Govt turns to revamp insurance sector as revenue challenges bite, sets bold agenda

The Federal Government is now putting energy at pushing the country’s struggling insurance sector to make it more able to deliver to the economy in terms of generating jobs and improving incomes, particularly as dwindling oil prices throw fresh challenges on revenue.

As Ngozi Okonjo-Iweala, the coordinating minister for the economy and minister of finance, on Monday laid down a bold agenda for the sector, including growing gross written premiums (GWP) at N300 billion today to N1 trillion in the next three years, and to N5 trillion in ten years, she also signaled that enforcement would be stepped up in the sector generally seen as lacking discipline.

“Some of the things we have to do is step up enforcement, for instance, if we say everybody should have third party insurance for their motor vehicles, if you come to register or get your licence as they do in other countries and you do not have that type of insurance, you cannot renew your licence and you cannot renew your registration.

“That is what we will do and it is as simple as that,” the minister warned as she addressed participants at an insurance summit she convened with NAICOM in Abuja to look at ‘game changing opportunities’ in the sector.

Recent reforms have seen Nigeria’s insurance sector grow, albeit slowly. Total premiums have quadrupled in the past 10 years: growing from N75 billion in 2005 to more than N300 billion today and has attracted strong external interest in the sector with the entry of foreign investors such as Old Mutual and Sanlam from South Africa.

However, in spite of the investor interest, and huge opportunities in Africa’s largest economy, the insurance sector still lags behind in many respects especially when benchmarked against other emerging markets.

Okonjo-Iweala confirmed that the current insurance penetration (i.e. the ratio of premiums to GDP) is only 0.4 percent in Nigeria, compared with 1.1 percent in Ghana; 3 percent in Kenya; and for the BRICS (Brazil, 4 percent; Russia, 1.3 percent; India 4, percent; China 3 percent; and South Africa 15 percent).

In terms of assets in the overall financial system, insurance also accounts for only 3 percent of total assets, compared to 12 percent from pension assets and 79 percent from banking as sets, she noted. According to her, this is different from other emerging markets such as Brazil and Mexico, where insurance assets accounts for about 6 percent of total financial assets and for India where insurance contributes about 14 percent of total financial assets.

“Unleashing the latent energies of the insurance industry to create more jobs and boost economic development is one of our strategic responses to close the gap created by the economic challenges we are confronting at the moment,” she sated.

Okonjo-Iweala said part of the new vision would be to grow the number of direct jobs created in this industry from the current 30,000 people to 100,000 people in the next three years, and to more than 300,000 people in the next decade.