A Critical Look at Sustainability Leadership in Nigeria’s Insurance Industry During the Coronavirus Pandemic
It is Mark Goyder, renowned British author, and governance expert that said, “Governance and leadership are the yin and the yang of successful organisations. If you have leadership without governance you risk tyranny, fraud, and personal fiefdoms. If you have governance without leadership you risk atrophy, bureaucracy and indifference.”
Corporate culture is central to corporate governance, where corporate governance provides the underlying framework for administering the organisation and regulating its internal and external activities. This corporate governance culture is necessary for fostering sustainability within an organisation as it sets the tone for a culture that considers not just the business’ profitability, but its immediate and long-term impacts on other stakeholders. These are the practices which help businesses to form long lasting relationships with customers, media, investors, suppliers and governments; relationships that can see these key stakeholders become their advocates. In the 21st century, it is not enough for a business to be profitable alone. A business must also be able to demonstrate the sustainability of its business model through environmental awareness, ethical conduct in its operations, and a good succession plan.
Sustainability management in Nigeria, measured using economic, social and governance (ESG) performance of businesses – is slowly but surely taking root, particularly at the level of organisation and industry, and one of the industries beginning to feel the impact of corporate governance because of its access to the wealth of third parties, is the insurance industry. Insurance helps protect us and our activities from risks, and as such it would be a tragedy if the companies tasked with protecting us all from these risks are themselves at risk from uncertainties.
In tandem with the rest of the world, Africa is progressively gearing itself towards a brighter future – bar the temporary setback of the coronavirus, with a growing insurance industry that encourages risk planning, creates jobs and growth in capital markets, as well as other financial assets for the development of the economy. The industry enjoys the patronage of the financial services sector under the regulation of the Nigerian Sustainable Banking Principles (NSBP) spearheaded by the Central Bank of Nigeria, with its more established counterpart, banks – which have gradually been divested of its ownership of insurance companies.
As far back as 1961, there has been a regulatory framework for insurance in Nigeria, which later culminated in the creation of the National Insurance Commission (NAICOM) to regulate the industry. NAICOM is tasked with ensuring the safety and soundness of insurance institutions in Nigeria and facilitating stability of the insurance sector. While this body has been instrumental to enforcing internal structures within insurance companies, it may be challenged in its ability to acquire redress for customers with complaints against their insurance company. And this was what occasioned 62 year-old Wapic Insurance to initiate its self-regulating ombudsman desk – a service that independently mediates fair settlement between the company and its customers, striving to arrive at a win-win solution for all – early on, for the purpose of dexterous management of customer-insurance company relationship by pre-empting and preventing conflict and promoting accountability, a leadership stroke in a sector besmeared by malaise because of a market with limited interest in the service and truth be told, uninspiring competition.
According to data released by PwC, over the past decade, the Nigerian insurance industry has grown, as evidenced in total premiums, rising from about N75 billion in 2005 to over N300 billion as at 2015; a development that arrested the interest of foreign investors like AXA which then acquired a $246 million stake in Mansard Insurance, creating the new entity, AXA Mansard. Regardless of the rise in premiums, Nigeria’s insurance industry has been confronted with challenges ranging from lack of consumer trust occasioned by insurance companies not willing to meet their obligations when there are genuine claims on insurance, low implementation of compulsory insurance and low penetration, amongst other issues.
As at 2016, industry statistics showed Nigeria’s Insurance Penetration Rate (IPR) at 0.06 percent – meaning that out of every 10,000 Nigerians, only six have a form of insurance cover – and the sector’s contribution to Nigeria’s real GDP at 0.02 percent, a figure that pales in comparison to other African countries like South Africa, with penetration rate of 13.2 percent.
I had written a report about COVID-19 and business contributions as well as how government can support business during this pandemic. Now more than ever, with the number of confirmed cases in Nigeria reaching five digits, and the economy under the threat of a full blown recession, Nigeria is frantically looking for innovative ways of padding the attendant shock for its private sector more than ever; a shock that is gradually sinking in for the federal government and the economy, considering the jolt given to the government’s economic mainstay, oil and gas production. To its credit, however, Nigeria’s private sector, including the insurance industry, has risen to the occasion to support the federal government’s drive to administer judiciously during this auspicious time.
One of the most significant contributions of the insurance industry to this pandemic, was the provision of free life insurance cover for 5,000 frontline health workers on COVID-19, by 19 accredited life insurers, which will ensure that in the event of any death their families or dependants will be compensated. Like their banking counterparts, the contributions to government poured in – AXA Mansard partnered with the government to provide life insurance and personal protective equipment to medical professionals across Lagos, Abuja and Ibadan, Leadway contributed COVID-19 test kits and foodstuff and all major insurers, including AIICO Insurance and Wapic, made cash or kind contributions.
