Lack of trust and confidence in the Nigerian insurance industry resulting from non-settlement of claims has remained one of the biggest challenges of the industry. Non settlement of claims have negatively impacted confidence in the industry.
Thus, insurance companies should endearvour to settle claims promptly because Claims payment in insurance contract serves as spice that attracts potential policyholders to insurance patronage.
Article 1.2.2 (g) of Revised Market Conduct and Business Practice Guidelines for Insurance & Reinsurance Companies 2022 requires the insurance companies to deal with customers’ complaints in a fair manner. While Article 4.0 to 4.6.11 of Revised Market Conduct and Business Practice Guidelines for Insurance & Reinsurance Companies 2022 stipulates claims handling procedures by insurance companies.
But despite the provisions of the existing Laws, claims settlement has remained a mirage by some insurance companies. Experience had shown that some insurance companies were unable to settle claims due to Weak Capital Base, Insolvency, Poor Underwriting etc.
However, to re-awaken the Nigerian Insurance Industry through claims settlement, the following should be considered: Increase of the Insurer’s Capital Base: The liquidity position of some of the underwriters is very bad. The capital increase will assist the company to meet their obligations thereby re-awakening the Nigerian insurance industry.
Creating awareness on claims notification and documentation is also essential. Most of the policyholders lack awareness on claims notification and documentation. There is need for creating awareness on this because it will enable the claimants to provide adequate documents needed for their claims for prompt settlement. This will aid prompt claims settlement and in turn re-awaken the Nigerian Insurance Industry.
Another point is beefing up claims reserve. Claims reserve is money set aside for a claim that has been reported but not settled (RBNS) or incurred but not reported (IBNR). An insurance company assigns claims reserve to each file, reflecting its best estimate of the eventual settlement amount.
Section (20) (a), (b) and (c) of Insurance Act 2003 requires insurance companies to make provisions that will cater for unexpired claims and outstanding claims. In order to re-awaken the industry through claims settlement, insurance companies should beef up claims reserve to cater for claims settlement when loss occurs.
Section 31 (1) of NAICOM Act, 1997 established Inspectorate Department for the purpose of carrying out the supervisory functions of the Commission in respect of the insurance institutions. Section 49 (1) (b) of NAICOM ACT, 1997 and Section 101 of Insurance Act 2003 empowers the Commission to issue Guidelines to Insurance Institutions.
The Commission had made numerous rules and regulations concerning the protection of policyholders to ensure that genuine claims are settled timely. The Commission had also established Complaints Bureau to which complaints against the insurance institution are submitted by members of the public and where complaints against insurance institutions are resolved.
The Inspectorate Department of the Commission had carried out several inspections on insurance institutions to enhance insurance companies’ solvency so that claims will be settled timely. The Regulator should not relent in their functions. They should continue to make rules and regulations to enhance fair customer treatment, as well as supervise the compliance of the regulations to ensure robust claims management system. This will assist to re-awake the insurance industry through claims settlement.
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