NAICOM out with guidelines for Micro Insurance operation

After almost five years of fine tuning, the National Insurance Commission (NAICOM) has released the guidelines for Micro Insurance operation in Nigeria.

NAICOM explains that the guidelines which establish uniform set of rules, regulations and standards for conduct of micro insurance business in Nigeria took effect from January 1st 2018.

NAICOM, the regulator of the nation’s insurance industry said in a statement:  “In exercise of the powers conferred by the National Insurance Commission Act 1997 and the Insurance Act 2003, the National Insurance Commission (hereinafter referred to as the Commission) hereby establishes uniform set of rules, regulations and standards for conduct of Micro insurance business in Nigeria.

“No person shall commence or carry on any class of Micro insurance business without being registered or authorised by the Commission.

“The Guidelines supersede all other micro insurance guidelines and shall take effect from January 1st, 2018”.

The objectives of the guidelines, according to NAICOM, include the provision of minimum standards for the conduct of Micro insurance business in Nigeria; to ensure consumer protection; to establish general features of Micro insurance; to establish duties and responsibilities of Micro insurance operators and insurance intermediaries as well as to establish conditions for entry and exit from the Micro insurance market.

The commission defined Micro insurance as insurance developed for low income populations, low valued policies, micro and small scale enterprises provided by licensed institutions, run in accordance with generally accepted insurance principles, and funded by premiums.

It explained further that Micro insurance products are insurance products that are designed to be appropriate for the low income market, low valued policies, micro and small scale enterprises in relation to cost, terms, coverage, and delivery mechanism.

The commission, defined scope of micro insurance for the operators saying the sum insured under a Micro insurance policy(ies) shall not be more than N2,OOO,OOOper person per insurer.

“The Commission may review this provision subject to the nature of the low income earners”, NAICOM said.

It further said Micro insurance policies shall exclude special risks insurance, motor insurance (except tricycles and motorcycles), professional indemnity and other pecuniary risks with sum insured higher than N2,OOO,OOO

“Third party liability risks and all other classes of risks with sum insured above N2,OOO,OOO are also excluded, all compulsory insurances on third party liability risks excluded from micro insurance”, the commission stated.

It listed features of Micro insurance operation saying, it shall be simplicity in nature, its policies, conditions, procedures and marketing must be simple and the documentation must be presented in plain language.

The products/services risk, procedures and coverage must be unambiguous and easily understood, Micro insurance products must be affordable and accessible to the target market in terms of purchase, premium payments and claims.

The products or services shall be designed to meet the needs of clients, be beneficial, fair in price and coverage.the delivery/distribution channels must be efficient to both the insurer and the policyholders.

The commission further explained in the guidelines that the Micro insurance underwriters are classified into unit, state, and national operators.

On the distribution channels, NAICOM, said all l eligible distributors may be utilised to reach potential Micro insurance Consumers upon the grant of license by the commission.

It said all licensed insurance brokers/loss-adjusters by the commission are qualified to provide insurance broking/loss adjustment services for micro insurance operators.

In addition to these, NAICOM, said Micro insurance agents shall be appointed by a Micro insurer and must provide evidence in the form of letter of appointment or service Level agreement.

It further said the Micro insurance agents are further classified as individual agents and corporate/referral agents, adding that the corporate and referral agents include cooperative societies, mutual benefits associations, microfinance banks, trade organisations, health maintenance organization.

vii. Faith Based Organisations, postal agents, non-governmental organisations, esusu/ adashi group, age Grade group, telecommunications. Others listed by the commission as micro insurance distribution channels include Mobile payment system, and any other registered associations.