Bode Akinbode is the Group Managing Director, Standard Alliance Insurance Plc. He spoke with Ebere Nwoji on the state of the insurance sector and the strategies adopted by his company to remain afloat, among others. Excerpts:
We are almost at the end of first half of this financial year, how has insurance industry fared within the period given the economic realities on ground in the country?
We have managed to stay afloat despite the economic challenges. There will always be challenges and Nigerian economy is not an exception. As operators, what we believe we will continue to do is to work hard and make sure we service our customers better and create more opportunities for them and for the company so that at the end of the day, the company will remain more profitable for the shareholders and for us.
For us, it has been mixed feelings; we set out in this my second coming in 2015 January to transform our business. But as much as we try to make progress in the transformation bid, we realised that we have been somehow limited by the economic constraint of the economic contraction suffered by the country. But all the same, we have stayed afloat; we have lived up to a large extent to our commitment. We have cleared off outstanding claims we have as a company. We have paid about N7.6 billion to our customers in the last two and half years ago. The bulk of these payments, we met them on ground on our coming back.
So we believe we are making progress in that wise. We have stabilised the company, we are rebuilding our team and product. We have launched a new product and more products are still on their way in the area of agricultural and health insurance. We have introduced what you call salary protection insurance to guard against employees who suddenly lose their jobs. The product provides compensation to them until they get another job at least for a period of two years. So to a large extent, we believe we are making progress though we had hoped to do more but were slowed down by the challenges in the economy.
Could you please throw more light on the salary protection insurance; tell us how it works and what informed your decision to introduce it into the market now?
It is a product driven by the dictates of the time; you know what is happening now in Nigeria, with the current state of the economy, the forex problem and the impact on the real sector and manufacturing sector in fact on the entire economy, you see that somehow, there is slowdown on economic activities. Because most of our companies are import dependent so if they are finding it difficult to source forex or if the cost of forex is too high for them, then it will constrain their size of operation and if the size of operation is constrained, the next thing is for them to cut cost and when you want to cut cost, you have to look at expenditure end and staff cost is a major cost. Therefore if a company is not able to operate within its installed capacity, let’s say a company is producing at 30 percent capacity, then it will need to right size. Rightsizing means throwing some workers back to unemployment market. Those people are just unfortunate because it is not their fault yet the company must make profit. So this product is to provide a kind of succor and stability to such workers.
I am still interested in understanding how this salary protection insurance policy works? Is it that if I lose my job and I buy the policy, the insurance company will take over payment of my salary?
This is how it works; first, we have done a lot of research and rated different sectors of the economy. You know the risk in private sector is different from oil and gas, it is different from telecommunication, manufacturing sector and so on. We have rated different sectors. We have also rated the companies so for any employee to buy the product, he must belong to a rated company. So now, having rated the sector and the company, the next thing to rate is the employee buying the product. So we have automated the process on your phone on our agents’ phone. We were able to ask the proposed person that wants to buy the products five or six questions. Having provided answers to those questions which has to do with your age, your nature of job, your position, how long you have been working, how many times you have changed your job, your qualification whether you are incapacitated, having answered these questions, then your premium will be calculated.
So your premium is unique to you. Even if we are working in the same company, as long as your job is different and your age different, your premium will be different. Once you determine your premium, you will be told to sign the enrollment form and the authority to deduct your premium from your salary account either on monthly, quarterly, half yearly or on yearly basis. But we make it convenient for you that we don’t have to bother you every time. You give the instruction and you wait for at least one year and after one year of buying the policy and there is sudden loss of job, the insured is affected, he will be entitled to claim 100 percent of his salary for the first Six months. Assuming he insured N100,000 as his monthly salary, he will collect N100,000 for six months which is 100 percent of his salary he insured.
If after six months, he is unable to get another job, he will be entitled to collect on monthly basis 75 percent of his monthly salary which is N75,000 for six months, if after that he fails to get a new job, he will be entitled to 50 percent of his monthly salary for another six months which is N50,000 if after that he hasn’t got another job, he will be entitled to 25 percent of his salary for another six months making it 24 months. But we believe that given the rating of the industry and rating of the personnel, we will be able to work with the personnel to get another job within that two years because we also have alliance , we have agreement with some employment bureau that can assist such employee to get back to work, that is how it works .you choose how much you want to insure as long as it is not higher than your salary. So you cannot say because you are earning 100, you want to insure N150,000 no, because insurance is about indemnity, it is about getting you back to where you were before the loss occurred. So you chose within your salary as long as for us is not more than N1000,000 so if you are earning N2000,000, monthly you can only insure N1000,000.
