Insurance Sector in Dire Need of Transformation


Ebere Nwoji reports that the insurance sector which struggled to overcome various challenges in 2018 is in dire need of major reforms to enhance its contribution to the country’s Gross Domestic Product

The insurance industry in 2018 was confronted with the need to overcome various challenges that inhibited its much expected growth.
Prominent among these challenges were the insecurity in the country as a result of continued activities of the insurgents and lack of trust and confidence from the insuring public which could not allow operators to realise their dream of growing the retail insurance market which holds the key to the overall growth of the sector.

The insecurity in the country culminated in increased claims coming the way of insurers while premium growth failed to match the rate of claims increase.
The overall effect was that most firms failed to grow their top line while realisation of the industry’s tall dream of metamorphosing to trillion naira market remained a mirage.

With a total Gross premium of N315 billion as at third quarter 2018, much below the targeted N1 trillion premium, the industry, in terms of premium income generation, recorded mere 22 percent increase from the N258billion premium in the same period last year.

With this the operators themselves admitted that their performance last year was below optimal potential.
This abysmal performance was accompanied by increased claims, while increase in premium generation stood at 22 per cent, increase in claims stood was 30 per cent up from N110 billion in 2017 to N143 billion last year.

Against this backdrop, the key industry operators towards the end of the year challenged the National Insurance Commission (NAICOM) to raise its regulatory powers against errant operators and fish out those whose activities have continued to erode trust and confidence of the insuring public in order to encourage Nigerians to patronise the industry to grow its top and bottom lines.
NAICOM was also advised to employ the “name and shame,” strategy against operators who often shirk payment of genuine claims to build public confidence in the sector and promote financial inclusion.

The experts said this at the maiden insurance workshop organised by the National Association of Insurance and Pension Correspondents (NAIPCO), held in Lagos.
Chairman Nigeria Insurers Association (NIA), Mr Tope Smart, who is also Managing Director NEM Insurance Plc, noted that in buying insurance, people are buying promise, saying promise must be kept always.

Smart said this was why the NIA, which is the umbrella body of insurance underwriters is currently putting structures in place to build confidence among Nigerians.
Also, the President Chartered Insurance Institute of Nigeria (CIIN) and Managing Director Consolidated Hallmark Insurance Plc, Mr Eddie Efekoha, noted that industry operators, have traded to their limit as far as corporate business was concerned insisting that what they needed was to develop the retail segment of insurance business,
“As an industry, we have traded to the limit, as far as corporate insurance is concerned, all corporate bodies are buying insurance but there is hard nut at the ray base which is retail.
“Nobody will dispute that progress has not been made in this direction and insurers’ presence has not been felt at the micro or retail level.

“People have been licenced to trade in all areas but have not done a lot . The missing link is build up to the publicity,” he noted.
He urged insurers to sit up to the task of building confidence in their operations through robust capital.
According to him, in the insurance market today, the consumers are detecting capital for operators adding that some of them have said that N9 billion is the minimum capital adequate for the industry.

He urged operators to ensure that they shore up their capital, noting that insurance buyers especially multinationals and large corporates have some categories of businesses that select underwriters through capital base.

On his part, the Deputy Commissioner for Insurance Technical, NAICOM, Sunday Thomas, noted that it had become a common saying that insurance is underperforming in Nigeria, with dismal percentages and unflattering comparisons trotted out to reinforce this position.
He said while one may not disagree that the industry was performing less than optimal potential, the insurance industry has not been static.

“All our indices have grown steadily though at a slow pace over the past few years.
“The gross premium as at the third quarter was N315 billion, a 22 per cent increase over the N258 billion for 2017 in the same period. The Gross claim figure for third quarter 2018 was N143 billion, a 30 per cent increase over the N110 billion reported for the same period in 2017.

“We anticipate the final figures for 2018 to be significant indeed”, he stated.
According to him, 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.

“The end game for us is to increase the insurance uptake ratio among the Nigerian populace and we have a number of initiatives in place towards achieving this”.
He said financial inclusion was one of the tools NAICOM envisaged to help improve market penetration.
He said the initiative was premised on the fact that getting the mass of the financially excluded to embrace insurance would have a positive impact.
Accordingly, insurance companies were urged to have a buy-in into its micro-insurance initiatives.

He added that the Takaful market was still grossly under accessed by the public, noting that there was 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 sub-optimal.
“Whereas Bancassurance has received the most attention, there are other initiatives to reach out to the public,” Kari stated.

The industry last year also grappled with the challenge of high speed of technological advancement, consumer needs and expectations.
For instance, professional services firms such as the PwC observed that these continued to disrupt the industry traditional way of doing business and had continued to put severe strain on traditional business models.

According to PwC in the face of this, many insurers responded by re-imagining their internal operations and business strategies, but the pace of change outside the industry has been relentless and even proactive companies struggled to remain on the cutting edge.

As an industry, we have traded to the limit, as far as corporate insurance is concerned, all corporate bodies are buying insurance but there is hard nut at the ray base which is retail. Nobody will dispute that progress has not been made in this direction and insurers’ presence has not been felt at the micro or retail level.