Even though insurance is about 100 years old in Nigeria, penetration is still under 0.25 per cent. Founder/Group Chairman, Mutual Benefits Assurance Plc, Dr. Akin Ogunbiyi, explain why. He also spoke about his life history, how Mutual Benefits revolutionized the industry and other thorny economic issues. Eromosele Abiodun presents the excerpts
You just turned 60 years. What does that mean to you? Share with us the story of your journey for the past 60 years.
I really don’t know what it means to be 60 because I don’t feel 60. I can’t see any difference between when I was 31 when I started Mutual Benefits Assurance and the way I’m feeling now. I’m full of energy and I thank God for His grace.
My first degree was in Agricultural Economics. When I was in part three, the concept of Agricultural Insurance was introduced. I was interested in it. So, I went to my lecturer and told him that I would like to choose Agric Insurance as my project topic. But he said no. Other lecturers in the department also said no, that it was a new area and there would not be enough materials for the study. I went to the central library, Oluwasanmi Library. I searched all the book indexes for weeks to see if there could be anything. God so good, I found one book, about 1,015 pages with the title Agricultural Insurance authored by FAO (Food and Agriculture Organization). I took the book and wondered what kind of article it could be. Then, I went to my lecturer, showed him the book and I told him I would be writing my project on this. Then he said, “If you insist then, you should do an extract.” I wrote a 25-page extract and I was allowed to go ahead with the topic. But my lecturers said if I took up the project I must be willing to pursue it to PhD level. I agreed.
After my NYSC, I returned to the campus to commence my post-graduate studies. But I stumbled on the pay slip of one of my lecturers, Professor Alimi, who was then Mr Alimi. He had finished his MPhil, was doing his PhD and he was given graduate assistantship. His salary was N600. And I said, “Oga, is this what you are earning? And you are doing your PhD.” He said ‘yes’. At that point, I resolved not to be an academic.
By the time I finished, the government had set up the Nigerian Agric Insurance Company and I applied for a job there. But NICON Insurance later offered me employment because one of the panelists who interviewed me for the NAIC job felt I would be more useful at NICON. At that time, NAIC was a subsidiary of NICON.
Within two years of joining NICON, I qualified as a chartered insurer. But contrary to NICON’s regulation that anyone who qualified as a chartered insurer must be promoted, I wasn’t promoted. So, though I loved the job, I became frustrated. As a result, I started looking for opportunities outside NICON.
After I qualified as a chartered insurer, I decided to take the professional examination of the Institute of Chartered Accountants of Nigeria (ICAN) and I cleared the foundation at a sitting. I then registered for PE I but in the course of that I saw an advert stating that a company was looking for somebody that had a good first degree in any field, a chartered insurer, and a good working knowledge of accounting with four years experience to be the Managing Director. When I saw the advert, I told myself that the position was meant for me, so I applied for the job.
I passed the interview but was told that they would not offer me the position of MD but Associate Director. The company, called Finance and Insurance Expert Limited, was owned by one of my bosses at NICON, Mr Remi Olowude. I initially refused to take up the offer but he persuaded me.
While working with Mr Olowude, I had written the feasibility study for a new insurance broking firm. The company was VTL Brokers. When they were going to recruit the head of the firm, I was offered the position. The promoter of the business, Mr Akin Opeodu, did one thing for me. He said, “Look, It won’t be ideal for me to just treat you as an employee. If you’re going to run as chief executive, I will convince my board to take 51%, you take 49% for yourself but don’t own it all alone”. I have never come across anything like that in my life. So I look for some people to buy some of the shares allotted to me.
But then from the first day, I called all the shareholders and told them my plan. I said I would run the company for four years. In the fifth year, I would prepare to start an insurance company. I would run that company for 10 years. And after 10 years, I would form a re-insurance company. I put down a beautiful plan ready for them and they all agreed. And just as I said, after four years, I left VTL to start Mutual Benefits.
