News Column

Pricing of Life Insurance for Federal Workers Inadequate - NAICOM

July 4, 2014

Sola Alabadan

The National Insurance Commission (NAICOM), on Thursday, in Lagos said insurance companies handling the Group Life insurance of Federal Government workers have not been charging adequate premium (price) for the risk they are carrying.

Speaking during an interactive session with shareholders of quoted insurance companies, Commissioner for Insurance, Fola Daniel, said this is one reason why insurers are not making profit.

According to him, "pricing of risk is very critical to insurance underwriting. How well an insurance company performs on a particular risk depends largely on how you are able to appropriately price the risk. So, if you are one of such companies that offer prices that are not commensurate with the risk you are taking, there is no way such a company will make profit.

"No company will make profit and pay dividends if it writes business for almost free, give rebates and gratis but pay huge claims on risk it collected little or no premium on. This is what most of these insurance companies do. The Group Life insurance of federal workers is a key example in this regards."

Another reason insurers are not declaring profit annually and consistently paying dividends to their shareholders, he said, is the failure of operators to take good investment decisions to invest in ventures that will guarantee returns on such investments.

He emphasised that the major obstacle to insurance companies making profit is their huge management and underwriting expenses, which he lamented are about the highest in the world.

He therefore charged shareholders of quoted insurance companies to have a change of heart and live up to their responsibilities by taken keen interest in what happens in the companies.

Daniel stated that "you shareholders also have responsibilities that you are not upholding. You have to note that delegation of your responsibilities to the board and management of your companies does not translate to abdication. Most of you do not ask questions as to how well your companies are being managed by your representatives.

"Beyond the annual general meetings which you attend, how often do you seek information and get satisfactory feedback from your Board and management? Do you engage in intelligent and constructive interrogation of the financial reports of your companies?" he queried.

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Source: AllAfrica

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