Perversely, some insurance businesses chose instead to primarily push even more insurance policy products to their beleaguered customers during the financial crunch, such as the purportedly perfect life insurance policy, ostensibly to ensure that people and their loved ones can maintain a healthy financial lifestyle regardless of uncertainties due to a loss of life or a critical illness.
It is imperative to note that rising up to the occasion must be beyond making donations to the government or playing to the gallery. It must involve creating innovative processes to mitigate the impact of the pandemic on both the organisation, its key stakeholders and the public, and a framework that ensures stability even in the face of unexpected events like the pandemic. This can only be achieved through the existence of a sensitive and dynamic corporate culture, engrained in strong, enduring corporate governance. This is more so because amidst the COVID-19 pandemic, Nigerians like other citizens of the world, continue to look up to corporate organisations for innovative solutions that will ameliorate the discomfort of the containment, because of its expected ability to be nimble.
With thousands under stay-at-home orders during the lockdown, roadways were almost free of vehicular movement and that meant minimal accidents and less insurance claims. Wapic’s auto insurance business saw a market need and delivered the coup de maître of being the first insurance company to speak directly to its sustainability base – its existing customers – by announcing on 22 April, 2020, its refund of 50% of premiums for the lockdown duration to customers with active motor vehicle road risk policies upon renewal, passing the benefit of reduced motor insurance claims to them, as global indices indicate that car insurance claims have dropped by as much as 50%; thus driving corporate goals while meeting customer expectations in a move that can only drive long term value.
The insurer also offered 15 percent discount on new policies covering personal accident for frontline heroes. This move not only covers a critical demography of its existing customer base, it moves beyond to look after as many of our citizens risking their lives to save other lives, as would seek to benefit from the offer.
Within days after Wapic’s announcement, other insurers followed suit in presenting other exciting and directly beneficial palliatives to their existing and potential customers; Leadway announced that it would give back the equivalent of two weeks’ premium back to Personal Motor Comprehensive Insurance policyholders and AXA Mansard announced a partnership with Tremedoc, a telemedicine provider, to launch an app which gives people the opportunity to talk to licensed medical practitioners from the comfort of their homes at no cost to them.
Old Mutual announced the launch of an electronic channel by 30 May, 2020, to help customers process claims more easily and to facilitate access to insurance benefits, although Wapic had set up a board-level IT committee years before and had commenced online services before the onslaught of the ravaging pandemic in Nigeria.
Wapic’s leadership during the COVID-19 containment is not surprising as the organisation has a culture of innovation pre-pandemic, having risen quietly, but surely, to being one of the top five most capitalised insurers and top 10 by Gross Written Premium since the completion of its restructuring in July 2012. Its business is nestled in an aspirational green building, designed to reduce any adverse impacts to the environment, its vision to transform and illuminate the insurance market, its mission to intentionally lead in all that is worthy, priding itself on its ability to motivate others in the space, and its plan to be one of the top 10 financial services businesses in the country, beyond insurance, through practising sound ESG, including investing ethically and utilising paper that is Forest Stewardship certified.
Even in weak legislative environments, business must realise their potential to foster leadership through innovation. Innovative leadership may not come with immediate economic benefits, but if one looks at the leadership displayed by international conglomerates like Tata Group, founded by Jamsetji Tata in 1868 – which literally pursued risky business opportunities because they were beneficial to India’s progress as a nation, early on understood the value of independent governance and introduced staff welfare and provision for women empowerment up to a century ago, and the attendant ongoing benefits, including its revered status in India, and its longevity as a centenarian – one would start to realise that business and concern for key stakeholder needs and needs are not a dichotomy.
The United Nations Environmental Programme Statement of Commitment by Financial Institutions on Sustainable Development (UNEP FI) defines sustainable insurance, in its Principles for Sustainable Insurance, as a strategic approach where all activities in the insurance value chain, including interactions with stakeholders, are done in a responsible and forward-looking way by identifying, assessing, managing and monitoring risks and opportunities associated with environmental, social and governance issues. It is a valid assertion that a good business sustainability strategy must prioritise why it is in business.
It revolves around how and why the business generates revenue and uses the concept of materiality to focus on actions and products and services which would be beneficial to it and which would have little or no negative impact on its stakeholders; concepts which the Global Reporting Initiative (GRI), the leading standard for sustainability reporting, expound on in detail.
If a business, therefore, takes an action which does not deliberately speak to its operations, there is an undeniable loss of value to that business. In extension, when a business does not take actions that are directly beneficial to its key stakeholder base, it loses an opportunity to build closer relations with the partners that will extend its shelf life.
People will remember how businesses treated them, not what services were thrown at them, not just during this crisis but for long afterwards. Insurance companies, as any other business, must ensure that they continue to forge friendships with stakeholders through such intentional interventions.
–––Bekeme Masade-Olowola is a leading sustainability expert in the West African region, is the Founder and Chief Executive of CSR-in-Action and a Board Member of the Global Reporting Initiative (GRI).