2021: Insurance Sector Restart after COVID-19 Devastation

Ebere Nwoji writes that as business managers close their books for the year 2021, insurance operators describe it as a year of rebuilding damages caused by COVID-19 pandemic lockdown in 2020.

The year 2021 was one of the few years in the history of insurance business in Nigeria that operators welcomed with enthusiasm, much hopes and expectations because it was expected to mark the end of the COVID19 pandemic and its attendant lockdowns and business disruptions.

As a result, insurers were eager to bid the troublesome year 2020 farewell to usher in a new year that would redefine their business experience and hopes.

The insurers, rising from the undesirable sleep in businesses occasioned by the COVID 19 for greater part of 2020 business year, enthusiastically beamed into the year 2021 as a year of total recovery and rebuilding with hope that 2020 marked the end of the pandemic while 2021 marked the beginning of a new era in business.

However the mutation of COVID19 into Delta and omicron variants appeared to have compounded the pandemic problem leading Nigerians into the fourth wave of the virus as declared by Nigeria Centre for Disease Control (NCDC).

Indeed, news of the new phase of the pandemic greeted the world in the first quarter of the year 2021 followed by the news of another lock down which never came to be in Nigeria and few African countries.

The level of hopes reposed in the year by the insurers could be seen from their discussions at various fora during the year and their choice of themes for the forums.
All revolved around building a new insurance industry and how to evolve technologies that would enable the industry thrive in the face of the new business era.

For instance, the industry hosted the 47th African Insurance Organisation’s conference with the theme, “Rebuilding African Economy, the Insurance Perspective.” The Chartered Insurance Institute of Nigeria anchored the theme of its professional’s forum for 2021 on “The Nigerian Insurance Industry in the Digital Era”. The Nigerian Council of Registered Insurance Brokers anchored the theme of its annual conference and exhibition on, “Innovation, Strategy and opportunity.”

These show the level of confidence the operators reposed in the year as a year of new business dreams and model.
However, as the operators wind up activities for the year, there is the question on whether they actually realised their hopes, aspirations and expectations for the year?
Looking at the events that stood as herald for the year, these hopes and aspirations seemed to have doused from the first quarter especially when the news of the resurgence of new wave of the pandemic hit the world and countries like UK went into second phase of lock down.

The operators at that point began to view their recovery dreams with reservation because of fears that if the resurgence became real, the year 2021 might not be different from the year 2020.

However, industry analysts said what was certain was that should the pandemic resurge, the operators have from the 2020 COVID-19 lessons, built strategies that would enable them weather the storms in the mist of any difficulty.

They noted that most insurance operators have built IT system in a way that would enable them produce optimum result even while on remote working condition.
The operators themselves said they have retooled to serve their clients even when meeting them one on one seemed impossible.

Looking at the events that marked the year right from the first month, from global perspective, In its outlook on global insurance market in general in 2021, Deloitte Nigeria has this to say concerning the global insurance market including Nigerian market in 2021, “Our 2021 insurance outlook, 200 industry leaders weighed in on their companies’ COVID-19 recovery efforts. How can the emerging lessons serve as a catalyst for business transformation?”

Insurers in 2021
What a difference a year makes or even a few months. The COVID-19 pandemic and resulting economic fallout radically shifted consumer and employee needs, habits, and expectations, while compelling virtualisation of insurers’ operations practically overnight. But while most of those in the industry adapted quickly, insurers are still likely facing lingering obstacles to growth and profitability in the year ahead.”

Also during the year under review, global outlook survey by Deloitte’s Center for Financial Services found that many insurers knew they still have their work cut out for them, even after spending most of 2020 adapting to the outbreak’s impact.

The study said 48 per cent of 200 responding insurance executives agreed the pandemic, “showed how unprepared their business were to weather this economic storm,” while only 25 per cent strongly agreed their carrier had, “a clear vision and action plan to maintain operational and financial resilience” during the crisis.

According to the Deloitte study, given the pandemic’s impact on employment, business activity, and trade, global nonlife premiums were expected to be flat for full-year 2020, including a one percent decline in advanced markets. However, despite these challenges, the study said the industry might yet rebound to three percent growth in 2021, led by a potential seven percent boost in emerging businesses.

Here in Nigeria, earlier in the year, the regulator, the National Insurance Commission (NAICOM) had already prepared operators’ minds on what to see in 2021 and beyond and how to navigate it.

The commissioner for insurance, Sunday Olorundare Thomas, in one of his addresses to the insurers on the way to go in post COVID business era stated, “The present challenges brought about by the pandemic in the economy in general and our industry in particular are enormous. Critical measures are therefore required of us that sit on top of the pyramid. It must be emphasised that the insurance sector require more urgent recovery post COVID – 19 to support the recovery and restoration of other businesses.

“The times in which we require more prudent management of resources in order to meet all stakeholders’ expectations including ensuring quality return on investments. Our focus must shift to service delivery, which will make our companies to seek more reasons to settle client’s claims and less reasons for repudiation of claims.”

On claims payment, he said, “The era of huge backlog of claims should no longer be associated with our companies and while the Commission is profiling companies with huge unsettled claims for necessary regulatory action, companies that are responsive to the plight of their clients in prompt settlement of claims are encouraged to sustain the good business conduct.”

He continued by saying that operators in the industry must strengthen their human and financial capital for effective participation in big ticket risks, observing that the gains of domestication policy of the government as enshrined in the Nigeria Content Development Act 2010 was gradually loosing its meaning for the insurance sector.

