‘Assessing group life insurance viability in NNPC, MDAs amidst pandemic’

The House of Representatives is currently investigating the insurances of the Nigerian National Petroleum Corporation (NNPC), and a few Ministries, Departments and Agencies (MDAs), to evaluate the insurance portfolios of NNPC to know the viability of the allegation levelled against it.

The lawmakers, a month ago, said it will carry out an investigation into $179 million premium allegedly paid by NNPC and Joint Ventures (JVs) for non-existing assets overseas as well as the implementation of insurance policies of other MDAs.

Other issues the lawmakers said it will look into include ineffective regulation of foreign placement of insurance, alleged breaches on insurance business by industry practitioners, low retention capacity of dollar-denominated insurance business, underutilization of capacity of Nigeria insurance policy, among others.

The Chairman, House Committee on Insurance and Actuarial Matters, Darlington Nwokocha, said the investigation was necessitated by alleged breaches by industry practitioners; low retention capacity of dollar-denominated insurance business, and the effect on economy; and underutilisation of the capacity of Nigeria insurance policy.

After the pre-forensic meeting, he said, his Committee would deploy forensic auditors to NNPC and all the MDAs as well as insurance companies and brokers handling the portfolios.

Although all the allegations and issues raised are industry-related and within the purview of the regulatory authority, yet, the lawmakers pointed accusing fingers on majorly the NNPC.

However, investigation showed that since 2013 to the current insurance year (2020/2021), the premiums paid by the Corporation has been reducing consistently, notwithstanding that the assets value have been increasing through acquisition of new assets and new investments.

From a premium of $79.8 million and asset value of $50.3 billion in 2014/2015 insurance year, the premiums have been on a downward trend to $39.6 million with an increased asset value of $68.9 million for 2020/2021 insurance year.

The Corporation insists that as a corporate entity it values all extant laws in its operations, including those regulating insurance of assets and liabilities.

The Guardian gathered that the contracting process and strategy of the Corporation insurance placement in compliance with the provisions of the Public Procurement Act (PPA) 2007, Bureau of Public Procurement Guidelines, the Insurance Act, and NNPC Policy and Procedures Guidelines.

Based on the credibility of the contracting process, findings showed that NNPC has had no cause to resort to litigation in claims recoveries in the last 10 years. It has also never received any query from any regulatory agency on compliance to process and procedure. Rather, they have always obtained approvals where necessary, and received recommendations from regulatory agencies.

Market observers applauded NNPC insurance procurement process as robust, open, transparent and competitive in full compliance with the provisions of the PPA 2007, and the Corporation’s Supply Chain Guidelines.

For the insurance of NNPC’s oil and assets and liabilities, market analysts affirmed that the bidding process usually resulted in the selection of insurance companies that passed the technical evaluation with the lead primary underwriter having scored the highest technical evaluation score.

The lead primary underwriter thereafter appoints an international reinsurance broker, and conducts a bidding process in the London Commercial Market with a view to securing a competitive pricing for NNPC.

The process is designed to guarantee the selection of underwriters with the lowest responsive bid, while the lead primary underwriter also leads the oil assets and liabilities account with other approved consortium of Nigerian underwriters for the insurance placement in line with the regulations of the relevant regulators.

Similarly, in the last 10 years, NNPC has insured its workers to the tune of N25.2 billion cumulative premiums paid under the Group Life Assurance (GLA) policy.

The N25.2 billion premiums were paid to life insurance companies, who are expected to pay death benefits to the family or next of kin of a deceased NNPC staff. Further findings show that about N23.3 billion claims were paid by participating companies to the families of deceased workers in the last 10 years.

With continuous renewals of the policy as it expires, the families of the deceased under the insurance coverage, all got death benefit claims to sustain them, including the wives and children they left behind.

The Guardian gathered that the Corporation paid N2.6 billion premium in 2010 with N1.8 billion claims paid to the families of the deceased workers. In 2011, NNPC insured its workers to the tune of N2.4 billion, while N2 billion claims were paid by the insurers. It renewed its group life premium to the tune of N2 billion in 2012, against N1.5 billion claims paid.

NNPC paid N2.6 billion premiums for its group life policy in 2013, against N2.7 billion claims, and paid N2.6 billion premiums for N2.3 billion claims in 2014.

In 2015, premiums worth N2.3 billion were paid to insurers for its workers, with N2.9 billion total claims paid, which rose N2.4 billion premiums for renewal in 2016, against N2.3 billion claims paid.

By 2017, the premiums paid was N2.3 billion, for claims worth N2.8 billion, while N3 billion premiums were paid in 2018, and 2019, respectively, for N2.4 billion claims in 2018, and N2.6 billion in 2019.

Analysts believe the consistency in the premiums and claims payments confirms that NNPC insurance division is manned by some of the most-qualified and experienced personnel in the industry.

To them, NNPC ensures that adequate cover at the most competitive price, noting that the Corporation has been economical, while also getting value for money as well as holding the lives of workers in high esteem through group life insurance schemes.

The Executive Secretary/Chief Executive Officer, Nigerian Council of Registered Insurance Brokers (NCRIB), Fatai Adegbenro, speaking in one of the industry’s fora, said the N23.3 billion claims paid proves that insurance companies actually pay claims on the risks they cover, contrary to insinuations that they do not.

Moreover, he commended the Corporation for consistently taking group life insurance as a priority scheme yearly, urging state governments and other players in both private and public sectors to do the same.

Commenting on the development, an Actuarial Scientist, Dr. Pius Apere, said the NNPC has done well to insure its assets and human lives, saying this is what is needed to boost insurance penetration and adoption in Nigeria.

Apere, however, faulted insurance companies for failing to publicise the claims they paid, especially on NNPC accounts so that this can correct the erroneous belief that insurers don’t pay claims.

Speaking on the Corporation’s group life scheme he said, the N23.3 billion claims paid in the last 10 years is a plus to the insurance industry, even as he appreciated NNPC for having insured its workers to the tune of N25.2 billion premiums during the period.

“Insurance companies must begin to blow their own trumpet by letting people realise that while underwriting firms take premiums on risks adopted, they, as well, pay claims. When people know this, they will be more persuaded to buy insurance products,” he stressed.

He equally appealed to the National Insurance Commission (NAICOM), and the Nigerian Insurers Association (NIA), to invest in awareness creation, engage relevant government agencies on the need to insure as well as partner the lawmakers on regulation.

While analysts applauded the lawmakers for taking the initiative to investigate the insurances of not only the NNPC, but also MDAs, they urged them to separate issues from sentiment, saying the result of their investigation should be devoid of biases, and protection of sacred cows, among others.