Insurance: Crisis raises questions on integrity

Sunday Ojeme

Still smarting from its new found position as the toast of investors in the stock market, quoted insurance companies last week maintained their streak of successes with their stocks getting the bullish edge over other conglomerates.
This is following on the trend set by the industry immediately after the conclusion of the insurance industry recapitalisation.
At the close of business on Wednesday, the volume of trading recorded by insurance stocks almost doubled the ones traded by the banks. Insurance stocks, widely considered as penny stocks, have become suddenly attractive to investors in anticipation of the future.
On the day in question, the sub-sector recorded 440.17 million shares worth N1.05bn traded in 1, 272 transactions.
Leading the pack was International Energy Insurance Plc, which traded 209.31 million shares worth N374.64m in 130 deals followed by NEM Insurance Plc, which traded 89.86 million shares worth N169.75 million in 293 transactions.
Crusader Insurance Plc sold 66.65 million shares worth N285.96m in 39 deals.
Despite the sudden interest taken by discerning investors on the fortunes of the sector, activities of the operators in the recent past have continued to dampen the enthusiasm of some stakeholders, potential investors and industry watchers.
The development has continued to generate mixed feelings because of the inability of the industry to end its consolidation that has gone on for two years, thereby putting a question mark on the integrity of the industry.
Observers believe that the clash of interests will go a long way in ridiculing the sector before the international community despite the bullish experience currently associated with some of the companies' stocks.
They contend that the current situation in the industry should not have arisen in the first place if personal interests were not allowed to override the purpose of the consolidation programme.
Prior to the current development, the insurance sector had suffered a lot of credibilty problem arising mainly from non-payment of claims or delayed payment of verified claims.
The Federal Government had thought that the early recapitalisation of the sector would instil confidence in people to take insurance covers as well as put to an end the credibility problems suffered by the industry
Just as the stakeholders are still battling to resolve the current impasse, a new dimension cropped up two weeks ago with the resolve by the former Commissioner for Insurance, Chief Emmanuel Chukwulozie, to be joined in the suit filed by the Group Managing Director of NICON Group of Companies, Mr. Jimoh Ibrahim, against the Federal Government and the National Insurance Commission.
Industry watchers believe that the decision will enable the former CFI restore his integrity as well as ensure that all the parties involved get justice at the end of the day, no matter what the court eventually decides.
Among other things, the ex-commissioner wants the court to set aside the report of the Mallam Bala Zakariya'u-led committee and also reinstate him as the CFI.
Chukwulozie also raised some questions, which bordered on the constitution and integrity of the panel.
He questioned the rationale behind making an operator in the same industry to head a panel to look into the activities of NAICOM and review an exercise that his company participated in.
According to him, "The chairman of the panel is an operator, a chairman of an insurance company. I have queried him in the past over reckless spending of pension fund. For the Finance Ministry to ask the same person to head a probe panel over the affairs of the regulator is abnormal and an abuse of due process.
"If the court finds the panel to be illegal, then I will have to be reinstated, hence my joining the plaintiffs in this matter to be on the part of justice."
Chukwulozie said his intention for being a party to the suit was for justice to be done over the manner in which he was removed from office.
Although the Federal Government and NAICOM had asked the Federal High Court to vacate the order halting the consolidation exercise, observers are still worried that Chukwulozie's renewed interest in the suit and the recent appeal to the National Assembly by Ibrahim to ensure that the rule of law was adhered to might further pose obstacles to the move by the Nigerian Insurers Association, stakeholders and some elders in the industry to find amicable solutions to the crisis.
The integrity question has always come up as the events unfolded.
Whereas some observers have criticised Ibrahim for not subjecting his companies to verification, they also picked holes in the committee’s decision to turn a blind eye on the Nigerian Agriculture Insurance Corporation currently with a shareholders’ fund of N499m
They alleged that NAIC was cleared by the committee after the minister promised that the balance of about N2.6bn would be made available in the 2008 budget.
They wondered how such a decision was arrived at when the same panel had allegedly scandalised a company like Equity Life Insurance Company Limited for merely failing to pay commission.
Commenting on the crisis, the immediate past President of the Nigerian Council of Registered Insurance Brokers, Chief Babajide Olatunde-Agbeja, said the impact of the current crisis would further scare foreign investors who were beginning to worm their way into the country's insurance establishment.
He pointed out that the development was also eroding trust and integrity, which were major factors of consideration in insurance business.
According to him, “If we stay in court, it can go on for the next two or three years and we pray that this will not disintegrate the insurance industry.
“The big boys have started insuring abroad again, they say they would defile the law rather than let their investments collapse. So there are lots of problems here that many of us are not seeing. It is the entire industry that is at stake, it can disintegrate, and it can collapse. What do we sell in insurance if not trust and integrity and in all this that is happening, where is the integrity?"
Blaming the initial grouse on the perceived crack between NICON management and the agents of the Federal Government, which is a part owner of both NICON and Nigeria Reinsurance, he said he could not blame Ibrahim for going to court to protect his interest and investments, which he did not want to lose, adding, however, that he should have equally subjected himself to verification in the first place.
He said, “The Federal Government owns 30 per cent stake in NICON Insurance Plc and 49 per cent in Nigeria Reinsurance Corporation, it is still a Federal Government baby, so why are you taking your part owners to court? Why can't you sit down and dialogue because if I were Jimoh Ibrahim, I would not be in this state because I would have dialogued with my part owners to know how to move forward."
On the way forward, Agbeja suggested that the report of the Presidential Technical Committee be implemented without doing anything about NICON and Nigeria Re until the court case was resolved.