The National Insurance Commission’s directive for insurers to clear all outstanding claims by December 31, 2024, is commendable. The directive aimed at restoring public confidence and protecting the interest of policyholders in the insurance industry in Nigeria. However, having regard to past experiences, the feasibility of enforcing this directive effectively is in doubt. To be effective in this direction, NAICOM needs to review the modalities of enforcing this directive in light of current realities, paying attention to capacity for enforcement, verification mechanisms, technological infrastructure, and involvement of external partners.

Also read:
NAICOM Sets December 31 Deadline for Insurers to Clear Outstanding Claims
African Alliance Challenges NAICOM Over Board Dissolution in Court
Regulatory Interventions in Insurance – A Call for Fair and Balanced Oversight
Training One Million Youths… A Promise or an Empty Gesture?

1. Capacity for Enforcement

While NAICOM has made clear its intention to clean up the books of insurers, the question remains: Does the Commission have the immediate internal capacity to enforce this directive effectively? Issuing such a deadline without a robust enforcement mechanism risks creating an impression of an “empty directive,” which could further damage industry credibility.

• Human Resources and Expertise: As it stands, NAICOM’s current workforce may not be sufficient to conduct detailed on-site inspections of all insurance companies, especially given the size and complexity of the market. Building internal capacity should be a priority for the Commission to ensure thorough audits and verification processes.

2. Verification Mechanisms

The success of this directive hinges on NAICOM’s ability to validate the claims reported as settled by insurers. Reliance solely on the self-reporting of insurance companies could lead to manipulations, where companies might clear claims on paper without actual disbursements.

• Data Collection and Returns Analysis: Will NAICOM require insurers to submit detailed returns and claims settlement reports? If so, how does the Commission plan to verify the accuracy of these submissions? Merely relying on the financial statements provided by the operators could be misleading, as there have been instances where insurers underreported their liabilities.
• On-Site Inspections: NAICOM might need to ramp up on-site inspections to cross-check reported figures against actual claims settlements. However, without a significant increase in manpower or technological support, conducting comprehensive inspections of all registered insurance firms before the deadline is unrealistic. Where internal capacity is inadequate, NAICOM may need to enlist private consultants with relevant experience, but this will entail additional costs, which may not have been budgeted, having regard to NAICOM’s current financial status.

3. Technological Infrastructure

The Commission’s current level of technological sophistication could be a limiting factor in efficiently tracking and verifying claims settlements. Currently, on its portal, NAICOM can only monitor the issuance of insurance policies in the country, without a proven capacity to monitor claims settlement by insurers.

Going forward, NAICOM should leverage technology such as integrated claims management systems and digital reporting platforms could greatly enhance NAICOM’s ability to monitor compliance in real time.

4. Involvement of External Partners

Given NAICOM’s limited internal capacity, it may be prudent for the Commission to engage independent consultants with expertise in auditing and claims verification. Furthermore, partnering with consumer protection organizations involved in the insurance sector could provide an additional layer of oversight and help validate the experiences of policyholders.

• Third-Party Auditors: Independent auditors could play a critical role in verifying the settlement of outstanding claims, especially for companies with a history of delayed payments. By engaging external experts, NAICOM can ensure a more objective review of compliance.

• Consumer Advocacy Groups: Partnering with consumer advocacy groups could help NAICOM receive direct feedback from policyholders regarding unpaid claims, thereby providing a grassroots perspective on the actual state of claims settlements.

5. No Empty Directive

Without the necessary infrastructure and capacity to enforce this directive, this may be yet another regulatory announcement without real impact, which could further erode trust in both the regulator and the insurance industry as a whole.

Also read:
NAICOM Sets December 31 Deadline for Insurers to Clear Outstanding Claims
African Alliance Challenges NAICOM Over Board Dissolution in Court
Regulatory Interventions in Insurance – A Call for Fair and Balanced Oversight
Training One Million Youths… A Promise or an Empty Gesture?

NAICOM’s directive is a step in the right direction, but the implementation strategy needs to be well thought out. To avoid the pitfalls of past directives that failed due to inadequate enforcement, the Commission must address its capacity constraints, invest in technology, and consider external partnerships. By doing so, NAICOM can transform this directive from a mere announcement into a significant milestone for the industry, setting a new standard for accountability and consumer protection.

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