Modestus Anaesoronye
Barely two months after the release of Takaful and microinsurance guidelines and subsequent opening of doors for interested companies to apply for operating licences, no fewer than 25 firms, including existing and standalone companies, have expressed interest, BusinessDay investigations show.
Micro-insurance and Takaful insurance are two products launched between November and December 2013, as part of the National Insurance Commission’s (NAICOM) Market Development and Restructuring Initiatives (MDRI) targeted at increasing market penetration and enhancing the sector contribution to the GDP.
Insurance sector contribution to the GDP, said to still remain at less than 1 percent, the commission not-
ed, would increase significantly if micro-insurance and Takaful were driven to capture that uninsured population, even at the grassroots.
Takaful is a type of Islamic insurance, where members contribute money into a pooling system in order to guarantee each other against loss or damage. It is based on Islamic religious laws, and explains how it is the responsibility of individuals to cooperate and protect each other.
Micro-insurance, on the other hand, is insurance for persons usually with low income and irregular cash-flows, often ignored by the mainstream commercial and social insurance schemes.
"I can confirm to you that we have received not less than 25 enquiries from those who want to do Takaful and micro-insurance both from existing insurance companies and stand-alone operators," Fola Daniel, who disclosed the development during an exclusive interview with BusinessDay, said.
"We are encouraging them to come on board because the potential is huge and what it requires is only awareness so that people can appreciate the concept, and the fact that it is the opposite of conventional insurance. And unlike the misconception, Takaful is not an Islamic insurance; it is just the concept which makes it different from the conventional insurance, so it’s for everybody both Muslims and Christians."
As contained in the guidelines for Takaful, an intending applicant seeking licence from NAICOM is expected to have certificate of registration as a full-fledged Takaful insurance company in accordance with international best practice and must have, as part of its name, words or terminologies that connote Takaful operations. It must also maintain a minimum deposit in a non-interest financial institution at all times.
For micro-insurance, on the other hand, there could be service providers including existing insurance companies, but the applicant must obtain a Service Level Agreement (SLA) authorisation from NAICOM.
Sabiu Abubakar, head of compliance, NAICOM, said the micro insurance guideline requires insurance companies to obtain the approval of SLA to enable them play their role, adding that approval has to be obtained by an insurer where the insurer wants the service provider to provide additional service to him. Such services include premium collection from low-income earners, premium remittance to the insurer, collection of underwriting information from low-income earners to insurer, clients’ data update, claims notifications and remittance of claims amount to insurer.
Obasi Ngwuta, executive director, West Africa Business School, had, during a conference on micro-insurance, stated that this product presented a large market that was yet untapped by the nation’s insurance providers.
According to him, the product does not only provide platform for the insurance companies to enlarge their frontiers and increase their market share, it also provides the insurance industry as a whole the opportunity to enhance insurance penetration amongst the populace.
Microfinance banks (MFBs) and other microfinance institutions (MFIs), he said, expand beyond credit to a broader array of financial products, adding that there was need to provide their clients access to risk management solutions such as micro-insurance products in partnership with insurance companies.
Source BusinessDay
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