This is the primary cover. We have now embedded other ancillary benefits into it. You know it is not only an employer that can tell somebody to stop work. Certain sicknesses like cancer, stroke etc, can force an employee to stop work so we have put illness cover there.
What about voluntary resignation?
No, voluntary resignation is not covered. It must be accidental loss of job. It must be the option of the employer to say look, we don’t need this number of employees any more.
Recently Standard Alliance General and Standard Alliance life merged as one company and the general public has been itching to know what actually informed this alliance. What explanations have you?
We are two companies with almost similar identities. The names are so close yet running differently, two different managing directors, two different board of directors, two different management teams, different employees, different products which means every year we have to submit two different accounts to the regulators. We have to do AGMs differently; meanwhile, they are similar business.
So what the new board of directors did was to study the environment, look at the environment and discovered that most of the successful companies today, a large chunk of them are composite companies. They are run as one company. Apart from that, we believe that is the most appropriate model to run in Nigeria because it brings economy of scale for us. You then have one board, one Managing Director, may be enhanced and strong management because you bring all the strong management team from the other side to this side. It brings operating cost savings. Then there is benefit of cross selling. My sales person needs not go and sell only general insurance but sells life insurance. At the same time, my life salesman needs not sell only life insurance but sells non-life insurance. So we are able to cross sell our products as one team so that we get better result.
So since the merger, what is your result like at least for the first year?
No, the merger was concluded just two months ago. We got approval in January, but there have been pockets of approval. Effectively, we just concluded the merger two months ago. But because we have been closely knitted organisations, before now, since we got basic approval of our primary regulator, we made sure we work together. First, all our office locations have been merged, where we pay separate rents before we pay single rent. In selling all our products, we make sure we add a bit of life to non- life and non- life to life, that is better deal for our customers.
For our staff, they now have more opportunities to succeed, given that they have more products to sell compared to selling just one line of insurance.
What is the future of life insurance like in Nigeria?
The truth is that historically, you know that life business has not been well embraced in Nigeria because people say culture but I will say is more of distribution strategy which I believe the industry is working on. For us in Standard Alliance, we are aggressively addressing it. It is about taking insurance to the grass root, it is about creating value in insurance for the consumers. If customers can see that there is value in a product, they will buy it. It is about strategic cooperation with frame work or channels to reach customers quickly that is why you see us go into partnership with banks, partnership with telecoms, partnership with very strong brands that will rub off possibly on image of insurance will help us to succeed.
So life insurance is actually where the future of insurance industry is because that is where critical mass is that is where the small savings that can be left for a long time and that supposed to be the strength of insurance. small savings on a longer period can be built up to create massive investment fund that can be used to trigger economic activities and create returns not only for insurance people but for the policy holders. So I believe, even what we are doing now product innovation creating what I call ‘living benefit’ products not death benefit products because some people are thinking and saying, “why should I buy products that I will not benefit from while I am alive”. So we are trying to reverse that by creating living benefit products.
How and when will insurance become a prominent part of financial services sector, I mean when will insurance begin to rule the economy?
It is going to take concerted effort. It is going to take effort of government as the prime leader of the economy.
Nigerian economy is driven by government. It needs massive role of government. It is going to take the cooperation and effort of operators we need to invest in research, we need to invest in our people, we need to develop products, we need to learn how to engage with the customers.
We need to educate the customer on the products they are buying because if the awareness is there, understanding is rich, it will minimise conflicts when you are trying to close claims because the customer will be very clear from day one, what he or she is buying. And how do we make this happen, you need to catch them young as students from school. Get them involved so that they understand insurance so that when they become adult, they are already familiar with it. Insurance is supposed to be a way of life. Insurance is one of the major drivers of savings and long term fund mobilisation in advanced countries, insurance contributes as high as 15 percent to the GDP but here in Nigeria it is only 0.3 percent. So it takes all of us to come together.