An insurance expert and representative of Leapfrog Investment Limited, Dr. Jim Roth has advised Nigerian insurance operators to play down the use of the traditional agency channel for distributing retail insurance products and services.
In the alternative, he said operators should design new retail insurance channels including partnering telephone service providers, churches and trade groups, among others to effectively reach their target customers with their products.
Roth gave the advice at a seminar organised by the HR Management Limited, a firm of actuaries in Lagos recently. Reflecting on the experience of his organisation in the emerging markets of Ghana and Asia, Roth said compulsory insurance was used to significantly expose the population to the needs and benefits of insurance. This made insurance an "easier sell" in such markets, he stressed.
The traditional agency distributing channel, according to Roth, is not suitable for retail insurance business. He encouraged operators to design new distribution channels with wide reaches and customer base, including partnering mobile telephone providers, churches and other affinity groups. He also underscored the importance of understanding the target markets and aligning their deeds with the strategic objectives of one's organisation.
"The poorest end of the market was not a viable target for insurers, given the low premiums available; the market reach would need to be extremely wide and cost base extremely low in order to make any level of profit.
"The most important market segment is the emerging middle class, those who have begun to acquire their own assets and the key for success here is products most likely to be valued by this market, in addition to being simple and offering affordable products such as hospital cash plans and funeral cover," Roth said.
Meanwhile, the Deputy Commissioner for Insurance, Mr. George Onekhena, said the National Insurance Commission (NAICOM) has started addressing issues, which are always of concern to stakeholders in the industry.
He highlighted the initiatives in the pipeline that were expected to bring about change in the industry including the Vision 20:2020 and the public enlightenment programmes.
He recalled that the Vision 20:2020 was designed to make the insurance industry "the safest and most diversified financial system among emerging markets, supporting the real economy."
The deputy commissioner also noted that the mass insurance enlightenment programme aims at shoring up the deliverables of insurance operators and improving product offering and market perception generally.
The insurance market conduct framework was also developed in consonance with international best practice and focuses on policyholders' protection, Onekhena added.
Some other stakeholders said they were concerned about lack of regulatory support for non-traditional distribution channels, including corporate agents and bancassurance.
They said these channels were being explored by operators for reaching the mass markets in recent times even as the regulator have not really been encouraging them in this regard in terms the needed regulatory approvals. Questions were also asked on whether the market actually understood the benefits of insurance and it also confirmed that recent surveys indicate that insurance does not make the shortlist in terms of dealing with insurable events, such as the death or illness of a breadwinner.
They noted that the use of personal and family savings, borrowing, selling assets and accepting donations from friends and family were the most common forms of coping with such losses were favoured above insurance.
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