Insurance Industry will do better in 2019 – Experts

The Nigeria insurance industry has continued to maintain its growth trajectory even in the presence of internal and external challenges.

The Nigerian economy had suffered recession occasioned by the sharp dropped 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 developmental purposes.

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 nation’s 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 streak growth rate 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.

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, the Commissioner for Insurance, Mohammed 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.

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.

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 in the industry have embarked on various initiative 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.

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.

He said NAICOM fully appreciates the necessity of having insurers that can safely carry the risks they underwrite, pointing out that Risk-Based Supervision is being adopted as a regulatory tool because it is proactive and addresses the key issues of corporate governance, risk management, capital adequacy and others.

Kari said the Commission is exploring ways to ensure that insurance companies are adequately capitalized to enhance their risk-bearing capacities.

This, he said, was the thinking behind the capital initiative of the Commission.

“Achievements of the goal that we have set for ourselves is predicated on the market’s ability to attract business and customers need to have confidence in operators. To this end, NAICOM has championed an industry-wide rebranding project to burnish our reputation, but we cannot do it alone,” Kari explained.

Commenting on the industry’s performance in 2018, the Managing Director/Chief Executive Officer, NSIA Insurance Limited, Ebelechukwu Nwachukwu, said “the industry in year 2018, I will say that has grown and I will not want to measure growth by numbers, but I will measure it by mind. I think this year, the kind of conversations we have in the industry are really different from what I have heard over time. We have identified the need to diversify our products; we have identified the need to improve our speed to service; we have identified the need for information and communication technology as the driver of that process and you can see companies actively getting involved.

“And if we can push all these over and over in 2019, I have no doubt at all that penetration will increase and premium will rise also. Today, the industry is paying better salary and so people are better; the industry people study more than any other industry I have engaged with. In my entire career life, insurance people read more than any other profession, they are dedicated to writing examinations, attending seminars, conferences and workshops, they want to be heard and an insurance person wants to be heard intelligently.

“In my mind, in this year 2018, this industry has grown significantly and we see that growth even in the quality of products that we rolled out, the quality of channels of distribution that we rolled out, the quality of people that we engaged, the commitment that we need even in growing the people that we engaged and all of that have come together to increase the penetration of insurance industry in Nigeria,” she added.

Also on his part, the Chairman, Nigeria Insurers Association (NIA) who is also the Managing Director of NEM Insurance, Tope Smart, said the nation’s economy has been projected to expand by about 2.5 per cent in 2019, promising that insurance will take advantage of this expected growth.

“We have figures of the growth of about 22 per cent when you compare the figure with 2017 and 2018 and I hope 2019 will be better. By the time we have the end of the year result, we will be having what I call a very positive result. The industry will continue to prioritise claims settlement and both regulator and operators are working together to put insurance companies on their toes to pay genuine claims through NIA and NAICOM complaint bureau,“ he said.

Industry’s Premium Income

The National Insurance Commission (NAICOM) has been superintending over an industry with barely N400 billion premium incomes since its establishment.

From our findings, in 2016, the total risk carried by the insurers amounted to a whopping N1 trillion. Out of this, N650 billion accounting for 70 percent of the premium income was given as discount, while retaining N350 billion or 30 per cent.

This development, the Deputy Commissioner, Technical, NAICOM, Thomas Sunday at a recent NAIPCO event in Lagos, noted has forced insurers to be surviving on investment incomes.

“The risk insurers are carrying is over a trillion Naira and the premium is still at N350 billion. We take 30 per cent and discount 70 per cent,” he said.

He called on insurers to leverage the initiatives introduced by the commission to redouble their premium income and also told them to place customers at the centre of their services, stressing that insurance should not just end with premium and claims, but insurers should always make out time to visit their customers to help them in managing their risks.

Foreign investors in the industry

Because of the growth potentials inherent in the industry, the industry has attracted foreign investors into the industry.

The number of indigenous insurance companies acquired by foreign investors has continued to grow by the day.

The Commissioner for Insurance, Alhaji Mohammed Kari, had said that the Nigerian development plan vision 2020 described the Nigeria insurance sector as a grossly untapped opportunity with low market penetration.

He said, “The foreign investors, having noted these great opportunities, are attracted by the huge potential in the Nigerian insurance space. The investors are ready to position themselves for the future, hence the likes of AXA, Prudential, Liberty, Swiss Re, SUNU Group, Saham, have taken positions in the industry and in partnership with indigenous companies for development and growth.”

