Strengthening the Legal Framework for Competition in Nigeria’s Insurance Industry

Description

ABSTRACT

Strengthening the Legal Framework for Competition in Nigeria’s Insurance Industry

Professor Taiwo Osipitan, SAN * & Dr. Viashima Akaayar**

The article advocates the enactment of a dedicated legal regime for strengthening competition in the Nigeria’s insurance sector. This is anchored on the assumption that competition is the lifeblood of strong and effective insurance sector. This is, in part, because it curtails not only the market imperfections such as insurance cartel, uneven premium fixing, and entry barriers, but also protects the interests of the general insuring public. Although the article acknowledges the presence of anti-competitive rules in related financial legislations, such as the Companies and Allied Matters Act 1990 and Investment and Securities Act 2007, such rules are non-sectoral and largely ineffective in enhancing the core objectives of promoting competition in the insurance sector. Consequently, the article proposes the enactment of tailored competition rules for the Nigeria’s insurance sector. This is informed by the reality that the Nigeria’s insurance sector is still evolving and as such, appropriate and dedicated competition rules are desirable to protect not only the unsuspecting consumers, but also the nascent insurance market. As a starting point, the article proposes the resuscitation and enactment of the Federal Competition Commission (FCC) Bill 2002 and the National Antitrust Commission (NAC) Bill 2005 in line with socioeconomic realities in the Nigeria’s insurance sector.

INTRODUCTION
Competition has long played, is playing and would continue to play major role in the insurance industry,₁ and financial sector in general.₂ Doron rightly acknowledges that, from Adams Smith’s ‘invisible hands’ concept, through classical economics, through the Harvard school of behavioural economics approach and to the Chicago school of pro-market approach, competition has always been viewed as a desirable market instrument.₃ Admittedly, different approaches may be adopted towards contextualizing competition, yet its protection appears to be unanimously accepted. For instance, the Harvard school acknowledges that competition and market multi-structures are strongly linked. Consequently, market vices such as collusion, market power and entry barriers should be rejected, unless circumstances for a natural monopoly exist.₄ Other pro-competitive justifications include strengthening fairness and freedom of choice.₅

* LL.B, BL (Lagos), LL.M (London). Professor of Law, Senior Advocate of Nigeria (SAN); Former Head, Department of Public Law, Faculty of Law, University of Lagos, Akoka, Lagos
** LL.B (BSU), B.L (Abuja), LL.M, Ph.D.(UNILAG). Lecturer, Department of Commercial & Industrial Law, Faculty of Law, University of Lagos, Akoka, Lagos

1. See D. R. Bigger, ‘Competition and Related Regulated Issues in the Insurance Industry’ (1998) No.19, Australian Roundtable on Competition Policy, at p.1
2. See N. Dimgba, ‘The Need and the Challenges to the Establishment of Competition Law Regime in Nigeria’ in D. Adekunle, L. Fashola, T. F. Kio-Lawson (eds.) Developments in Business Law Series 1, (Legal Blitz Consultants: Lagos, 2010) 145
3. See Z. Doron, ‘Competition versus Regulation in the Insurance Market: A Law and Economic Analysis of Policy and Institutes’ (2006) being a Master Thesis submitted in Partial Fulfillment of Award of European Masters of Law and Economics, University of Hamburg, Germany, at p.7
4. ibid
5. See A. Sen, ‘Markets a Freedoms: Achievements and Limitations of the Market Mechanism in Promoting Individual Freedoms’ (1993) 45 Oxford Economic Papers 519