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Expanding Insurance Adoption Through New Microinsurance Licencing Regime

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The current move by the insurance industry regulator, the National Insurance Commission (NAICOM) to create a special licencing regime for microinsurance is expected to increase insurance penetration and adoption, especially, in the grassroots of the country, in the near future. ZAKA KHALIQ writes.

The federal government through the National Insurance Commission (NAICOM) recently launched a revised Microinsurance Guideline to cater for about 80 million low income earners in the country asb part of its efforts to increase insurance penetration among the grassroots in the country. The current insurance companies have, somehow, restricted the low income earners from the insurance system, running after conglomerates, government and juicy sectors, such as, Oil and Gas, Maritime and Aviation.

But with this new guideline, however, microinsurers are expected to simplify insurance policies, make it affordable for low income earners and the poor, thus, deepening  insurance acceptance in the country.

The new move, it was learnt, is expected to increase insurance penetration from 0.6 per cent it is currently to over two per cent in the near future, as well as increase the annual premium income of insurance industry to N1 trillion by Year 2020.

Investigation revealed that NAICOM has received applications from some microinsurance investors, with more applications expected in the coming weeks.

To this end, NAICOM, who regulates the microinsurance sub sector of the insurance industry has lowered the capital base of microinsurance outfits to make it easier for many investors to come in.

The revised guideline also classified  Microinsurance operation into Unit, State and National License.

For a National Insurer, such composite microinsurance operator is expected to be capitalised to the tune of N600 million, while N400 million minimum capital base is needed from a General microinsurance operators and N200 million for a Life  microinsurer. According to the guideline, national operators are allowed to have presence in at least six states within the three geopolitical zones of the federation.

For a State Microinsurer,  the minimum capital base is pegged at NI00 million, while the regulator expects such underwriter to operate only in one State of federation with at least three branches or office locations, each in a different Local Government Area.

For a Unit Microinsurer investor, such investor must be capitalised to the tune of N40 million, with operation in one location within a local community.

The regulator has therefore made it mandatory for these microinsurance outfits to make themselves visible and must be seen to be serving the low income earners grassroots.

To this end, the commission had warned these outfit to stick to their civic responsibilities, while failure would lead to appropriate sanction.

Microinsurance is an insurance developed for low income populations, low valued policies, micro and small scale enterprises provided by licensed institutions, run in accordance with generally accepted insurance principles, and funded by premiums.

Microinsurance products are insurance products that are designed to be appropriate for the low income market, low valued policies, micro and small scale enterprises in relation to cost, terms, coverage, and delivery mechanism.

Insurance Brokers, Agents Show Interest

There are strong indications that insurance brokers and agents are showing interest in microinsurance in their plight to i ncrease insurance penetration in the grassroots.

Investigation revealed that insurance agents are already nursing the idea of applying for microinsurance license. Some operators in the insurance agency system, it was learnt, are planning to pool resources together to meet the required capital base and apply for microinsurance licenses, wherein the partnering agents are major investors. This is because the capital base is too expensive for an agent to have one.

Moreover, since insurance brokers act mainly as an intermediary between insurance companies and the insured, some brokers are showing interest in being shareholders in some of the microinsurance outfits, by the time NAICOM issue licenses to stand-alone microinsurance investors. They have, however, promised to market the products of these microinsurance outfits, even though, some brokers are already selling microinsurance policies of some conventional insurance companies.

Speaking on behalf of brokers, the Executive Secretary, Nigerian Council of Registered Insurance Brokers (NCRIB), Mr. Fatai Adegbenro, said since insurance brokers are acting as a viable intermediary, there would be no need to apply for fresh microinsurance licenses, especially, since some brokers are already selling microninsurance products of insurance companies.

He did not rule out the fact that some brokers might want to buy stake in some of these microinsurance outfits by the time they come on board, but that, there is a percentage of shareholdings they can have in insurance companies, including microinsurance outfits.

