The is an indication that the insurance industry may embark on another round of recapitalisation as the Minister of Finance, Mrs. Kemi Adeosun, has stated the need for insurance industry operators to increase their capital base and create opportunity for partnership and other strategic alliances within the system.
Adeosun, made the remark at the 2016 National Insurance Conference organised by the Insurance Industry Consultative Council (IICC) in Abuja.
The minister urged the operators not to see recapitalisation as a punitive measure but an opportunity to reposition for the future.
She also advised them to be ready to take risk, pointing out that they are in the business to bear risks of others.
The minister, who stressed the need to address the issues responsible for underperformance of the industry, revealed she is currently working with the industry regulator to address the problem of premium discounting.
“There is need to immediately address the issues responsible for the under-performance because a 0. 33 per cent increase in insurance penetration can result to a growth of 0.5 per cent in GDP”, she sated.
According to her, the increment was capable of creating over 70,000 jobs annually
Noting that the industry was under-performing, compared to its pension and banking counterparts.
Adeosun identified low awareness as one of the factors responsible for the under-performance of the sector, pointing out that out of 57 insurance companies in the country, less than 23 advertise their products.
“The companies put in less than 20 adverts on television, less than 10 adverts on radio and less than 10 adverts on social media”.
She listed other factors responsible abysmal performance of the industry as poor distribution channels and unethical practices among operators.
“I’m working vigorously with the National Insurance Commission (NAICOM) to ensure that premium discounting is eliminated among practitioners.
Also speaking, at the event, the Commissioner for Insurance, Alhaji Mohammed Kari, said the commonly used index for measuring the development of insurance in an economy is the market penetration which is the ratio of total insurance premium to the gross domestic product.
He said while the challenges of low spending power, culture and low financial inclusiveness did not help insurance penetration, enforcement of the compulsory classes of Insurance would give the needed boost to jump-start penetration in the sector.
The Commissioner said having reasonably tackled the immediate issues wedging the positive moves of the industry, efforts are now being focused on the medium and long term impetuses required to provide the quantum leap the industry desired to be able to contribute to the national economy.
To achieve this goal, Kari said the NAICOM has continued to provide regulatory oversight for the industry in relevant areas through the issuance of guidelines, training and the creation of the enabling regulations to introduce new classes
of insurance to address the financially disadvantaged in the society.
“To address the medium and long term challenges of penetration, the Commission is on the verge of relaunching the Market Development and Restructuring Initiative (MDRI). The initiative originally launched in 2009 is being reviewed for the immediate impact we believe it will provide. We believe if properly implemented, it will bring the desired result as envisaged.
“This effort has further been boosted by the following of recent: The just concluded review of the draft Insurance bill by the ministerial committee setup by the Minister of Finance.
The presidential directive on the insurance of government assets, the Senate resolution supporting the enforcement of compulsory classes of Insurance across the country, the Insurance Industry’s resolve to rebrand itself
The desire to create more distribution channels”, he sated.
Kari, said efforts and consultation have reached advanced stage with the various agencies including state governments towards the enforcement of the classes of insurance.
He said the efforts of the market need to be supported by the government and the Legislature adding that government need to ensure the adequate protection of public assets and the timely funding of such, just as the legislature need to increase its oversight function of the activities of the sector including passing the appropriate legislation when required.