Odukhale : Retail Insurance is the Only Way to Develop Nigerian Insurance Industry

Mr Oye- Hassan Odukhale is the Managing Director of Leadway Insurance LTD. In this interview with Ebere Nwoji,  he spoke extensively on  burning issues in  the insurance industry especially the  importance of developing retail insurance in Nigeria excerpts.

You have just pushed a unique insurance product to the market , the Family Benefit Plus, which is a kind of funeral expenses insurance cover and in retail insurance category, what informed your effort in this direction now?

Insurance is a business  that you do with a large number of people. You want to make sure that   you touch people. One of the things we have been accused of  in Nigeria is not reaching large number of Nigerians.That is low insurance penetration in the country.
You penetrate insurance better  by selling the product generally  to a larger number of people.Even the commissioner for insurance himself agree that we have not adequately penetrated the market.

Nigeria has a population of over 175 million people  so where we look at it that the market is tough, people outside Nigeria see it as opportunity because they look at the number of people we have and if you can sell products to them you know you have penetrated the market. So   it is a matter of time we are looking at it  also that we need to look at our backyard .There are people to reach there,I look at it that  we in insurance industry , we have been a bit lazy  I will be frank with you .We are not trying to reach people enough with insurance. When it comes to overall premium income of insurance industry,it is not all that bad but most of them come through commercial insurance because you can sell one policy to an organisation for a couple of millions.

You need to sell probably 1000 policies to individuals to make that same  level of premium and previously we had challenges of bad payments system because you want to sell in a way that you can efficiently collect your premium. Now it is getting better but we are still struggling.

You Cannot say you want to post your cheque from your house to insurance company, you are not sure of the safety and if you  have to use  a dispatch  to go and collect N2000 from Ajegunle, you know the expense  of using that  dispatch.
So we have a lot of things  that have not worked in our  favour and when you  use agents, some agents can be very funny and that also can affect your brand. Sometimes they will collect the premium they will not remit it to the company then you have insured that is not happy with you. So we have a lot of challenges but still is not enough reason for us not to try and take advantage of the opportunities that are just lying at our door steps in terms of market in Nigeria, but I think we are all waking up to it.

Talking about retail market , your  colleagues out there complain that it is expensive what is your own experience?

Retail is very very expensive  but is the only way out.If you don't face it now, you have to face it some other time and it takes a while to reach a critical mass in retail  but in terms of investment, it is very expensive.Now we believe in Leadway, that  if  we don't do it  now when will you do it because one day you have to do it. You have to look at  the retail market that is a case for you.Corporate insurance with time may reduce because there are a lot of mechanisms in term of managing risks but the retail person, the man that has one car must insure that one car because that is the only car he has.But the man that has 50 cars, to insure one may be hard because he has other cars. That is how to relate cooperate  to individuals. 

So the person that needs insurance more is the individual, am not saying cooperate don't need insurance, they need insurance but their own insurance is more sophisticated  but the basic insurance: your motor, fire, house, children 's education is mostly individuals but to reach them, that is why I said  reaching them, collecting premium is expensive.

So what is the way forward?

Am not saying because it is expensive we will not face it, yes we will face it.Now when you see some foreign companies coming to Nigeria,  that is what is attracting them.They are not coming to Nigeria to insure NNPC, no they are not interested there , they are coming to Nigeria to insure people like you.That is what is attracting them.they deal with so many people with low insurance density they know it is going to be expensive initially but when you overcome it you will just be cruising but to reach that critical mass.

In Nigeria,we must reach that critical mass,people must feel our impact as an industry , companies feel our impact because we pay their claims, but individuals will  say insurance companies,they don't pay claims  but companies say we pay claims because we are not reaching them they are not feeling our impact enough, now  if people start buying  policies from  insurance companies and they are getting paid or whatever, that is how the news will spread and they will share with their friends saying ah!these people are paying o!. For instance,now you buy  insurance of  this Family Benefit Plus  and something happens to your family and you get paid and you have a smooth burial,you will tell your friends that  ah! this thing worked for me and that is the best advertisement .So it will get around.

So if you want to share your latest experience in terms of retail insurance what will be your opinion?

There is still work in progress, we are  not yet there, but we are ready to face  it squarely.  There is mass premium in retail insurance for instance, in corporate you con do premium of N1billion but for you to do N1 million in retail,  it will take you a long time, it is a  lot of  policy count. You have to issue a lot of policies. But overall retail can be more profitable when you get the right number .Also it smoothens your experience.If yo are insuring one big factory now,if there is a claim, you know how much you will pay.

