A leading industry expert and former Commissioner for Insurance, Mohammed Kari, has opposed the issuance of licence to NPF Insurance Company Limited by the National Insurance Commission (NAICOM) based on what it described as the antecedents of the company.
Kari warned that there could be compromise in the management and enforcement of compulsory insurances in the country if the NPF Insurance Company Limited secured a licence to operate as an insurance company.
The former NAICOM boss, who is now the Waziri Bauchi, Bauchi State, also maintained that the authoritative nature of the Nigerian Police and their potential representation on the Board of Directors of the insurance firm could lead to undue interference in the management of the insurance company, thereby compromising its independence and effectiveness.
Earlier, the NAICOM had, through an advertorial in some national newspapers, disclosed that it received an application from the NPF Insurance company Limited for registration as an insurance company to transact insurance business in Nigeria and had requested the public to submit/report any objection or otherwise against the registration to it within 21 days from the date of the publication.
Kari, in his letter dated July 25, 2024, opposing the proposed licensing of the company, stated: “The core operations of the Nigeria Police Force are fundamentally at odds with commercial activities. The primary mandate of the Police is to maintain law and order, not to engage in business ventures.
Allowing the Police to operate an insurance company could lead to conflicts of interest and distract from their essential duties. The Police is a regulator of sorts, they cannot be enforcing the law on compulsory insurance and be a provider of Insurance. The temptation to force motorists to insure with their company will be irresistible.”
“The structure and ownership requirements stipulated by Nigerian insurance laws and Financial Reporting Council(FRC), he stressed, necessitate a level of expertise that is currently lacking within the nominated Board of Directors of the proposed insurer and the Police Force.
“Another requirement is a spread in ownership to avoid undue influence on the company by one shareholder. The authoritative nature of the police and their potential representation on the Board of Directors could lead to undue interference in the management of the insurance company, compromising its independence and effectiveness.
“The Nigeria Police Force Investments have a history of mismanagement, as evidenced by the numerous issues surrounding the Nigeria Police Pension Scheme. This history raises significant doubts about the ability of the Police to effectively manage an insurance company, which requires a high level of expertise and know-how”, the industry expert stressed.
Noting that the fragmentation of the insurance business will result in the loss of valuable data and income for the industry, the former industry regulator maintained that the entry of the Nigeria Police into the insurance market could disrupt the existing ecosystem, thereby leading to inefficiencies and potential data loss that could harm the overall industry.
He further clarified: “In case they are floating the idea of a captive, I don’t believe the Nigeria Police Force has enough business spread or expertise to support the survival of a captive company nor do they have the reputation to attract independent business. This would expose public funds to unwarranted loss.
“The command-and-control nature of the Police force would make them take offence of a caution by a regulator. I don’t see how the Police can operate under someone’s regulation, for they would not accept commercial directive, and neither would they observe regulatory control. It would compromise the authority of the regulator if one company is seen to ignore regulatory control or out rightly disregard them, the regulator would lose his authority to regulate the market.
“The core operations of the Nigeria Police Force are fundamentally at odds with commercial activities. The primary mandate of the Police is to maintain law and order, not to engage in business ventures. Allowing the Police to operate an insurance company could lead to conflicts of interest and distract from their essential duties. The Police is a regulator of sorts, they cannot be enforcing the law on compulsory insurance and be a provider of Insurance. The temptation to force motorists to insure with their company will be irresistible”, Kari added.
While maintaining that approving the NPF Insurance Company Limited’s application could set an undesirable precedent, he expatiated: “It may encourage other government agencies, such as the Federal Road Safety Corps, Nigeria Customs Service, Nigerian Army, Navy, Air Force, Nigeria Civil Defence Corps, Office of the Head of Service of the Federation and others, to seek similar licences. (And why not?) The Commission can therefore not refuse them.
“This proliferation of government-run insurance companies could undermine the integrity and stability of the insurance sector and reverse the government policy of divesting from business, which as you remember was the reason for the creation of the Bureau for Public Enterprises (BPE). I suggest you seek the opinion of the Bureau as you continue with your consideration”, the former NAICOM’s chief added.
