There are enormous potentials in insurance industry, but operators, regulators, investors, government, among others must sit up to unlock the potentials, ZAKA ABD-KHALIQ writes.
According to a recent report by Fast Market Research – an American market research firm, Nigeria’s insurance industry was projected to grow at a cumulative average growth rate of 7.5 per cent between 2017 and 2018.
This growth trajectory portends several positives namely: relative stability of financial services, favourability of fiscal policy frameworks and long-term sustainability of the sector.
However, despite this growth, there still remains huge untapped potential for the sector, as large percentage of the Nigerian population remain unbanked.
Hence, it is unsurprising that just about one per cent of the total Nigerian adult population is insured.
Harnessing this extra potential, according to experts, is now the imperatives for the next big step and long-term growth of the Insurance sector.
With an estimated insurance penetration rate 0.4% and only 1% of the population holding any form of insurance policy, the opportunities in the Nigerian market are enormous.
Crucially, with the emergence and increased integration of the services sectors, which are now mainstay in the nation’s productivity profile, the managing director/CEO, Infrastructure Bank PLC, Mr. Adekunle AbdulRazaq, said, it is clear that the Nigerian economy is expanding and diversifying, as such risks and risk events are evolving, which suggests that there is a growing need for companies and individuals alike to seek protections against unexpected losses.
The ability of the Insurance Sector to craft and realign products to the emerging insurance needs of businesses and individuals alike, according to him, will be instrumental to repositioning the sector for rapid growth, unlocking latent potential and sustaining the economic recovery and long-term growth.
relevant stakeholders could be alive to their duties and responsibilities, experts, who spoke at the National Insurance Brokers’ Conference and Exhibition organized by the Nigerian Council of Registered Insurance Brokers(NCRIB) in Yaba, Lagos at the weekend, believe this step could unlocking the potentials of the industry.
The President, NCRIB, Mr. Shola Tinubu, said Nigerian Insurance Industry has continued to be bedeviled by numerous challenges making it an ‘endangered profession’.
Aside from the need to comply with gale of changing global regulations and laws affecting its operation, he stressed that the industry is grappling with its internal challenges of knowledge and professionalism amongst operators with their attendant negative implications on the image of insurance sector. Despite these challenges, he said, there still remains a glimmer of hope in the horizon that the industry remains the last hope of the common man.
“For as long as risks remains part of human endeavor, insurance would continue to be relevant. What we need, therefore, is to be apprised with survival and thriving strategies, especially at this time,” he pointed out.
The President, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Iyalode Alaba Lawson, said there is growing need for more information and awareness about the benefits of insurance, especially, in the grassroots, adding that everyone must be more enlightened about the need to be insured irrespective of means of livelihood. “You could be a farmer, teacher, doctor, trader or any other; it is a fact that the Insurance Industry can offer a better landing in times of emergencies or mishaps,” she stressed.
Stating that about 87 million Nigerians are in extreme poverty, she called on relevant stakeholders to seek more creative ways to maximize the human and natural resources we have as a nation while ensuring protection from financial loss or compensation in the event of contingent or uncertain loss.
Investors or entrepreneurs who give no regard to insurance, she stated, often lose a lot in the event of disasters such as floods, fire, theft, among others, saying, there was the need for the Insurance Industry which is identified as one of the sectors who have the panacea to poverty alleviation, to provide risk management packages to hedge against loss.
The Managing Director/CEO, Infrastructure Bank PLC, Mr. Adekunle AbdulRazaq Oyinloye, said insurance sector has the potential to serve as a catalyst and enabler for unlocking the vast flow of capital and private investments that are sorely needed in practically all facets of the nation’s economy.
Insurance sector, he said, is ideally suited to serve as the nexus between capital providers (whether debt, equity or quasi-equity) – on the one hand and the broad range of real asset managers which cut across the real and service sectors – on the other hand.
This, he stressed, was because the investment decision-making process is primarily concerned with identifying, appraising, mitigating and pricing risks associated with such investments; for which the Insurance Sector is best-suited as the Default Manager of Risks, duly equipped with the tools and techniques to spread and diversify risk portfolios.
With the long-term nature of life insurance, retirement savings and pension annuities, he pointed out, that the Industry is well positioned to participate in infrastructure financing of Private-Public Partnership (PPP) projects, given its need to match long-term liabilities with long-term assets.
In today’s low-yield environment, he said, insurers are under increasing pressure to source additional investment return, stating that Infrastructure investments may present an opportunity for insurers to achieve the required yields to cover future liabilities and provide competitively priced products.
The Insurance Act 2003 and the National Insurance Commission Act 1997 in particular, he said, require better implementation and enforcement.
To him, “For instance, Section 64 of the Insurance Act makes compulsory insurance of building under construction which is more than two floors, while the general implementation of the Insurance Act has left more to be desired. The limitation of liability on third party insurance is too small in line with the present day economy. Several sections of the insurance Act have also been badly implemented. We cannot overemphasize the need for an adequate legislation and policy to create operational environment.”
The formulation of economic policies which will give room for investment, according to him, will also help the insurance industry. Where there are investment friendly policies, insurance companies would also be able to make long term investment for better returns on such investments, he said.
The first step of changing the face of the industry, according to him, is ensuring an exceptional customer experience. Insurance companies must find a way to provide customers with an internet based self-service insurance platform where customers can view policy coverage, pay bills, make changes to policies, submit claims and check the status of claim progress, even as brokers should be able to obtain online quotes, proposal and plans, design for their customers.
Insurance companies, he said, must also allocate a percentage of its budget to Continuous Professional Development to keep staff abreast of professional standards and practices, while insurers must also find ways to sensitize the populace about the use of insurance.
The government also has a role to play in this by making relevant laws that will help make certain insurance policies compulsory and harsh sanctions for non-compliance of same, he pointed out.
“Essentially, for the Industry to survive, thrive and attain its potentials, the government must be sincere in promoting a favourable environment that will allow the financial service industries thrive. This will help increase the operational efficiency of the insurance industry. Additionally, the Industry must make concerted effort to play more actively in the real sector of the economy,” he advised.
On his part, the Chairman, Nigerian Insurers Association (NIA), Tope Smart, said, insurance sector is seriously under threat, calling on the players to redefine their model of operations by embracing professionalism, good corporate governance and best practices as well as moving with the current trend of events in the world especially in the area of technology.
“If you look at our environment, the environment is so harsh. Some of the policies of government are against insurance. If you critically look at the tax law, it will tell you that insurance industry is not favoured. A situation where the tax payable is based on gross premium without taking into cognizance other expenses insurance companies incurred is very abnormal,” he pointed out.
He added that; “If you also look at ourselves too within the industry, talking about some of the things that is happening, we need to do a lot, we have all kinds of challenges within us. We have a market that is not disciplined. All these are threatening the survival of the industry. We need to look at all these and for us to survive and for us to thrive, we must address these issues urgently.”