Underdeveloped credit system with its attendant failure to bolster demand for consumer goods and services has been identified as a major factor slowing insurance penetration in Nigeria.
Analysts say real intermediation by banks will encourage customers to seek for credit facilities that would require insurance cover. They add that the absence of this intermediation is adversely affecting insurance penetration in the economy.
Ope Oredugba, chairman, Claims International Limited, who spoke on the sidelines of a seminar on ‘Retail Insurance Business – A Begging Challenge’ in Lagos, said efforts must be geared towards reaching out to the emerging consumer group with the kind of products that would meet their development needs and also be reasonably affordable.
Other stakeholders who spoke at the seminar organised by HR Nigeria Limited, consultants and actuaries, said the credit market needed to be opened up to assist in bridging the penetration gap.
Nigeria’s insurance penetration, according to recent statistics, stands at an abysmal 6.5 percent, while its contribution to GDP is less than one percent with a population of over 170 million people. Though the current market penetration is extremely low, analysts say the demographic profile demonstrates a clear need for insurance and potential for market growth, which requires strategic efforts to unlock.
According to them, other markets within and outside Africa succeeding in insurance are strong in the offering of credit facilities to the populace, and this in itself creates an immediate need for insurance.
“Insurance provides support for mortgages, loans, car financing, as well as asset acquisition which do not only drive purchases; it also increases penetration for insurance and subsequently, economic growth,” said Jim Roth of Leapfrog Investments.
Roth further stressed the importance of understanding the “target market”, stating that compulsory insurances, mobile insurance as well as partnerships were distribution channels which succeeded in other markets.
They stated that credit in itself creates an immediate need for insurance, support for mortgages, loan acquisitions, car financing as well as asset buying, particularly household equipments.
Looking at other challenges bedevilling the insurance industry, they observed that there is a perceived lack of confidence in the insurance industry – the key concern resonating being that “insurers do not pay claims”.
Beyond that, they also identified the lack of regulatory support for non-traditional distribution channels – namely “corporate agents” for insurance e.g. mobile network providers and bancassurance.
This is important and needs the attention of the National Insurance Commission (NAICOM) to liase with the Central Bank of Nigeria (CBN), otherwise achieving penetration like other markets would be difficult, Wole Oshin, managing director, Custodian and Allied plc said.
Another successful approach undertaken by Leapfrog to improve the perception of trust of the insurer was by partnering with a well known, trusted non-insurance brand. He however faulted the traditional agency route of selling insurance, that is currently the major model here.
Though the regulator came under fire by many practitioners who felt that the best way to invoke change was by regulatory changes – in particular in becoming less stringent on licensing of alternative distribution channels, George Onekhena stated that the commission was already looking at distribution, and may soon come up with a policy on the development.
Onekhena however stressed that a major challenge facing the development of the industry is premium leakages, calling for strategic efforts by operators to reach out to the mass of the uninsured public.
“Don’t forget that poverty is a major problem in our society and that many cannot afford to buy insurance, urging that a strategic effort to empower the populace would bring them closer to insurance, Onekhena stated.
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