'How to unlock Nigeria's multi-trillion insurance business'

In spite the huge insurance opportunities in the country, insurers still struggle to underwrite few businesses that have been for years. To unlock the untapped potentials and take the industry to the next level, experts believe the government, industry regulator and the public must perform their required roles. Chuks Udo Okonta reports.

Why did the insurance industry failed to hit the one trillion naira premium target last year? This is a question the government, National Insurance Commission (NAICOM) and the public have being seeking for an answer.

While some industry observers believe the target was set without first attending to the basic variables that ought to drive it, others said the variables have been put in place and that it would take some time for them to begin yeilding results.

The Managing Director Riskguard-Africa Nigeria Limited Yemi Soladoye, who traced the problems of the industry from the inception, said the industry was left unattended to for many years and that in recent times, many initiatives have been put in place to unlock the oppotunities, stressing that the industry will soon hit the anticipated trillion naira regime.

He said: "I would look at how to unlock the insurance multi-trillion business in two perspectatives, because it would be necessary for us to know the cause, then it will be easy to know the solution. I want to divide it into two stages.

"In all sincerity, between 2008 and today, that the insurance regulator, NAICOM added Market Development and Restructuring Initiative (MDRI) to its operations, thing have never remained the same. Things have never be as it is now. The focus before was supervision and regulation. In so many countries, unless the regulator intensionally add market development initiatives, you would find out that the market may just stagnate. So, we were at that stage up to 2007, when the Commissioner for Insurance Fola Daniel came in.

"I believe he settled down by 2008, from where we started seeing a lot of difference. But still, because we spent about 90 years, at the same spot, the way I see it is that up till recent time or before the MDRI was brought in, the demand for insurance actually exceeded supply. Which I believe was as a result of infrastructural constraint."

He noted that the fact is that, there are many insurance companies in the country, even larger than the number in India and China, but at the same time, these companies are small when compared with international standard. He said the companies are only concentrated in two cities which are Lagos and Abuja.

He maintained that the industry in the past has failed to take advantage of opportunities provided by other sectors of the economy.

"When you look at other sectors in the system, like education, banking, religion and others, opportunities from them such as bancassurance, micro insurance, takaful were not harnessed. In the real sense of it, when you look at other sub-sectors of the economy that actually create demand for insurance, the supply from insurance industry could not meet the demand.

"In the same manner, even the supply that is insufficient, I see it very weak in depth and breadth. The supply we had was only to the government sector. All other areas were not really expanding. The moment Shoprite was coming to Nigeria, insurers must have been ready to collaborate with it. Megaplaza and many of such are there, but no collaboration was made with them.

"All the collaborating and opportunities that make insurance to thrive were not utilised by the industry. I also realised that service expectation exceeded service delivery and what do we get from there, customer dis-satisfaction. People knew the importance of insurance, but when it comes to giving them good service, it was not there. So, people were dis-satisfied.

"The distributions channels were quite few. What we got was that we find ourselves in a situation where retail was not utilised. The opportunity with the aggregators were not utilised. At the end of the day, it is only the brokers' market that was been utilised. I also feel that the products that were been given to the people, were off the shelf.

"We had laws, so many provisions in our laws, that made insurance compulsory, but the products were not there. New markets were ignored - micro insuance, takaful and annuity. All these were ignored. When you put all these together, that was the situation we found ourselves.

"Moreso, all these issues were why the MDRI was initiated. In the MDRI we talk about insurance companies collaborating with all other other sub-sectors. To the extent that we named 48 stakeholders that are to be collaborated with. We worked out ways that Fire Service across the states can help insurers enforce the compulsory occupier liability, because there was provision for them there. We talk of the retail market to the point of NAICOM and Chartered Insurance Institute of Nigeria (CIIN) to lower the entering requirement so that more people can enter the insurance agency job.

Having explained the reasons for the poor developement of the industry, Soladoye, highlighted the steps that are being worked on to unlock the market opportunities.

"I want to say, that as things stand presently, I can see an evolutionary process. It is already taking place, to unlock this trillion naira premium. Because, at the moment, insurance companies are now appreciating the importance of the retail market. Many of them are already going into it. But because it is a process, you might not see it now. In the last one year, a company like Mutual Benefits Assurance Plc, has opened 44 new branches. And I know other companies are doing same.

"Annuity is also taking the central place,as many retirees are embracing it. I have also realised that stakeholders are now asking for insurance on their own. In our last meeting with micro-finance banks in Lagos state, they were actually asking to have insurance products. The no premium no cover is now bringing respect and professionalism back to insurance, as insurers are now seen as professionals. Even the underwriters that went out of the country as a result of the capitalisation to establish branches abroad, have now realised the huge potentials in the local market.

"Now, foreign donor agencies are now funding market reforms. Some foreign operators like Old Mutual are coming into the country. The regulation is now appreciating the importance of non-traditional distribution channels in insurance market developement. All these are evolutionary process. Looking at our level, what we need is revolutionary process and for that to take place, there must be a trigger from within or a threat from outside the industry.

"Incidentally, I think we are going to have a trigger from within in the next four to six months. It would come in the area of service, product and marketing. A new approach is going to be dictated, and it would make all other insurance companies go back to the drawing board.

"In essence, I think the problems with the industry has been appreciated and they are being addressed in a revolutionary manner. The revolutionary process would take the industry in a supersonic manner into the multi-trillion naira regime. The trigger from within would actually un-lock the multi-trillion business. Once somebody takes the lead, and I know one company is prepared for that. Definately, within this year, each insurance company will have to go back to the drawing board and that process, will take us in a supersonic manner to the trillion naira business," he said.

The President, Nigerian Shareholders’ Renaissance Association, (NSRA) Olufemi Timothy, said the the industry regulator NAICOM, has to do more in the crave to unlock the market. "The regulator has not been implimenting policies like other regulators. For an instance, if somebody can walk into my office and demand for my tax clearance, if somebody can say before you take a visa, you must produce three years tax clearance, if somebody can say before you can drive a car, you must have a driver's license, I do not know why the government and insurance regulator cannot enforce the laws on compulsory insurances.

"I do not know why the government cannot prosecute those who do not insure their houses. I believe there is no house that is preventable from fire mishap. Looking at the compulsory insurances in our laws, is any body enforcing that law? The government must join hands with the operators to develop the sector for when the sector thrives, the government would get more taxes.

"Nothing stops the government and NAICOM from instituting a compulsory life insurance for every child that want to enter school in Nigeria. And the certificate would be used as a qualification for admission into schools. To un-lock the business, enforcement must be a priority, as it is the reason why people do not buy insurance just as we have in other nations," he said.

The President Chartered Insurance Institute of Nigeria (CIIN) Dr. Wole Adetimehin, said insurance needs a level of law enforcement for it to thrive.

He noted that the presentation of compliance certificate by individuals bidding for government's businesses, have helped in adherence to group life policy of the Pension Reform Act 2004.

Adetimehin, noted that for the public to comply with the compulsory insurances, NAICOM should ensure there is a law to enforce it.

President Nigerian Council of Registered Insurance Brokers (NCRIB) Mrs Laide Osijo, called for colloboration with the government in the enforcement of the compulsory insurances in the MDRI.

She noted that though NAICOM has helped make some insurances compulsory, effort should be intensified on the enforcement of the laws.

"I think the government has a lot to do. Some of the compulsory insurances are not enforced. NAICOM has tried in supporting the industry, by making some businesses to be compulsory under the MDRI. But the implimentation and enforcement lie with the government either at state and federal levels," She said:

NAICOM has said it would review the operational guidelines of the MDRI to align it, for better performance.