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NAICOM: Simplifying regulation via digital migration

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The National Insurance Commission (NAICOM), last week, achieved one of the objectives it listed under the three-year strategic reforms (2021-2023) – the online supervision of insurance sector – a feat that will certainly change dynamics of the sector, ABDULWAHAB ISA reports

Insurance sector regulator, the National Insurance Commission (NAICOM), scored another bull’s eye last week by bringing to reality one of its envisaged reform pillars – online supervision/ regulation. Prior to last week’s breaking of the manual supervision jinx, NAICOM was policing and supervising over 58 licensed operating insurance firms manually. This was in addition to activities of insurance brokers and Loss Adjusters, which it supervises. With manual inspection paving the way for real time, online supervision with effect from September 1, 2021, real time digital portal dream conceived three years ago is the game changer for the insurance industry.

The journey

NAICOM migration of its activities to online, real time is innovation long overdue. At Uyo in Akwa Ibom State in 2020, Commissioner of Insurance/ CEO of NAICOM, Mr. Sunday Thomas, had hinted on an impending regulators’ new policy drive. Speaking on the real time porter, which, at the time (2020), was a work in progress, Thomas said it would elevate the nation’s insurance sector to globally compliant entity. He said NAICOM had put in place a real-time digital platform to drive the process. The portal, which had been in the works for years, was conceived by the Commission as part of ongoing reforms.

Global vision

Throwing more light on the workings of the new portal, the commissioner said it would be such that wherever anybody was in the world, information on the nation’s insurance sector would be available to him at the click of a button. “We will be looking at the digital world. Part of what we have done so far is the fact that our portal that was on the drawing board for over six years has been fixed. It is taking us from where we are to the next level. We have sensitised the technical people in the industry and they have been going through a series of training.

“The next thing we are going to do is to engage the industry with IT guidelines. It is no longer going to be historical reporting,” said NAICOM boss. The new policy, which became operational last week aimed at enhancing efficient and effective service delivery. Consequently, the Commission, in a circular directed to managing directors/chief executives of all insurance institutions dated August 27 and signed by Director, Policy and Regulations, NAICOM, Mr.L. M. Akah, said there shall be no manual submission of requests/application effective from September 1, except through its online portal.

The statement added that “all insurance institutions are require to align their operations to NAICOM portal for submission and processing of all requests such as certificate of registration/renewal, Approvalin- Principle (AIP), product authorizations, micro insurance, takaful insurance, letter of request, financial statement approval, enforcement actions, governance and complaint issue among others.” NAICOM said all insurance related issues requiring the Commission’s attention would henceforth be entertained through its dedicated licensing system.

Positive mileage beckons

The newest feat by the commission came on the backdrop of its three-year strategic reforms roll out (2021-2023). The three-year strategic reform is the plank for the current aggressive transformation of the insurance sector. NAICOM’s Head, Strategy and Special Duties, (NAICOM), Usman Ibrahim Jankara, had in June this year, at the annual retreat for insurance correspondents in Lagos, espoused ingredients of the threeyear strategic plan.

In a paper, ‘Corporate Strategy of the Commission 2021- 2023 the Objectives and Deliverables,’ he noted that the strategic plan would deliver a safe, stable, and strong insurance industry capable of meeting the test of time. According to him, the plan was targeted at ensuring that insurance firms are adequately capitalised, effectively managed and regulated. He posited that the regulator’s effort would strengthen the firms and other stakeholders in the sector to fight against money laundering, while ensuring that competition among firms are on product offering.

The regulator’s Head of Information Technology, Mr Abiodun Aribike, in his paper presentation titled: ‘NAICOM’s Digital Transformation, Progress So Far’ described digital transformation as enforcing effectiveness, efficiency and cost reduction. According to him, this means replacing manuals with digital operation to ensure time-saving and encourage innovation. He noted that the Commission had upgraded its portal to eradicate fake insurance and deepen insurance penetration. Aribike added that the Commission would continue to upgrade its technology to meet global trends in the industry.

In unveiling the reform, the Commission said the start point would be to return operating firms to liquidity status by ensuring that they restructure their balance sheets so that those that currently rely on assets that they can hardly turn to cash would effect a major turnaround in their operations and run their business based on cash flow instead of fixed assets. To this end, the Commission said it has already started this through expert advice on owners of various insurance firms who have in the past exceeded the maximum level of investment in real estate, and are now facing cash crunch and could not easily turn their assets to cash to keep afloat in business. This measure is bound to inspire and retain confidence of the policy holders. When claims occur and are promptly settled by an underwriter, without policyholder needing to seek NAICOM’s intervention, such demonstration of utmost good faith on the part of the insurance firm boosts confidence in insurance business.

Besides, the online regulation of insurance activities by NAICOM will impact positivity on the sector’s overall contribution to Gross Domestic Products (GDP). Recently released GDP second quarter data from the stable of National Bureau of Statistics (NBS) showed negative growth from the combined finance and insurance sector.

They accounted for 87.92 per cent and 12.08 per cent of the sector respectively in real terms in Q2’21. As a whole the financial and insurance services sector grew at -1.86 per cent in nominal terms (year-on-year), with financial institutions growing at -3.93 per cent while Insurance recorded a growth rate of 16.41 per cent.

The overall rate was lower than that in Q2’20 by –22.68 per cent points, and by -4.01 per cent points than the preceding quarter. Quarter-on-quarter growth was -3.45 per cent. The sector’s contribution to the aggregate nominal GDP was 3.21 per cent in Q2’21, lower than the 3.76 per cent it represented a year earlier, and the contribution of 3.25 per cent it made in the preceding quarter. Growth in this sector in real terms totaled –2.48 per cent, lower by –20.97 per cent points from the rate recorded in the second quarter of 2020 and -2.02 per cent points from the rate recorded in the preceding quarter. For the first half of 2021, growth in financial and insurance services stood at -1.47 per cent year-on-year, compared to 19.63 per cent year-on-year for 2020. Quarter-on-quarter growth in real terms stood at -2.18 per cent.

The contribution of Finance and Insurance to real GDP totaled 3.72 per cent, lower than the 4.00 per cent recorded in the second quarter of 2020 by –0.29 per cent points, and the 3.77 per cent recorded in Q1 2021 by -0.05 per cent points. There is expectation that the insurance sector will contribute maximally to GDP growth with the migration to online, real time digital supervision.

Last line

NAICOM’s new policy, which ensures all regulatory supervision of insurance activities are conducted via online platforms, is the game changer. The sector is poised to reap maximally from this laudable innovation.

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