Policy makers, supervisors task on importance of insurance
Mr. Olaotan Soyinka, MD/CEO, Sovereign Trust Insurance Plc
Given the growing importance of the insurance sector and the increasing number of interlinks to other financial sectors, the evolving role of the insurance industry vis-à-vis economic growth and stability should be of growing relevance for policy makers and supervisors, Managing Director/Chief Executive Officer, Sovereign Trust Insurance Plc, Olaotan Soyinka, has said.
He also said that without mechanisms for pooling and transferring risk which insurance companies provide, part of the economic activities would not take place and positive effects on social welfare would fail, stating that insurance fosters investment and innovation that engenders economic growth by creating an environment of greater security.
Speaking on the topic “Repositioning the Nigerian Economy: The Role of the Insurance Industry” at the 5th BusinessToday Anniversary/Awards recently in Lagos, Soyinka also identified challenges facing the industry and also suggested the way forward.
He said In the face of bearing risk for the insured (individuals, corporate firms and government), the insurance companies are faced with numerous challenges.
Some of which, he said, include fluctuation in foreign exchange values; emerging threats amidst macroeconomic uncertainty; purchasing power; insurgency; purchasing of fake insurances from unregistered offices and religious beliefs.
Identifying the importance of insurance in the national growth, he said the primary functions include provision of certainty or confidence where the insured is assured of being compensated or restored back to his former position at the time of loss.
Another function, according to him, is protection against loss of property which is to provide protection against the probable chances of loss through risk-sharing function which is the main concept of insurance.
While Secondary function is promotion of trade and commerce, saying the increase in GDP is positively correlated to growth of trade and commerce in the economy as well as facilitation of efficient capital allocation through provision of cover to large number of firms, enterprises and businesses and also deploys their funds in number of investment projects.
Insurance as financial intermediary, according to him perform the function of channeling savings into domestic investment thereby facilitating efficient allocation of capital resource which in turn improve productivity and economic efficiency, adding that it also encourages financial stability and reduces anxiety by promoting financial stability in the economy by insuring the risk of losses of individuals, firms and organizations among others.
On the way forward, Soyinka suggested that the industry players should look inward and tap into the available potentials the industry offers to further grow the industry and positively impact the economy.
To this end, he called for identification of untapped opportunities; awareness campaign; appropriate distribution channels and strategy, product knowledge, and quality services delivery as importance to the growth of the sector.
“With an estimated insurance penetration rate of 0.4% and only 1% of the population holding any form of insurance policy, the opportunities in the Nigerian market are enormous. The Nigerian economy is expanding and new risks are evolving hence, a growing need for companies and individuals to insure businesses and protect themselves in the event of unexpected losses.
“In the recent retail consumer survey conducted by Augusto & Co. in an attempt to ascertain the reasons behind the industry’s low patronage in January, 2017, it was recommended that it is imperative for both operators and regulators to work together to increase awareness and educate the populace on the benefits of insurance.
“In the same study by Augusto & Co. 57% of female respondents preferred direct sales agent as an avenue to purchase insurance policies. This indicates that there should be a pragmatic approach in reaching out to this growing number of would be insured.
“Stemming from the above, operators should equip the agents to market products with an adequate understanding of the products offered and the needs of clients. This will enable them recommend the right product that will satisfy the need of the client.
“The most important sales strategy is the delighting of the customers through our services. The industry should ensure that claims are promptly attended to and genuine claims settled within a stipulated turn-around time. This will enhance referrals from such clients and repeat sale is assured. Continuous training and retraining will go a long way in strengthening the capacity of the industry,” he opined.