But if you are insuring retail, how much claims can you have.Also in retail insurance, companies retain more premium because if you are insuring your car  and your car is N5million,  Leadway can retain it.But if Leadway is insuring a plane for $5 million   Leadway cannot  retain a premium of $5million .  So if you pay us the premium, it is going to the reinsurance.So if you work out  a premium  retained in commercial insurance and retail insurance, you see that in retail insurance, you are better off.For instance, if you are a commercial insurer and you are doing a premium  of N1billion you may probably retain   N300million  premium,am just talking of the curve but if you are a retails  underwriter, if you do N1billion you may retain N900million that is the difference.
Bancassurance guideline was recently released after it was suspended, what opportunities does that offer to insurance:

I think what the CBN wanted to achieve was to ensure that the banks are  not exposing their balance sheet to any insurance risk at all and which in some experience we have seen it about to happen or nearly happened.They want to make sure that it is very clear  that the risk lies with underwriter  that the banks are not exposed .I think that is the genesis of that circular to me .

The CBN is saying hold on, you are a banker yes you have clients let's study it very well ,we will allow you to expose your clients to insurance companies, but the risk rests with the insurance companies totally no risk should in any way or any form, be in your books and if things are not very clear,there can be mistakes.In Leadway we have experienced it with one bank particularly we have to accommodate  the claim because it was not tidy and it was their fault and when I was talking with the MD of the bank he said  wao! I did't know this thing can create problem for us this way  that was  about the time Central Bank suspended it.
So things can go wrong if they were not well defined and that is what CBN is trying to guard against.

But there is a provision in the guideline that says banks are only limited to two insurance companies meaning that if a bank can accommodate two, insurance companies can go to a number of banks, it was not specific how many banks insurance companies can sign up to.

No insurance companies can sign up with  all the banks . If you are one of the two  the banks want to sign up with,what they are saying is that they want the banks to be limited to two partners and I think it is just the beginning.You know when you come up with new things,you want to study it gradually and see how it goes  you make it a bit tight but with time you will release it  so they are just limiting the banks to two and I don't think there is any problem with that.

You don't think it could place the banks in such a position that insurance companies  will have to cluster  or compete to partner with banks?

No  they are just saying that one bank can have  not more than two insurance partners, any two insurance partners .What they are  also saying is that let the banks also be able to compare not just be confined to one insurance company because there is value in competition for the consumer. So they want the banks to be able to relate with two insurance companies not just one. So I think that is what they are doing and I don't think there is any problem with that.

The first quarter results are coming  in and some of the results are not too robust showing that probably the industry didn't do well.The group life insurance ,police pension have not been paid  why is the result like that ?

You have said it, the premium has not been paid, and it cannot be ignored.We also  know  that there is a challenge in the economy. Government must set priorities for what they do but I believe that very soon they will look into that area. There have been challenges, you know our main source of foreign revenue income is oil and there is deep in the oil price so it affected everything ,it affected government revenue, you know many state governments have not paid salaries, so you  want to resolve these things before you say you want to pay insurance premium.But overall every business go through turbulent times it cannot be smooth and selling every time you must go through some hard time, the economy gets through hard times, we pray that it will get better again.It cannot just be one way traffic, there may be times you have challenges in every industry.

How soon do you see recovery?

We have a new government coming up and we all pray that it will  find solution to all these problems we are facing in the country. Look at the cue  of petrol.But It is for every body not just for the insurance industry, it is for the entire economy and insurance is a reflection of what is happening in the economy we don't create business we only insure business so if the business is not doing well, what are you going to be insuring, we are the mirror of the economy so is only when the economy is doing well  that we do well also.If the economy is not doing well  what are we going to be insuring.

You are a major player in life insurance and pension.Both offer benefits to retiree s  on the platform of annuity and  programme withdrawal and Nigerians are at liberty to choose between the two, what is your experience in annuity and  programme withdrawal  pension market?

It depends on what the insured wants. It is like you want to buy a car, you want to buy Toyota or Honda,  it is your choice, it depends on what you want  you cannot say this product is a better product .programme withdrawal, sets of payment coming over a period guaranteed .Annuity  may be  for life  so they are different programmes  even in some countries abroad where they used to have annuity alone , they are now encouraging programme
withdrawal also. So let the people make up their  minds on what they want. Every market should give people opportunity of  a choice. So I think is good for our system to have annuity and programme withdrawal let the people make up their mind on what they want. And they are not very complicated programmes so you can read it. Get conversant with whatever you want. So there is space for everybody.Some people are happy with their programme  withdrawal, some people are happy with their annuity.