Meanwhile, the Chairman-in-Council, Association of Registered Insurance Agents of Nigeria (ARIAN), Mr. Gbadebo Olameru, said the agents hope to collectively examine the recently released revised guideline on microinsurance and determine how to maximize opportunities therein.

The guideline, he said, is one of the best legacies the Commissioner for Insurance, Mohammed Kari, has done for the industry, adding that the guideline has provided a platform for professionals to contribute more to the industry, whilst encouraging professionals to take advantage of the initiative to better their lots and increase insurance penetration in the country.

Stakeholders’ Reactions

On his part, the Managing Director, Lancelot Ventures Limited, Mr. Adebayo Adeleke, urged professionals to leverage the guideline to deepen insurance at the grassroots, while cautioning the would-be microinsurance operators to avoid mistakes made by some microfinance operators, who left their core area of business to operate like conventional banks.

Speaking on this development, Deputy Commissioner for Insurance, Technical, Mr. Sunday Thomas, said, the categorisation and low capital base were meant to ensure influx of investors in this new microinsurance landscape, while allowing the conventional insurers to concentrate on their core business, thus, leaving microinsurance operation to these new outfits.

Thomas added that the regulator has the needed capacity to supervise these firms coming up, as there are plans by the commission to float more branches and recruit new staff across the country to have a closer monitoring of not only these microinsurance outfits, but also the conventional insurance companies.

He said the new arrangement will ensure that innovative Microinsurance products are designed for the low income market, low valued policies, micro and small scale enterprises in relation to cost, terms, coverage, and delivery mechanism.

He pointed out that the regulatory body is already receiving application from investors in a bid to deepen the insurance penetration, especially, in the grassroots, adding that, the contribution of the insurance industry to the Gross Domestic Products(GDP) will improve significantly as a result of this development.

In the same vein, the Commissioner for Insurance, Alhaji Mohammed Kari, has charged underwriting companies in the country to shift away from corporate to the retail segment of the insurance market.

Kari, while speaking at the First Annual Insurers’ Committee Retreat in Abeokuta, Ogun State, recently, noted that the growth of the industry lies in embracing financial inclusion products in the country.

According to him, “It is this realisation that led the commission into introducing financial inclusion products into the market a few years back. We are glad that Takaful and Microinsurance is now taking firm root in the industry. It is also noteworthy that insurance companies have started to make good attempts at shifting focus from corporate segment to retail segment of the market.

Earlier, the Managing Director, Universal Assurance PLC, Mr. Ben Ujoatuonu, applauded the categorisation of microinsurance licensing into Unit, State and National,saying, this will allow investors to play in the microinsurance market, depending on the level of their capital.

Stating that  insurance industry is now serious about penetrating the grassroots through microinsurance, he noted that the highest percentage of the Nigerian populace lives in the unorganised sector of the economy, where microinsurance outfits are expected to play in.

According to him, “The capital base is going to give opportunities for investors to come in, but there must be a defined strategy and products that will reach low income people so that we, as an industry, will reap the benefits of the huge population of this country. This business line will lead to rapid insurance penetration in both rural and urban areas and increases insurance contribution to GDP.”

The Future

Advising microinsurance outfits to make their products simple, seamless, well-articulated and in line with the financial inclusion objectives, Ujoatuonu said, doing so will allow people assess them and get good values from these micro products.

He believes microinsurance sub sector of the insurance industry will be a toast for conventional insurers, because it is safer and claim is not as high as in the conventional insurance business.

He said: “If microinsurance is well articulated and followed, even the conventional insurers may begin to focus in that direction because there would be a lot of revenue from there, cost in the long run would be lower and it would make your balance sheet healthy. The claim is not as huge as in the conventional insurance, which makes it attractive.”

However, the managing director, Saham Unitrust Insurance Nigeria Limited, Mr. John Ijerheime, believes there is no need for the government to separate microinsurance from the conventional insurance business, calling on the regulator to restrict microinsurance operation to conventional insurance system.



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