Streamlining the Insurance Sector

Last week the pan African insurance watchdog, the Inter-African Conference on Insurance Markets, (CIMA, in its French acronym) decided to withdraw the licence of Alpha Insurance, a well-known actor on the Cameroonian insurance scene.

As can be easily imagined, thousands of subscribers are in disarray, not knowing where to go or simply fulminating over the fate of their insured businesses or property. An official of CIMA, speaking to Cameroon Tribune last Monday from Dakar where the regional commission of insurance controls of the body met last week said all the insurance's accounts and assets were being blocked immediately. But far from adding salt to the injury of the difficulties of the subscribers, CIMA says the decision is in the interest of all the subscribers with the aim of "protectaring all the insured and other beneficiaries of insurance contracts". However, to protect the interests of the company, a provisionary administrator will keep watch over over the present situation until a Yaounde competent court will designate a liquidator. It is then that all the insured and other beneficiaries of insurance contracts can expect to be paid off.

Alpha Insurance's problems were well-known. Its drift to the precipice was well-known also. CIMA had stirred the hornet's nest over the management style and the corporate strategic options of the company which all indicated that it was doomed to fail. Many indicators pointed to the fact that the company could not meet its commitments in the very near future. Very dangerous indeed for an insurance company which, unlike other financial houses such as banks that amass and store customers' savings, should always have ready money to meet contingencies. Insurance companies work on the "rainy day" principle; and since it is difficult to predict the rainy day, it is rather safe to put enough provision aside to avoid surprises.

The withdrawal of the licence of Alpha Insurance is just a hidden part of a huge iceberg of problems rocking the insurance sector. Sometimes serious enough to question why many other companies operating in the country did not come under CIMA's axe. But with the explanations given for the demise of Alpha, there is no doubt that a sword of Damocles is hanging dangerously over many of the country's insurance companies.

Of their numerous sins, the non-payment of insurance rights or benefits is most manifest. Often times, if these were to be paid, the process was so labyrinthine and harrowing that many subscribers have even preferred to abandon pursuing files. And the companies feel quite unalfashef with such frustrations. Many of the companies live in open opulence incommensurate with the real financial standing of the house. They run posh offices and installations while their executives a paid salaries and other emoluments that are not in common measure with the company's financial capabilities; and these practices thrive simply because of the regular inflows of cash. This description may portray a cartoon image, but the situation is real because, for example, Alpha was, on the eve of its licence cancellation, still receiving money from subscribers. And this was being done fully aware of the CIMA injunction made earlier, asking the company to inject up to FCFA 2 billion in fresh money to be able to operate normally. Similarly, the company was also asked, well in advance of the sanction, to conform to the prudential norms and ratios which it has since abandoned and which had put it in a squandamenia posture, strange of an insurance company worth its name.

From decisions as the one taken by CIMA are obviously going to keep amateurs in the sector at bay. And in the process the sector will regain good health and become a robust actor in economic development in the way it is supposed to be.

This decision is praise worthy. So is the vigilance and diligence CIMA is manifesting as a trusted guarantor of good practices in such an important sector, especially in a context where many Cameroonians are struggling for a place in the new and numerous work sites Cameroon has opened with the framework of its Vision 2035.