He said, “More businesses especially in the oil and gas and the aviation sectors are now being re insured abroad. Of more concern is the declining participation of life companies in the annuity business which is the emerging business for our industry.”

NAICOM portal
NAICOM as the regulator championed this course by launching during the year its long awaited NAICOM portal in September to ensure effective and efficient interface with its stakeholders.
The commission during the year directed all operators to integrate their operations with the portal, warning that any company that was lagging behind in the technology phase was already phasing itself out.

One of the greatest achievements made by the industry in 2021 was that the year was the first year anniversary of the #EndSARS protest and it was in the same year that the industry received claims filings from the victims of the incidents.

The Chairman Nigeria Insurers Association (NIA), Mr Ganiyu Musa, giving account of how the industry handled the matter, said that insurance companies settled 718 claims on vandalisation; 93 cases on looting; 113 on theft; and 136 on loss of cash, three death claims were paid while claims were paid on other property losses, 99 claims were settled on malicious damage; eight claims on business interruption; 455 claims on burglary attack and 912 claims on fire and burnt site.
These claims, according to the Director General NIA, Yetunde Ilori cost the industry over N9 billion.

The claims payment on the protest and provision of N11 billion life insurance cover to the front line health workers during the COVID-19 year earned the industry very high recognition by President Muhammadu Buhari .

The president demonstrated his high regard for the industry through his verbal comments and actions especially through his attendance at the 47th African Insurance Organisation’s conference and closing of the conference by the Vice President Professor Yemi Osinbanjo.
While personally declaring the conference open, the president praised the insurers for their contributions to the economy especially during the COVID-19 era and pledged his administration’s continued support for the insurance sector.
The insurers themselves confessed that it was the first time a sitting president in Nigeria attended insurance forum.

The insurers said they learnt a big lesson from the #EndSARS protest and at the same time used their claims experience from it to lure the public to believe in insurance.
These, they said, had led to higher patronage and higher premium growth for the industry during the year under review.

#Endsars protest lessons
One of the insurers, Mr. Casmir Azubuike, Managing Director, Afriglobal Insurance Brokers, told THISDAY that the lesson that insurers learnt from Endsars protest is this, “we have been hearing about catastrophes and everybody believed that catastrophe can only come when you have wars, natural disasters like flood but little did anybody know that it could come from that angle and it came and was very overwhelming to the industry.”

Continuing in his analysis of the insurers’ experience in the #EndSARS protest, Azubuike said, “But if you look at that #EndSARS protest critically, it could have been possible for insurance industry to opt out of that risks or those losses but for image reasons, the industry decided to take them up because when you read the policy documents, they will talk about riot, strike, civil commotion, war or war like situation, politically motivated risks.

“If you bring these together and link them to the #EndSARS protests, you find links which could have been possible for insurance companies to say look, we are not liable or at best let us pay these claims on ex-Garcia basis. But because the industry is struggling to shore up our image, we paid.”

This, being the case, during the year under review, the Lagos State Governor, Mr Babajide Sanyo Olu, said the behaviour of insurance operators towards claims from the protest was very encouraging and had shown that insurance protection was real.

The Governor, who stated this while addressing insurers at the Africa Insurance Organisation’s Conference in Lagos where he was represented by the state Commissioner for Finance, Mr. Rabin Olowo, said because of this, the state had perfected plans to bring all its workforce under various group insurance coverage including Group Personal Accident Insurance Cover, Group Life Insurance.

“This is why we have continued to partner with various insurance bodies and associations in the enlightenment of our people on the benefits of insurance in mitigating loses that might result from unforseen occurrences, “he said.

This aside, during the year, some notable Nigerians like former President Olusegun Obasanjo, accepted to be brand ambassador of the insurance industry.

Still on the positive side, successful hosting of the African Insurance Organisation which saw a Nigerian, in the person of Mr. Tope Smart, the Managing Director, NEM insurance plc., emerging the president of the regional insurance body is expected to showcase Nigeria to the outside world and attract investors into the industry.

There are high expectations that before the first quarter 2022 runs out, gains of the conference in form of foreign investments into the insurance companies in Nigeria would begin to manifest.
On the negative side, the insurance industry during the year suffered a carry over of some of the challenges it grappled with in 2020.

One of the challenges was its inability to conclude the pending recapitalisation exercise with the result that the regulator could not achieve the December 31, 2021 deadline it gave to operators to raise the last batch of their minimum share capital.

Claims #EndSARS
The regulator had on account of the COVID19 disruption of operators’ activities and huge claims from the #EndSARS splinted the recapitalisation exercise into two phases allowing operators to first raise 50 per cent of the required capital in the first half of the year while raising the balance by December 31, 2021. But this has remained inconclusive due to opposition from some operators and investors in the industry.

Aside the recapitalisation issue, the insecurity situation in the country impacted negatively on the industry during the year.

Operators said despite efforts to achieve better claims Management technique; they still experienced huge claims mainly due to insecurity situation in the country.

Non-enforcement of compulsory insurances was one of these negative factors as a result premium that would have accrued from buildings and other classes of compulsory insurances did not get to the insurers. The problem of non-insurance of most government assets continued and stood as a loss for the industry.

Due to the insecurity situation, claims experience of most insurers failed to match their premium generation.

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 the industry still hanging below N500billion and N600 billion mark, much below the N1 trillion mark, which the industry started pursuing since 2009,
Operators’ themselves alluded to the fact that their performance during the year under review was below optimal potential.

The rebranding project of the industry remained suspended during the year as such not much success was recorded in the area of image laundry of the industry.