Nigeria’s insurance industry has continued to maintain its growth trajectory even in the face of huge challenges. This is even as experts foresee a better 2019. DAVID AGBA reports.
The Nigerian economy had suffered recession occasioned by the sharp drop in oil price at the international market and this affected all economic indices. The nation was able to come out of the recession in the later parts of 2016, according to the Federal government of Nigeria.
Nigeria, as a nation operates a mono-economy with total dependent on resources from crude oil export for its survival.
Insurance industry being an integral part of the economy was not isolated from the negative effect of the recession which affected virtually all sectors of the economy with a sharp decline in the citizen’s purchasing power resulting in increase in poverty rate.
But, the situation notwithstanding, the industry has continued to weather the storm to maintain growth as reflected in its third quarter financial report, where it reported a 22 percent growth in its gross premium income over that of the same period in 2017, the final figures for 2018 is expected to be significant.
Year end ceremony
Speaking at the 2018 end of the year workshop organized by the National Association of Insurance and Pension Correspondents (NAIPCO) in Lagos, the Commissioner for Insurance, National Insurance Commission (NAICOM) Mohammed Kari said: “The gross premium as at the third quarter was N315 billion, a 22% increase over the N258 billion for 2017 in the same period. The Gross claim figure for third quarter 2018 was N143 billion, a 30% increase over the N110 billion reported for the same period in 2017.We anticipate the final figures for 2018 to be significant indeed.”
Although the industry is contending with myriads of challenges ranging from lack of regulatory compliance, unhealthy competition/ unwholesome practices, low capital base, lack of public trust and lack of product that is tailored towards the needs of the populace.
Other issues the industry is facing include lack of qualified manpower, especially in the special risks such as oil and gas, aviation, marine as well as dearth technical capabilities, non-payment of claims by some insurance firms and these have been the bane of the growth of the industry over the years.
Confirming these, Kari, had said that the industry is characterised by inadequate capital, inability by some firms to pay claims promptly; dearth of appropriate human capital and professional skills; poor returns on capital; too many fringe players; incidences of rate cutting and corporate governance issues.
He listed other problems of the industry as insurance premium flight; lack of innovation in product development; lack of awareness on the part of consumers on the suitability of insurance products and low GDP per capita figures, among others.
Contribution to GDP
Industry analysts believe that if all these issue raised above are taken care of, the industry will perform creditably well to contributing significantly to the gross domestic product. They called on the stakeholders to rise to the challenges by ensuring that all hands are on deck to address these issues and liberalize the industry.
They also called on the regulator and the players to work as a team instead of working at cross-purposes against each other to ensure cohesion, collaboration and synergy that will engender the necessary growth needed in the industry for it to contribute meaningfully to the nation’s growth.
Lagging behind in Nigeria
In developed economies such as the United Stated of America (USA) , United Kingdom (UK)l South Africa and Egypt even in some developing African countries such as Angola and Ghana, insurance contributes significantly to national growth compared to Nigeria’s abysmal contribution to the GDP of about 0.4 per cent.
Insurance, apart from being a mechanism that mitigates risks or catastrophes, is also known as a mobilizer and provider of investible funds. These funds from insurance sector can be invested or used in the infrastructural development of the country thereby helping in the development of the economy.
Kari said “the outlook may not be as rosy as we all would have liked but NAICOM sees the silver lining and is fully committed to making the most of it. We have set for ourselves a clear, unambiguous task: to improve the aggregate numbers by enabling individual operators to optimally serve a much larger customer pool with a more varied basket of products.”
Nigeria with over 180 million people insurance penetration is still very low as the majority of Nigerians are yet to embrace it.
To this end, in order to deepen insurance in the country, NAICOM in collaboration with the various stakeholders have embarked on various initiatives aimed at promoting insurance culture among Nigerian populace.
The Commissioner for Insurance who spoke through the Deputy Commissioner for Insurance (Technical), Sunday Thomas, recently in Lagos said insurance penetration through awareness creation is the core priority of the Commission.
“The end game for us,” he said, “is to increase the insurance uptake ratio among the Nigerian populace and we have a number of initiatives in place towards achieving this.”
Financial inclusion, he said, “is one of the tools we envisage to help us improve market penetration. The initiative is premised on the fact that getting the mass of the financially excluded to embrace insurance in one form or another will have a positive impact. Accordingly, insurance companies are being encouraged to have a buy-in into our micro-insurance initiatives for the Nigerian market. The Takaful market is still grossly under accessed by the public, there is therefore the need for aggressive promotion in aid of financial inclusion.
“In addition, efforts are being made to expand the distribution channels for insurance products because the traditional channels are becoming too restrictive and suboptimal. Whereas Bancassurance has received the most attention, there are other initiatives to reach out to the public, he added.
The NAICOM boss said the Commission has developed a guideline for the creation of State Insurance Producers (SIP).
“It is expected that State Governments participation in enforcement of compulsory classes of insurance will enhance compliance and deepening of the market. States will in the process create employment and enhance their internally generated revenue. But initiative has been cancelled by the Commission as a result of the threat by the Nigerian Council of Registered Insurance Brokers (NCRIB) to drag the commission to court on the ground that the SIP policy is a threat to the existence of insurance broking in Nigeria,” he said.
Kari had said the spatial distribution of insurers and intermediary activities are alarmingly skewed. He lamented that virtually all insurance firms are headquartered in Lagos with a few in Abuja and this concentration was complimented by very poor branch network.
“In most states, the presence of insurance entities is near absent, making access to operators difficult due to proximity issues.
“It is, therefore, a paramount need for companies to spread beyond the urban cities to the hinterland, open new branches for purposes of proximity to prospective consumers. There should be a concerted effort to develop the retail sector of our business. The key responsibilities of the SIP include facilitating the sale of the compulsory classes of insurance within the State jurisdiction and all classes for its principal’s insurances (state government); additional insurance services and product would be considered in the future, depending on the success of the initial approach; exercising on defaulters the power to penalise them according to the laws of the states; maintaining proper records of individuals and organisations bound by the requirements of the compulsory classes of insurance and monitoring the compliance.
“This, we believe, would also go a long way in meeting government expectations with regards the Economic Recovery and Growth Plan (ERGP) in the areas of job creation, poverty prevention and confidence in the face of risk; answer to the saturation in the corporate segment; opportunity to improve the image of the industry; brand building for individual insurance institutions. Insurance plays a pivotal role in financial inclusion because it reduces the poverty line, help people to manage their risk and protect them from any negative adverse effect of any unforeseeable circumstances and increases access to other financial services.
“The industry needs to pay attention to and invest in inclusive insurance markets by introducing value added products to the market because of its promise for the future and government expectations that the insurance gap in the country is huge suggesting a large room for growth. The industry must as a matter of priority reach out to the uninsured, reduce its dependence on corporate clients and develop a retail base of clients.
“I would encourage insurance entities to consider it a priority to expand their operations and thus, strive to open new branches and outlets across the 36 states.
“This would allow for more access to insurance and in turn benefit both the industry and the consumers of insurance. Achieving a higher level of insurance penetration is the collective responsibility of all stakeholders. Therefore, I enjoin you all to support this drive as we forge ahead in creating an enabling and sustainable environment for insurance penetration through value creation. If half of the set targets listed out in the printed program are achieved, the industry and the Nigerian economy will be the better for it,” NAICOM boss said.