Each time you discuss with players in other Industry like banks,they keep on saying that insurance industry has a lot of fringe players.They feel that the best way to grow the market is consolidation  through mergers and acquisitions what is your view on that?

I think  you may  not  be totally wrong if you say that we still have  a good number of insurance companies.But you know sometimes in some economies,you have insurance companies that want to do only one  mono product.  Now should their capital be the same with the ones that want to insure plane?  I don't think so. So it is not  just size , you may have your niche, like you know in the banking now you have national bank , you have  international bank with different capital base, an insurance company may say  I want to do this kind of product only, I think they should be able to have choice you do that one product, you specialise on it and be a master on it.

The  regulator prefers industry advertisement to product advertisement, what s your position on that?

When you talk about insurance product, you  are talking about insurance industry.
It is the same subject.when you talk about insurance industry or say buy insurance, it doesn't really hit it until you talk about a product, when you talk about the product people can have a kind of connection with the production because that product is the something that suits them. But if you just talk about insurance, it  is okey but you may not get a kind of impact like when you talk about our Family Benefit Plus.Now you may say do I need this product or not,you may ask yourself this kind of  question but when you talk about insurance, you may say okey insurance  but I will tell you that  as much as insurance companies  advertise any  oftheir products, it is a plus for the insurance industry.

There has been a lot of reforms in the insurance industry particularly from the National Insurance Commission and one of them is the No premium No Cover and the Risk Based Supervision   I will like you to access how far this has impacted on the industry?

I think we have a very strong vibrant NAICOM now and I think most of us in the industry are very happy with our commission, they are pushing us very hard but they are pushing us to the right direction. Now we have overcome the issue of no premium no cover, that has been an issue the insurance industry has been battling with for years now. But now the commission has come up with something that is working beautifully well.

Yes you  still see a bit of outstanding here and there or whatever but it is something we can manage.  Now Risk Based Supervision, that is where we are all going into right now, that is where  the world is  also right now, because you should look at the key risk that affects a particular company and target that area, that is what they do abroad right now. You know, you may look at this extra company,they do a lot of this product, let me look at that, are they doing it very well, let me focus on that and you narrow on that and look at it very well.

Now for instance, if you have a new product, lets say annuity  is new in the Industry and you have motor business which is as old as it is , you are not going to spend the same length  of time inspecting the insurance company's book on motor and on annuity business, that is it so you focus on areas where there is competition of risks as you see it.So when you are inspecting or you are looking at companies, you look at companies differently because you look at areas  of the company where you see challenges or where you think that you need to work on and you focus on that  area.If you go to another company they have a different issue, you focus on that area so I think it is very positive and it is going on right.

The issue of capacity in oil and gas business underwriting in Nigeria has been a recurring issue even with the oil and gas pull formed by the industry. In the face of the pull can you say the Industry can underwrite oil and gas business 100 percent?

Every business that comes to Nigeria we underwrite hundred percent.When we issue a policy in the market, we sign the policy hundred percent  so I don't see the need for cry about oil and gas  its not  different from like when we are insuring  a big building, or a marine business or a marine hall business which we sign hundred percent also so I don't see the cry about oil and gas. In every business we do reinsurance and where we have the excess that is above our capacity, we reinsure the business but we do the business hundred percent.

What is the future of the industry like More competitors are coming into the industry  I mean foreign  players are coming into the industry what does this portend to the future of the industry?

It is a bright future when more people come.they will throw more capital into  the business and make the business more competitive and  tough and they will raise the  barrier to entry which is good because they are coming with a lot of capital. So it will take the industry to a different level. So I don't see any thing negative in that.

The foreign players, are they in any way a threat to the local players ?

I think we will all co exist together. It  will not be easy except if we   too are very lazy but at the end of the day, the consumer will get a better  product because there will be competition but if the local players are not up to it, okey that is their own challenge. And if they don't do the business very well, that is their headache all these things are just for me looking at the consumer, because if you are buying any insurance product now, you are buying it from a local or foreign company what do you care for when you have a claim, your claim is paid,is that not  what you care for?  that is what matters, also there will be regulation and the regulators will like to make sure that people play by the books.It is good for us to develop  strong  local companies because our companies can also go abroad and be champion abroad but we should get there but is not just by saying we want to play because you are a Nigerian you must do it properly, you must have a structure  and build a good company is possible but not  just by fiat, you must do your product very well respond to people very well.

Leadway used to be a company in Kaduna before  we started from the north, we were local company in the north  in Kaduna but we came here,we have to prove ourselves  to also exist here  and be accepted in the market here.So be it local, be it international be it anything you must serve the people properly, you must sell your product so well that they will believe in you  and deliver good service that is the only thing that will take you there.