Confronting impediments to insurance sector growth
Nigeria’s insurance sector contribution to the economy, as a measure of the ratio of total gross premium to the gross domestic product (GDP), has been abysmally low with small policyholder base despite the country’s population.
The challenges, though not necessarily caused by the industry, are largely environmental and must be confronted to enable the sector contribute reasonably to economic development, analysts have said.
The analysts, who spoke at the 2nd Annual Insurance Conference organised by BuinessDay in Lagos, listed some of the challenges to include low insurance consumption occasioned by the low per capita income, unemployment, poverty, low insurance education/financial literacy, awareness, inadequate capacity and cultural overview
These are serious impediments to why the policyholder base is small, and except one is able to grow the policyholders’ base which in turn would translate to significant gross premium income, insurance growth in the country would lag, an analyst said.
Fola Daniel, commissioner for Insurance, said there are also the self-inflicted challenges of rate competition, poor product design that are not tailored to meet the needs of the people, reluctance to take advantage of the huge potentials that exist in the retail end of the market and poor corporate governance culture.
“These factors combined have contributed in no small measure to the current status of the Nigerian insurance industry,” Daniel who was represented by Mohammed Kari, deputy commissioner, technical said.
According to him, while the primary responsibility of the Commission is the protection of policyholders, NAICOM has nonetheless remained committed to providing leadership, regulatory guidance and roadmap for expansion to the industry in the relevant areas.
“As part of her strategic imperatives and focus, the Commission had in the recent years committed huge human and material resources into driving insurance penetration; opening up new windows for growth; developing new markets especially the retail sector, ensuring financially sound and stable insurance institutions and building capacity and competencies.”
In 2009, the Commission launched the Market Development and Restructuring Initiative (MDRI), a medium term industry development plan designed by the Commission to drive insurance penetration and awareness.
Since inception of the programme, the Commission has been actively involved in massive insurance awareness drive across the country with several road shows and campaigns to create awareness on compulsory insurances.
Implementation & Monitoring Committees were set up by the Commission in various regions in the country, while memberships of the committees were drawn from the fire service, vehicle licensing authorities, the police, insurance companies and state governments.
From this point however, the Commission expected that the insurance industry would take ownership of the programme to achieve considerable level of penetration and market growth.
NAICOM further hinted that some underwriters have come together to enforce the motor vehicle third party liability insurance in collaboration with some State governments, while another group of underwriters are collaborating with another State Government to enforce the occupiers liability insurance.
“The Commission is working towards getting more states to embrace these models because it is one of the ways we believe we could enhance access to insurance in this kind of market where there is systematic apathy to insurance.”
According to him, there is no one single measure that will bridge the insurance gap in Nigeria, but could only be achieved through a combination of different approaches and initiatives.
Insurers will need to continuously develop simple and affordable products that will appeal to the public and should be able to offer better value by developing products and services which guarantee not only the profit needs of the company but, fits the pockets of the clients.
Thus, the Commission believes that with microinsurance, consumer interest in insurance would be awaken while access to insurance will be greatly enhanced in the Country.
Alongside microinsurance, the Commission is promoting Takaful and agricultural insurances in the market. The introduction of Takaful is meant to serve that segment of the market which might not be comfortable with the modus operandi of the conventional insurance.
This has generated a lot of enthusiasm in the country as a lot of Nigerians have shown interest in these so-called ethical classes of business. In addition, some underwriters have started exploring the option of partnering with mobile telecoms network to sell their products. This is one other way to go for the industry to improve insurance penetration in the country.
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