Baring any last minute change in the new guidelines expected on state agencies, the National Insurance Commission (NAICOM) will be richer by N74 million if the 37 state governments including the Federal Capital Territories (FCT) agree to set up State Insurance Producers (SIPs) that will act as brokerage firms in their states.
The amount is based on the N2 million requested by the commission as the license fee, and renewable every two years as outlined in the guidelines for their operation set for roll-out from today, Monday by the commission.
Insurance Commissioner Mohammed Kari had a fortnight ago at an event hosted by the Chartered Insurance Institute Of Nigeria (CIIN) in Oyo State announced the new plan which becomes effective January 1, 2019. The commission had hinted the industry some years back of this idea on which it had also sought their opinions.
The guidelines which require the state governments to enact a law to create the SIPs, also provide for a chief executive whose qualification is not defined for the agencies that will undertake professional operation.
The commission in the guidelines also provides for an Insurance officer who must have a diploma of the Chartered Insurance Institute of Nigeria (CIIN). The officer will report to the chief executive whose qualification and experience are not defined.
The anticipated 37 agencies, under the guidelines are to sign Memorandum of Understanding (MoUs) with insurance underwriters in their jurisdictions through which they will place insurance businesses they secured, with the approval of NAICOM from time to time.
Key responsibilities of the SIPs as outlined by the Commission include facilitating and ensuring the compliance with compulsory insurance and punishing defaulters in line with the states’ laws.
They are also to keep records of individuals and organisations and ensure their compliance with the compulsory classes of insuranxe business.
They are however amongst others, outlawed from underwriting, claims settlements and selling insurance outside those contained in the MoUs but may on behalf of the state governments place other insurance businesses with the underwriters.
They are also to observe other guidelines that guide private insurance brokers such as the No premium, No cover.
The SIPs under the guidelines, are authorised to facilitate sale of the compulsory classes of insurance and can handle all classes for their principals, the state governments.
On close scrutiny however, this new direction of the commission which it claimed will grow the IGR of interested state governments is unconstitutional according to some lawyers and analysts who had offered opinions.
“Some of the provisions of the guidelines are illegal and run contrary of the country’s constitution and this calls to question the sound judgement of the commission in delving into such area” noted a legal opinion..
With the constitutional question hanging on the commission’s new direction, analysts say the idea is likely to fail abysmally.
They noted that NAICOM, by pushing this idea, is shifting the burden of operating a law that is on the exclusive legislative list of the constitution to the state governments which they argued that it was purely illegal.
While they said the new SIPs canvassed by the commission are capable of crowding out private insurance brokerage firms through legislations and their enabling acts, they also argued that the State governments could also exploit the flaws in the guidelines to give monopoly powers that will compel the citizens in their jurisdictions to patronize the SIPs since they are the organs of the government.
By adopting this direction, they argued that the commission seems not to know that an agency of the state created by the law and operating within the jurisdiction of the state cannot be effectively regulated by an agency of the federal government.
“The SIPs could turn to monsters which the Commission may not be able to handle if they deviated from the guidelines on operational procedures, which is likely to happen since they are operating within their own jurisdiction which the commission has no power on”
In addition, analysts argued against the manner outlined by the guidelines by which the N2 million license fee is to be paid to the commission.
The guidelines stipulate that “ A signed undertaking signed by an officer of the State government not below the rank of a permanent secretary that the state undertakes and agree that the sum of N2 million shall be deducted from accrued commission to be earned by the licensed SIP before payment of commission is made to the coffers of the government”.
NAICOM, they argued, is by this section of the guideline, asking the state governments to go against the positions of the laws of both the state and the federal government on appropriation.
“The power to appropriate and approve funds reside with the parliament which must approve and appropriate before funds are disbursed. Anything short of this is unconstitutional and which no state agency, or its official would dare to do”, they said.
This, they said, amount to asking a permanent secretary to start spending state IGR without appropriation.
The new idea in a country’s economy that is in the red with adverse impact on citizen’s disposable income is capable of killing the entire industry which is still struggling to survive owing to the poor state of the economy.
The Central Bank of Nigeria (CBN) had after its last Monetary Policy Committee (MPC) meeting noted that the economy was weakening having dropped to 1.5 percent growth in the second quarter of the year from the 1.95 percent rate of the first quarter.
With this gloomy picture of the economy, urging state governments to create additional agencies is likely to stifle the insurance market which is already badly hit with the shrinking disposable income of the citizens.
The guidelines by the commission also demonstrate double standard as it downplays professionalism for the SIPs as against the requirements for the existing brokers and underwriters.
The guidelines stipulates diploma certificate of the CIIN or its equivalent for the Insurance officer who will direct the insurance affairs of the SIP.
Findings from the CIIN, the educational organ of the industry, however show that diploma is the first stage of certification and lower than the Associate Of CIIN which the commission compelled practitioners of same cadre in existing insurance brokerage firms and underwriters to possess.
Also, the equivalent to the diploma status required of the Insurance officer is not clearly defined.
The guidelines which also requires the Insurance officer to report to the chief executives of the SIP who could be a politician with no requisite knowledge in Insurance is also seen as not appropriate.
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