As part of efforts to urgently diversify the economy and stimulate employment generation, the federal government has introduced a three-year agenda to transform the insurance sector. Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala recently unveiled the road map that could have Gross Written Premiums (GWP) in the sector increased to N1 trillion from the current N300 billion, within the next three years and further to N5 trillion in the next decade.
The federal government intention is to replicate the success achieved in both the banking and pension sectors of the economy within the past decade. The idea is to liberalise the insurance sector for enhanced private sector involvement as well as the creation of huge job opportunities. Okonjo-Iweala had stressed the need to unleash latent energies in the insurance industry to create more jobs and boost economic development as one of the strategic actions to bridge the gap caused by the current economic challenges facing the country as a result of dwindling oil prices.
Part of the current strategies has been to further empower the National Insurance Commission (NAICOM) to enforce a compulsory insurance scheme across the country as well make insurance compliance a key requirement for accessing some benefits from government, including renewal of documents. According to the Commissioner of Insurance and NAICOM boss, Mr. Fola Daniel, misconceptions and lack of awareness constitute a major limitation to the growth of insurance in the country.
However, infractions on the part of insurance operators with dismal records of claims resettlement have helped to dampen the fragile confidence the people have in insurance products. In the words of Okonjo-Iweala, the insurance sector in Nigeria is still characterised by "lack of consumer trust, a fragmented industry with some weak and insolvent players, low enforcement of compulsory insurance policies, lack of professionalism by some agents and brokers in the industry, and a general shortage of skilled professionals in the entire industry."
This has no doubt limited the huge potential in the sector as ordinary citizens who make up the huge market in the informal sector of the economy no longer have regard for insurance. For instance, the current third party vehicle insurance cover only serves as ceremonious document to satisfy regulatory and compliance demand for vehicle ownership. No claims are ever paid in the event of an accident, however minor it is. Worse still, no refund is ever made to policy holders if there were no incident. It is however welcoming to hear that as a way forward, policies would now ensure that people can return a policy if it does not suit them and get their premiums refunded.
If anything, efforts to boost confidence in the insurance sector by ensuring improvement in payment of claims which is currently estimated at only about 25 per cent against 90 per cent in the United Kingdom is welcoming and would enhance the industry's contribution to Gross Domestic Product (GDP) which is currently at about 0.4 percent. However, in achieving the above objectives, institutions like the Federal Road Safety Corps (FRSC), the Physical and Inspection Section of the Federal Ministry of Works, PENCOM and other regulatory institutions must be alive to their responsibilities. There is also the need for the expansion of the market in the rural areas as obtained in other African countries like South Africa and Morocco other countries.
Finally, in a country where the level of financial literacy is still poor, embarking on massive awareness campaign to sell insurance benefits as well as disabusing people's minds of misconceptions about insurance is a major way forward. This would ensure that people properly understand and appreciate the variety of products which would be offered in the ongoing efforts to revive the sector.
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