Despite that, he said that the growth of the Nigerian insurance industry was hinged on right products, innovation, prompt claims payment and healthy competition between local players and their foreign counterparts.

He said that it was noteworthy to see that insurance entities had been working hard to clear some of the misconceptions inhibiting insurance penetration and growth by planning massive sensitisation campaigns across multiple communication channels.

According to him, once consumers understand and value the actual benefits of insurance, the Nigerian insurance industry will grow sharply and prosper, as it has been the case in many other countries.

“The presence of foreign insurers in the Nigerian market is another incentive expected to boost penetration, technical capacity and service delivery,” he said.

The President/Chairman of Council, Chartered Insurance Institute of Nigeria, Mr. Eddie Efekoha, also observed that the insurance industry was becoming more attractive to foreign investors.

He said, “The indices are clear. If you look around, you will see that a lot of our friends from outside Nigeria are looking at Nigeria and if they are doing so, then you don’t need any one to tell you that there is something good about us or potential they are seeing.”

Although the industry has faced a lot of challenges in the years past, she is not deterred in her efforts to move on to the next level. It is based on this that the industry analysts believe that with the unbundled potentials available are properly and adequately maximized, will become a leading sector in the country, contributing significantly to the nation building.

Industry’s analysts also believe that with the cancelled TBMSC and SIP by NAICOM, there will be increased consultations and collaborations between the various stakeholders in the industry in 2019 on how to fill the existing gabs the canceled TBMSC and SIP have created especially in trying to raise the bar of the industry’s capital base since the issue of recapitalization is what the industry need to move to the next level of it growth. This is because some clients are already in support of the recapitalization and are already advising their insurers whose capital base is below the new requirement by NAICOM to shore up their capital base.

This is a clear indication that virtually all the insurance companies with inadequate capital base will do something this year in terms of raising additional capital to shore up their capital base in order to sustain their business and also play big in the industry.

Today, insurance is rapidly evolving in Nigeria. Insurers are becoming more responsive to claims payments. For those firms that is not able to pay claims as and when due, NAICOM will soon wield a big stick on them. But based on the delay on the side of the regulator to take a decisive action against the defaulting firms in the area of prompt claims settlement, which they said is eroding public confidence on the industry, some players are not happy with this development.

In all these, experts called on Nigerian to embrace insurance as they stand to gain a lot. They also called on the insuring public to patronize registered insurance companies and avoid patronizing quacks so that whenever there is claim issue, there will be no problem.

Speaking at The Nigerian Council of Registered Insurance Brokers (NCRIB) 2018 CEOs Retreat in Uyo, Akwa-Ibom State, the President and Chairman, Governing Council, Shola Tinubu said insurance brokers play a major role in insurance value chain.

He called on government, individual and other institutions to patronize professional insurance brokers in their insurance transactions.

Shola noted that insurance brokers, being the professional arm of the industry know the nitty-gritty of insurance business and their engagement gives the client opportunity to maximise their insurance placement without any extra cost to the client.

“The importance of Insurance Brokers in the Insurance Value Chain cannot be overemphasized. It is important to state that Insurance Brokers are the Professional arm of the industry. We know the nitty-gritty of Insurance Business and their engagement gives the client opportunity to maximize their insurance placement without any extra cost to the client. I would like to appeal that the government ensures the inclusion of Insurance Brokers in all its Business transactions.

The industry, comprising of 58 insurance companies, about 500 brokers and over 2000 agents, has failed to fully play its role in developing the economy. But there is still hope at the end of the tunnel.

To ensure the success of insurance industry in Nigeria, the Minister of Finance, Federal Ministry of Finance, Zainab Shamsuna Ahmed, had reiterated Federal Government’s support for the National Insurance Commission (NAICOM).

She said the Federal Government will reengineer the insurance industry with a view to support NAICOM as regulators to get the best out of existing and prospective operators in the insurance sub-sector of the nation’s economy.

The Minister gave the assurance in Abuja recently while receiving on a courtesy call, the Governing Board of NAICOM led by the Chairman, Chief Emmanuel Jideoffor Nwosu.

She said President Muhammadu Buhari had directed that the financial insurance sub-sector find their rightful place in the Finance sector.

With all these, insurance industry is really aiming high to take its rightful place in the nation’s financial services sector.