Why is the insurance industry not able to do as well as the banking sector?
Let me just say straight away that insurance, even though it is about 100 years old in Nigeria, is still at its infancy stage. If I’m not mistaken, insurance penetration in Nigeria today is still under 0.25 per cent. Insurance has focused majorly on corporate sector and there hasn’t been any attempt whatsoever to penetrate the informal sector because if insurance is to develop, I will tell you, it has to focus on the informal sector. Every transaction that happens in Nigeria as of today is ratio one to nine; that is 1% for the formal sector and 9% for the informal sector and the informal sector is not captured.
We are focused majorly on corporate insurance. And if you look at the big time players, where do you find them? You find them in the cities. In fact, there are companies whose marketing strategies only work on a regional basis. The top flight insurance companies don’t have branches everywhere. They have in Lagos, which serves as their head office, they have in Kaduna, Abuja and then in Port Harcourt.
All the big time insurance companies, this is how they operate. They didn’t take time to develop the informal sector. But that was until I came into the scene because people call me ‘Apostle of Retail Insurance’.
When we started, the big brokers controlled the market. They didn’t have trust in us. At that time, if you had not produced five year financial statements, you could not get business from them. The focus of the big time insurance brokers is mainly on the big corporations. But when we started, I said I couldn’t wait five years. So, we went into retail and our retail was fully developed in the tenth year when we moved to our head office on Ikorodu Road. And we did this so well that NAICOM had to come and copy what we were doing for the industry.
Insurance practitioners need to open up the market; we have to patronize the informal sector, the trade associations, unions, remote villages and that means we need to have representation everywhere across Nigeria.
For the first time we saw NAICOM revoke the licence of some insurance companies. Looking at the challenges in the industry, are we going to see more of that because now there have been concerns about capitalization and the struggle for the industry to reform?
I really wish we had a very powerful regulator. We’ve had companies on the brink for so long. But the boldness to sanitize the industry was not there. If you look at the companies disrupting the market today, it is still those big players. When you have the regulated dictating to the regulator, it’s a major issue. We’ve always had these challenges.
Look, all the insurance companies that went down, they went on their own volition; they died a natural death, not because NAICOM was involved. You only hear about NAICOM when it has to do with capitalization. I can tell you that the insurance industry is not well regulated. For instance, NAICOM officials were with us at Mutual Benefits about four, five weeks ago and they were with us for about two weeks. But before then when was the last time we saw them? Maybe about 15 years ago. So, the industry is weak because we have an extremely weak regulator in the industry.
At a point when we had several local content policies, which were supposed to enable an industry like yours, we found out that the insurance plays at a very, very insignificant level. What do you think can be done?
I’ll tell you straight away. It still boils down to NAICOM. The insurance industry today has the capacity to underwrite any risk in this market. We don’t even need to get to N10 billion and N8 billion capital base, but we are there now. I am not saying that because we have any difficulty in recapitalizing, Mutual Benefits has been fully capitalized. But even before then, we are saying we don’t need to do beyond N3 billion or N2 billion capital. What is the essence of reinsurance? The reinsurance that we have has given us multiples of capacity. With reinsurance, what type of risk can’t the insurance companies in Nigeria underwrite? So I say if NAICOM will rise up to its responsibility and support the industry, and ensure the right thing is done, we will exhaust the capacity.
How do we address the unethical practices that are rife in the insurance industry?
Unethical practice is the bane of this industry; it is still in operation till tomorrow. Look, I delivered a paper at a Chartered Insurance Institute of Nigeria (CIIN) conference on the development. The Insurance Commissioner at the time, Mr Fola Daniel, was also in attendance.
In my paper, I said that there were two sets of people killing this industry; the big brokers and secondly the big underwriters. I said the big brokers compete on the basis of price, not on the basis of service. So, if something is N1billion, for them to get the account, it will be basically on pricing. They could price themselves as low as N50million. Something that is supposed to cost N1 billion premium, they would compete among themselves and bring it down to N50 million. Who loses? It is the industry. Can I do it? I cannot. The big brokers and the big underwriters are the ones that engage in this.
