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Panic as FG’s new policy may usher in hard times for some insurance companies

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Panic as FG's new policy may usher in hard times for some insurance companies

There are indications that some insurance companies in the country may face hard times in the nearest future as the Federal Government is about releasing new policy guidelines that will govern insurance business.

The new guidelines will spell out modalities for the award of insurance business by Ministries, Departments and Agencies (MDAs) to insurance companies, with companies with high risk management models only to be considered.

The practice before now, insiders say, is that some insurance companies have been getting government businesses merely on strength of their network of personal relationships and lobby without the necessary risk management framework in place.

However, the new guidelines will eliminate the trend as the purpose of the upcoming guideline is to eliminate all unwholesome practices in the underwriting contract for government’s assets.

This was disclosed by the Commissioner for Insurance, Alhaji Mohammed Kari, on the sidelines of an education seminar organised by the Chartered Insurance Institute of Nigeria, CIIN in Ibadan, adding that the anticipated government policy will focus on risk management capacity for underwriting of government assets.

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He said: “The era when government insurances are awarded to an insurance company based on contact will soon come to an end. This is because government will soon come out with a circular to MDAs on how they will place their insurances and I believe it is going to be based on risk management and risk selection concept.”

According to Kari, many companies argue that there is no need for capital injection in their business operation because they are comfortable with just doing government business.

He said: “The argument that we don’t need capital doesn’t hold water. Look at any company giving you that argument; you will realize that it is a government insurer. Many companies are just there because they are doing government business. Government does not look at risk management issues to place business; it is just on contact basis. But going forward, it is going to change.

“Insurance consumers are now telling some companies that, ‘I will no longer insure with you because your capital is low.’ It is not because consumers are now selective, which is very good, but because they have realized that it is a factor to confidence in such company because they pay dividends and their services are visible.

“But most insurance companies are quoted, yet nobody wants to invest in them because they know that dividends are not being paid for a long time. Even when there are no dividends, they would have been happy to have shares that appreciates because they can always sell in the market and make profit. Unfortunately, some insurance shares on the stock market have continued to depreciate”, Kari explained.

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