Airline operators, insurers at loggerheads over non-payment of claims

Controversy between consumers of insurance products and insurers over poor customer services has been a sore point of heated discussion in the indsustry over the years.

The situation appeared to have assumed a new twist recently following threats by Aircraft owners under the aegis of Airline Operators of Nigeria (AON), to boycott local insurance companies to insure their aviation risks with foreign underwriters due to non-payment or delayed payment of claims by local insurers.

Daily Sun investigation revealed  that if the above threat is carried out,  the Nigerian insurance industry may be losing risks worth over N10 billion to foreign insurance firms.

At the 2019 Annual Interactive Session with Consumers of Insurance Products organised by NAICOM in Lagos, recently; AON members, lamented that majority of insurance firms have continued to default on payment of their claims when insured  risks occurred hence, their preference to begin dealing with foreigners where they would be assured of value for premium paid.

Speaking at the event, the Chairman of AON, Captain Ahmad Joji, said his members businesses are being affected by the inability of local insurers to effectively carry out their responsibility while calling for an open market to enable airliners to insure their businesses freely without difficulty.

Appealing to the National Insurance Commission (NAICOM), to swiftly mediate and address the enormous challenges they are having with local insurers; Joji added that NAICOM needs to quickly organise a forum that would enable them sort out their issues with underwriters.

Expressing his displeasure over the services of local insurers, SkyJet Aviation Services Limited Chairman, Alhaji Kashim Shettima, who is also a member of AON said insurance firms do not have the capacity to insure airlines.

Shettima, added it is tough getting insurance firms to pay claims thus, he considers to opt for insurance with foreign underwriters as they are prompt in paying claims and highly professional in carrying out aviation businesses.

His words: “I used to insure my aircraft and its maintenance with a broker in South Africa under the Lloyds of London and was paying foreign currencies. I did this because I was getting value but at some point, I decided to obey the Local Content Act just to support my country by insuring with local operators. But now, I believe I made a mistake taking this step. I have four aircraft, which I insured with local insurers and pay $22,000 premium quarterly. Nigerian insurers got 85 percent of the business while 15 per cent was given to a foreign insurer. At present, I have a $700,000 outstanding claim and they do not want to pay me. They come up with different excuses not to pay.

“The broker in charge even asked to get things sorted for me while I share claims with him. This is the kind of thing that is going on in the insurance industry and yet NAICOM is insisting that we must insure 70 per cent of our business in Nigeria. What is NAICOM doing to curtail the malpractice and lack of capacity of the insurance operators? Enough is enough and very soon, we will boycott local insurers, if they do not change and give us value for our money.”

“We need to understand that we want to insure with the local companies but not for aviation business because it is a serious business that should not be handled with kids gloves as any error can lead to devasting damages,” he added.

For her part, the Managing Director, Air Peace Airline, Oluwatoyin Olajide, stated that insurance firms intentionally refuse to settle claims adding that a top insurer made Air Peace to lose over  $200,000 in 2017.

She said, “In January 2017, we had a fire incident at our maintenance facility, and we filed for claims from the underwriters. They sent their loss adjusters to come investigate the incident and evaluate how much claim was due to us. At the end, the claim was valued at $973, 291. This was done in June 2017 and we started following up for the payment. But we could only get $290,235.37 from the claim. For two years, we wrote to NAICOM, complaining about the non-payment of the remaining claim but got no response.

“We later got response from the lead underwriter who informed us that they couldn’t get their reinsurer to pay and so we the insured will have to wait. They made us to suffer and at the end we had to engage the services of a lawyer to assist us because after writing to NAICOM, we still didn’t get a favourable response. NAICOM even told us in one their responses that we should cooperatete and listen to the plea of the underwriter. After like over two years, the underwriters came to us for final settlement and offered to pay $478,138. So, this made Air Peace to take a loss of over $200,000. This is why I said it is really a challenge getting insurance companies to pay your claim when they need to,” he pointed out.

Reacting to the above accusations, the President Chartered Insurance Institute of Nigeria, (CIIN), Mr. Eddie Efekoha, however, quashed claims that insurance companies do not pay claims. He pointed that it is rather policyholders who do not fully understand the terms and conditions of their policies.

Efekoha said that many policyholders have been able to successfully process genuine claims from the industry however, in the case of speed, the sector can do better than it is doing.

Commenting on the capacity of the industry, he said, “It is true you will say insurance companies in Nigeria are small companies and not capitalised but insurance is about spreading of risks. No country’s insurance industry has been able to insure his own risk 100 per cent. Even in the United Kingdom, British Airways is not insured 100 per cent in the country. Emirates is also not insured 100 per cent in the United Arab Emirates. The same applies to Nigeria.

“Just like the airlines are in business to make profit, insurance companies are in business to make profit. We have been using our capital to subsidise our clients’ claims because premiums are going down and claims are increasing, so, what do we do? It’s not your fault, it’s our fault because competition is forcing us to do so many things but as I said our consumers are kings and I believe we can resolve all these problems.

“NAICOM intervened on the issue between the market and Air Peace. Yes, they appointed a lawyer. But, honestly, we value the aviation clients. We are doing well. As I said in every relationship, there will be differences. How do we resolve the differences? I think that is what is important? If you say you don’t want to insure here at all, if NAICOM permits, no problem”, Efekoha noted.

Speaking also, the Head, Complaint Bureau NAICOM, Ahmad Adamu, advised the airline operators to exercise restraint as NAICOM will look into their complaints.

He reminded them that the recent developments and reforms in the sector particularly, the recapitalisation exercise is a move to ensure that the industry becomes more robust in its technical competence and financial base, the end result of which will be to enhance the ability of insurers to provide better protection and improved services to the customers.