As Nigeria celebrated its 56 years of independence recently, ZAKA KHALIQ chronicles events in insurance industry in the last 56 years
The birth of modern insurance in Nigeria is closely associated with the arrival of British trading companies, which facilitated inter-regional trade in the country.
These foreign companies, therefore, needed to deal with some of their risks at a local level and this changed the shape of the insurance sector in Nigeria.
At the time of Independence, there were twenty five insurance companies in Nigeria. Only four of these were owned by Nigerians. In 1961 the J.C. Obande Commission report, a milestone in the history of insurance in Nigeria, was released. This led to the formation of the Nigerian Department of Insurance as part of the Federal Ministry of Trade. This department was later transferred to the Ministry of Finance. The Insurance Companies Act of 1961 made it necessary for insurance businesses to be grouped into various classes for registration. According to provisions of the Act, the office of the Registrar of Insurance was created. The purpose was to manage insurance practice in the country.
In 1976, an Insurance Decree was released. This gave authorization to insurers, transfers, modes of operation, administrative, enforcement guidelines and penalties. By this time, the number of indigenous companies had outnumbered the foreign insurance companies.
In 1997, the National Insurance Commission(NAICOM) was established. It was given the duty of overseeing and organizing insurance in Nigeria. This body is functioning as the main insurance regulator in Nigeria.
Between 1997 and 2007, noting drastic happens in insurance industry.
However, between 2006 and 2007, the major form of recapitalisation exercise, orchestrated by the National Insurance Commission (NAICOM), took place in insurance industry, when companies were asked to upgrade their capital base or cease to operate.
But thanks to the recapitalisation exercise which started in 2007, insurance companies in Nigeria increased their capital base from N150million for Life insurance license to N2billion, with Non-life licence moving from N200 million capital base to N3 billion, while composite insurance licence which was being issued for N350 million before recapitalization, shoot up to N5billion. Four reinsurance firms were equally asked to recapitalise from N350million to N10billion during the exercise.
Nevertheless, that commendable act of recapitalisation, at least, enhanced the capacity of the insurance industry in the country to absorb risks and fufil their obligations, whenever there is any genuine claim.
Meanwhile, NAICOM recently announced that it is set to quit compliant-based supervision and embrace a new supervision template, known as Risk Based Supervision (RBS), as according to it, this is the latest supervision model. This is expected to commence any moment from now.
Following the recent economic recession in the country, insurance industry is witnessing premium decline, especially in the last nine months, as a result of the sudden drop in disposable income and profit levels of both companies and individuals.
Managing Director, FBN General Insurance, Mr. Bode Opadokun, said most insured Nigerians have resolved to paying their premiums on monthly, quarterly and bi-annually, at least, until the economic position improves.
Speaking in an exclusive interview with Leadership at the weekend, Mr. Gbadebo Olameru, President, Association of Registered Insurance Agents of Nigeria (ARIAN), said from independence till now, insurance practitioners have been contributing to the growth of Nigeria as an economy, even though, the contribution is virtually not enough.
Unhealthy competition among insurance operators, rate cutting, as well as too much focus on government businesses, he said, have been the industry undoing, noting that the population of 170 million portends a greater opportunity for a thriving insurance industry.
He urged industry players to be innovative in product designs and marketing during this recession, so that they can come out of it stronger, even though, as he felt the recapitalization of the industry could not have come at a better time than now.
Meanwhile, the multi-million insurance rebranding project is set to commence this month, after all financial commitment to the project ended on October 1st, 2016.
The rebranding initiative is a jointly funded by the National Insurance Commission (NAICOM) as well as the 58 insurance companies in the country.
The insurance rebranding project is an innovation of the Insurers’ Committee aimed at deepening insurance acceptance and penetration through massive insurance education and awareness across all states of the federation, even though, Lagos and Abuja are expected to be the pilot states.
The Head, Media and Publicity Sub-Committee of the Insurers’ Committee, Mr. Oye Hassan Odukale, said the first phase of this multi-million Naira project will use the online medium such as Facebook, Twitter, among others, online platforms to create awareness on the need to subscribe to insurance products and services, following the rapid increase in the number of Internet and online users in the country.