protection towards uniformity of standards globally. Additionally, focus will also be on the underwriting of risks associated with climate changes (index insurances).
In the near future it is expected that the distribution of insurance services will involve less human interface because of technological advancements thereby resulting in less time in the uptake of insurance, better claims assessment and verification, better accuracy in risk assessment and underwriting, product development adaptability to specific needs of customers.
Regulators can rely on data sources to make decisions and formulate policies as well as supervise operators in real time. Insurance regulators will have seamless interface with insurance consumers and/or complainants for swift resolve of issues due to these technological advances. In addition, the implementation of Risk Based Supervision (RBS) and Risk Based Capital (RBC) will equally change the face of insurance regulation in Nigeria.
Onyewuchi Sunday Obi is the Principal Manager of Corporate Governance at the National Insurance Commission (NAICOM) of Nigeria. He is an insurance professional with extensive experience in insurance regulation and supervision, market development and conduct, risk-based supervision, financial inclusion, product development and innovation, as well as merger and acquisition and capital verification exercise. Rising through the ranks, he has headed teams, units, departments and several impactful committees within the organisation and in the insurance industry. He has also worked in the microinsurance unit as a pioneer staff reviewing and recommending approval of microinsurance window operations for conventional insurers, the reinsurance unit reviewing and recommending approval of Approval in Principle to transfer risk abroad and ascertaining the validity as well as adequacy of reinsurance treaties. He functioned as Head of the Market Conduct unit by ensuring compliance to the market conduct and business practice guidelines, been involved in the formulation of the Microinsurance Guidelines as well as the Market Conduct Guidelines of the Commission and is a member of the Commission’s Claims Adjudication Committee.
