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Wednesday, 11 February 2015


More often than not, the public experience with insurance revolves round the marketers, insurance agents and brokers that patronize them for business, as well as some insurance companies that they see around. To them the world of insurance is limited to the aforementioned stakeholders without fully understanding the roles they play in the value chain. The insurance industry comprises various participants or stakeholders who perform different roles within the market. They play significant roles in the insurance industry, and we shall be discussing the participants along with their roles and functions within the industry. Participants in this industry include the regulator, insurance companies, intermediaries such as insurance brokers and agents, loss adjusters, loss assessors, marine cargo superintendents and surveyors.

The Regulator
The insurance industry is regulated by the National Insurance Commission (NAICOM) established by NAICOM Act No. 1 of 1997 with the primary objective of ‘enhancing the administration, supervision, regulation and control of insurance business in Nigeria’. NAICOM was established to render the following services:
a. Establish standards for the conduct of insurance business in Nigeria;
b. Approve rates of insurance premiums to be paid in respect of all classes of insurance business;
c. Approve rates of commissions to be paid in respect of all classes of insurance business;
d. Ensure adequate protection of strategic Government assets and other properties;
e. Regulate transactions between insurers and reinsurers in Nigeria and those outside Nigeria;
f. Act as adviser to the Federal Government on all insurance related matters;
g. Approve standards, conditions and warranties applicable to all classes of insurance business;
h. Protect insurance policyholders and beneficiaries and third parties to insurance contracts;
i. Publish for sale and distribution to the public, annual reports and statistics on the insurance industry;
j. Liaise with and advise Federal Ministries, Extra Ministerial Departments, statutory bodies and other Government agencies on all matters relating to insurance contained in any technical agreement to which Nigeria is a signatory;
k. Contribute to the educational programmes of the Chartered Insurance Institute of Nigeria and the West African Insurance Institute.

The law governing insurance business in Nigeria is the Insurance Act of 2003.

Insurance Companies
Participating actively in the value chain are the insurance companies. They are often referred to as ‘underwriting firm’ or ‘insurer’. They are companies that offer insurance policies to the public, either by selling directly to an individual or through an intermediary. An insurance company can either be life, general or composite (selling both life and general insurance business). Insurance
companies offer policies such as individual and group life, health, fire, burglary, marine, motor vehicle, home insurance, etc. to the insuring public on collection of a consideration called a premium from the policyholder with a promise to restore the policyholder to the position he occupied prior to the occurrence of the unfortunate loss. The beauty of insurance is to put smile on the face of the policyholder after suffering an insured loss. Any company interested in transacting as an insurance company in Nigeria must be registered and licensed by the National Insurance Commission as provided in Part II of the Insurance Act 2003 before it can commence operation.

The three categories of registered companies are:
• Life Only: Licensed to sell individual life, group life and health insurance policies. Current minimum capital base or Shareholder’s Funds is N2billion.
• Non-Life Only: Licensed to sell all classes excluding that licensed under Life Only. Classes allowed include motor, marine, fire, pecuniary, liability, aviation, engineering and energy. Current minimum capital base or Shareholder’s Funds is N3billion.
• Composite: Licensed to sell all classes, Life and Non-Life inclusive with minimum combined Shareholder’s Funds of N5billion.

Reinsurance Companies
These are companies established to act as ‘insurers’ to the insurance companies.
As the insurance companies act as ‘insurers’ to the policy holders, the reinsurance companies act as ‘insurers’ to the insurance companies. More often than not, insurance companies accept businesses that exceed their capacity. In order to manage the risk exposure, they transfer part of the risk to another party, called a reinsurance company, so as to manage their risk portfolio and exposures. The arrangement is called ‘reinsurance’ and it’s normally agreed at the beginning of the year between the insurance company and the reinsurance company.

The Intermediaries

Within this insurance industry are intermediaries who act as go-between between the insurance companies and policyholders. Chief among them are insurance brokers and agents. Insurance brokers are professional firms registered and licensed as stipulated under Section 36 of the Insurance Act 2003.

An insurance broker can only be a firm whose fulltime occupation is to place insurance business to various Insurers and must be headed by a duly qualified Chartered Insurance Practitioner. Brokers may deal with a number of insurers and may, in their dealings with customers, act on behalf of the insured (the customer) or on behalf of the insurer.

An agent is certified to also source insurance business from the insuring public to be placed with various insurers. Insurance agents may be tied to a specific company, which means they can only sell on behalf of that company (i.e. Captive Agent), or could be Independent Agents, who can sell for as many companies as they are affiliated to.

Both insurance brokers and agents ordinarily earn commission for their services which is a defined percentage of the premium paid by the insured. Alternatively insurance brokers can work on a fee-based retainer basis with the insured, as against earning a commission for their services, while agents work strictly on a commission basis.

An actuary is a business professional who deals with the financial impact of risk and uncertainty. Actuaries provide expert assessments of financial security systems, with a focus on their complexity, their mathematics and their mechanisms. Actuaries, by employing mathematical modelling, evaluate the likelihood of the occurrence of an event and quantify the contingent outcomes in order to minimize losses, emotional and financial, associated with uncertain undesirable events. Since events such as death cannot be avoided, actuarial valuation helps to minimize financial impact when they occur.

Loss Adjusters
They are independent professionals, also known as Claims Adjusters, who are appointed by the insurance companies in the event of a claim, to investigate and research into the cause of a loss, assess the extent of damage, communicate with the policyholder in order to substantiate each aspect of the claim, negotiate with the policyholder on the cost of repairs for the purpose of making an offer of settlement to the insured. They belong to an umbrella body called the Institute of Loss Adjusters of Nigeria (ILAN).

Loss Assessors
On the other hand, a loss assessor is appointed by the policyholder to negotiate fair and equitable claims settlements on their behalf after suffering a loss or damage. A loss assessor helps the policyholder to maximize their claim. Typically, they negotiate settlement with the insurance company on behalf of an insured.

Marine Superintendent and Surveyors
Marine superintendents and surveyors are independent professional firms appointed by insurance companies to supervise the discharge of marine cargo or imported merchandise on their behalf.

The scopes of their duties are as stated below:
1. To liaise with the insured and/or their clearing agents in order to ensure that the necessary information/documents concerning each shipment is/are obtained prior to the arrival of the carrying vessel within Nigerian territorial waters.

2. To inspect and report the condition of the hatches and holds whilst the vessel is lying alongside the berth.

3. To inspect and report the condition of the goods (containerized or otherwise) whilst on board the vessel.

4. To supervise the discharge and report any case of damage, loss or shortage ex vessel.

5. To note the seal number of each container discharge ex vessel.

6. To keep proper surveillance on each consignment and supervise the delivery as well as unpacking, giving details of any shortage or damage.

7. To hold the negligent party responsible for any loss or damage on behalf of the underwriters or cargo interest by a duly signed letter of protest addressed to the carriers and/or their agents and/or Nigeria Ports Plc/ Nigeria Airways and/or Road Carriers.

A policyholder, also known as ‘insured’ or ‘assured’, is that individual or company who, upon the payment of a certain sum of money called a premium to the insurance company, agrees to transfer a risk of uncertain event that, should the event occur, the insurance company would indemnify the policyholder for the loss suffered. A policyholder is the ‘owner’ or sometimes the beneficiary, of an insurance policy. Click here for more

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