Ernest & Young seeks clearer policy directive to lift-off insurance growth
For the Nigerian insurance industry to achieve its growth potential and contribute reasonably to the economy, there must be clearer policy directive and government regulation directed towards building the business, Ernest & Young, management service firm said in its latest report.
“Clearer policy directives and government regulations are critical to creating lift-off for the insurance industry. As nearly half the population of Nigeria is Muslim, the potential for Takaful to expand insurance penetration is evident but not all of the operational guidelines necessary to expand in this direction have been established.”
The report titled “Waves of Change: Revisited- Insurance Opportunities in Sub-Sahara Africa 2016 said Nigeria’s new government must prove its credibility to boost economic growth, amid collapse of oil prices, while harnessing Takaful can be a major opportunity”
Presenting the report in Lagos , Sujay Shah, associate director, EY said growth prospects for Nigeria are robust – but so are the risks in Nigeria. Quoting Oxford economic projects, he noted that the insurance market will grow at 10 percent annually from 2014 to 2018, reaching $2.6 billion annually in premiums, up from $13.20 billion in 2018 from $10.00 billion in 2014.
Sujay joined by Colin Daley, partner, Advisory Services, EY and Benson Uwheru, senior manager, Advisory, EY said Nigeria’s insurance industry is undercapitalized, fragmented and too small to take on larger risks, according to a June 2015 analysis from NKC African Economics. Nigeria is home to 17 life, 32 non-life and 10 composite insurers, but companies report regulatory authority is more compliance than risk focused, the observed.
They also believe that Sub-Saharan Africa offers myriad opportunities for insurance providers, but the market and their prospects are hardly uniform. Rising economic opportunities and the potential for mobile technologies to create relatively frictionless financial connections mean more potential customers than ever before can be served by insurance companies. But face to face sales conducted by skilled agents and brokers will remain important.
“Consumer education will also be critical, as many consumers in these rapidly growing markets have never been taught the values that insurance offers. Investment in software programmers and mobile interface engineers will matter, as well as training of customer service representatives and actuaries.
These overviews suggest some important ramifications for those seeking to boost their insurance revenues in the region:
Focus on cities first. Africa’s cities are locomotives of growth and home to most consumers of life and on-life products. As African societies change. Consumers are now being more self reliant, hence the need to buy insurance.
Educate consumer. Consumer education will be crucial. The biggest competitors for insurer will not be other companies as much as the implicit practice among Africans to “self-insure” against loss – because they feel the market cannot replace personal relations when it comes to protecting themselves against life’s setbacks.
Invest for the long term: The initial success of innovative programs that harness mobile phones to market and sell insurance suggest Africa could become a major “test bed” for innovative insurance programs that could also be used in the developed world. Savvy companies will not only have invest in sales and training of brokers, actuaries and customer service representatives, but also software engineers and experts in developing mobile interfaces. The customer service representatives, but also software and expert in developing mobile interfaces. The customer of the future, who are just beginning to think about purchasing insurance, are “digital natives and companies need to demonstrate digital fluency.
Regulatory framework: It is critical that the framework is improved in order to support the growth of trust, inclusion and education about the value of insurance in the rapidly growing economies represented by the seven countries survey in this report.
Modestus Anaesoronye