I have a personal experience. I did a business. I quoted $1.4 million for NIMASA and I took the business out. It was P&I (protection and indemnity). We had only 18 clubs across the world. We don’t have anyone in Africa because that was the time of apartheid; they had their own P&I and it was not available to anybody, it just took care of South Africa’s interests. So, the rest, we had 17. So, I quoted and I got the business. The following year one broking firm took the account and they got $500,000 for the account I got for $1.4m. And then, I went to see the MD and asked him who quoted the $500,000. He said it was Guardian Trust. Where is Guardian Trust today?
I said, “Oga, this is an international policy, we don’t have it in Nigeria. So, why would anybody want to do it for $500,000?” He said, “Look, Akin I am a broker. I want this business. Whether I quoted it one Naira or two Naira, as long as I have my commission, when the thing happens, it is his problem.” So, you can see, when you talk of unethical practices, NAICOM has a lot of role to play in sanitizing the industry.
About four or five years later, the brokers again invited me as a guest speaker on insurance development. I can’t remember the topic but I prepared my paper. The Commissioner for Insurance was scheduled to give the opening remark. He spoke for 30 minutes. When it was my turn to speak, I got up. I said, “Ladies and gentlemen, this is the topic that you gave to me. I have prepared it but I have taken five issues from the remark that the Commissioner has made. And that would take time, so, please, keep my paper, print for everybody, I won’t talk on the paper.”
I picked up the Commissioner; what did I tell him? The Commissioner was talking of risk-based supervision. He took about five topics but the most important thing he said was that the industry could not get to the N1 trillion premium income mark because we chose to give unnecessary discounts. And he said, “You are giving as much as 95 per cent discount to people that are richer than you.” I said to him, “Mr Commissioner, who is to regulate this industry? If the banks say the MPR is 14 per cent and you can do five per cent above it. If the lending rate in the country is about 22 per cent and somebody says ‘I will give you 60 per cent return on your money’, would the Central Bank allow that bank to run?”
I said, “Remember the wonder banks. So, what are you regulating if you say you are the industry regulator and you, Commissioner, are saying that the industry is giving much discount, 90 something per cent discount.” So, who are the companies that are involved? What have you done to them?” It was very embarrassing to the Commissioner that day. So, if there is going to be better ethical practice, it still has to do with the industry regulator.
You built a multinational in less than two decades. How did that happen?
One thing that is helping us is the fact that we do what I call strategic planning effectively. Every five years, we look at what we were doing and you know, the business cycle, they say, it goes in half cycle, once it gets to the peak, we don’t allow it to go down but we take it to another peak. In Mutual Benefits, we are 27 years old now, we have had about three, four, five peaks and when it gets to the peak we take it to another peak. So, we do strategic planning, we look at development, we look at the market, we look at the environment and we decide on what to do.
But a major development that we had was when we had the “Wind of Change”, that strategy document, is actually what propelled us into these various things that we do. And the main reason why we went into it was we were looking at every investment and narrowing it down to insurance. When we went into transportation, our concern was how would insurance benefit from it? For that transportation, every drop carries a payment and we arranged it in such a way that once you pay your N100, N10 comes to insurance. Even if you take a ride from Ojota to Maryland, N10 out of the fare goes into insurance. So, everything was tailor-made towards boosting the insurance business.
We went into banking to develop micro-insurance. We saw the need to establish a microfinance bank. We made a presentation to NAICOM about owning a microfinance bank and they approved it for us. And about two to three years after, we generated about 60,000 individual policies as a result of our owning a bank. That added a lot to the bottom line of Mutual Benefits. So, it was actually a strategic thinking, looking at the environment and creating the capacity to be able to solve identified problems. When we get into a new thing, we look for good people who we think can handle it and we give them the free hand to handle it under guidance. That’s how we develop.
