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Business Finance Info & Updates

Hope rises for annuity business

For more than 10 years, the National Insurance Commission (NAICOM) and the National Pension Commission (PenCom)  struggled to find a common ground for the operation of life annuity business.

A conflicting regulation between the duo caused various challenges of compliance.

It came to a head in 2017, when both government agencies headed by the former Commissioner for Insurance, Mohammed Kari and Director-General, PenCom, Mrs. Chinelo Anohu-Amazu bickered, leading to the intervention of the former Minister of Finance, Mrs. Kemi Adeosun, who called a truce between them, although there was no headway. This also led the two regulators to issue a circular on the administration of life annuity for pensioners in March 2017.

But the two agencies seem to have reach an agreement under the heads of the two agencies, Mr Sunday Thomas of NAICOM and Mrs Aisha Dahir-Umar of PenCom, as The Nation learnt that they would soon sign sign a guideline for annuity business.

While the bickering lasted between the insurance and pension industry, the consumers of the product and the operators suffered. The operators of the two industries had also been accusing each other of demarketing.

As provided for by the Pension Reform Act 2014, the modalities for payment of retirement benefits are through life annuity, which is obtainable from life insurance companies or through programme withdrawal, which is obtainable from Pension Fund Administrators (PFAs). Either of the two methods is available depending on the retiree.

The Commissioner for Insurance, Mr. Sunday Thomas confirmed to The Nation that the two had reached an agreement and would soon sign the guidelines for the two industries.

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He said: “On our part, we have been able to identify all the areas where the industry has been de-marketed and we are working on them. we will sign the annuity guideline PenCom very soon. It has been pending since 2017 but we are happy that everything will go well going forward.

“I have been very concerned as to why insurance companies are limited in annuity business. The annuity business looks like it is slowing down but it will soon be one of profit driving business for the insurance industry.”

Former Chairman, AIICO Insurance, Dele Fajemirokun, at an event on insurance and pension, called on the regulators to tone down on the guidelines meant to supervise the sectors.

He said for insurance and pension industries to move forward, there was the need for bureaucracy to be eliminated and reduction in rules, to those that favours opportunities to generate funds.

“There is need to avoid complexity in regulation with a focus on judgment-led regulation instead of rules-based regulation. Over the years, the political desire to regulate an industry tended to ebb and flow in response to the opposing pressures of public disquiet about the industry problems and the industry’s concerns over-interference in the way it carries out its activities.

“The regulated firms in insurance and pensions say they do not object in principle to being regulated, but there are frequent and vociferous complaints from them, and indeed from the public, about how regulation is being applied in practice, either it is too strict or not strict enough depending on their perspective. The basic question that should be asked is: ‘How effective is regulation in achieving its purpose, which is creating and maintaining the effective and efficient insurance and pension market.’ ”

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He further said there should be   transparency, fairness, while addressing issues like bureaucracy, pull me down syndrome prevalent in the third world, complexity, over prescriptive, which led to compliance fatigue.

The immediate past Director-General, Lagos State Pension Commission, (LASPEC), Folashade Onanuga, called on Pension Fund Administrators (PFAs) and life insurers to work together to build a virile industry rather than fighting in a bid to retain market dominance.

Mrs Onanuga said the competition between the two operators must be healthy to build confidence in Pension Reform Act (PRA).

“The competition between the two operators must be healthy, otherwise, the ultimate consumer will lose confidence in the transparency which the PRA advocated, as human thinking will suggest that the infighting to gain upper market share, between the two operators means that the product being sold is more to the benefit of the operators than the ultimate consumer.

While marketing annuity or programmed withdrawal products, Mrs Onanuga said PFAs should understand that they don’t have a monopoly, but should rather they should work with annuity service providers to boost the pension industry.

Thenation

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