NAICOM creates new distribution channels to boost insurance penetration
Determined to deepen insurance penetration in Africa’s most populous nation, Nigeria’s insurance regulator, the National Insurance Commission (NAICOM) has released draft guidelines on five new distribution channels.
The channel guidelines including Web Aggregators Operational guideline; State Government’s Implementation of Compulsory Insurance (or State Financial Advisers) guideline; Independent Agents Operational guidelines; Mutual Organisations, Associations, Community Based; and Insurance Agencies and Non-Governmental Organisation guidelines according to NAICOM will compliment other existing channels for example micro insurance, Takaful and bancassurance referral model.
Insurance penetration to GDP in Nigeria is currently at less than 0.4 percent according to 2014 figures, putting Nigeria 10th in Africa behind South Africa, Mauritius, Namibia, Morocco, Tunisia, Angola, Algeria, Kenya and Egypt. South Africa is highest with 14 percent and followed by Namibia 7.2 percent. This is despite the country’s over 120 million people.
Mohammed Kari, commissioner for Insurance /CEO NAICOM said low Insurance penetration has continued to be an issue in this market with the industry concentrating on servicing only government and corporate clients to the detriment of the retail and micro consumers.
According to him, t resolve this problem, the Commission has identified the limited channels of distribution as one of the major drawback.
Kari also said that failure to effectively enforce the compulsory classes of insurance is another.
“In these regards, we have considered and agreed to create additional distribution channels in the market to include using the services of state government to enforce compulsory insurance at the state level.”
According to him, “we have further decided to explore and de-mystify the partnership type of operation for Brokers and I can assure you it will open a new vista in insurance inter-mediation in Nigeria and most importantly it would clearly separate the professionals from the businessmen.”
To underscore our determination in this regards, we have just exposed the following draft guidelines, Kari said. NAICOM says inadequate Insurance distribution channels has been roundly identified as one of the major challenges of deepening insurance penetration in the country and the Commission believes that expanding the channels of distribution will go a long way in bridging the gap of insurance awareness and penetration in Nigeria.
Also, when implemented, the new initiative will not only achieve the desired increase in insurance penetration, but would contribute to the Federal Government’s drive to create employment and wealth in the economy.
The words of Yemi Soladoye, founder, Riskguard Africa Limited on the importance of distribution channels remain critical in NAICOM’s agenda for market development.
Soladoy had said while speaking on theme “Maximizing Channels of Distribution for Insurance Penetration” that the non untilisation of varied distribution channels outside brokers and agents is why there is record in premium growth without market expansion.
Soladoye stated that this has a limited time, as the market would cease to grow in the short time unless there are frantic efforts to develop other channels of distribution.
“Growth prospect for this two traditional distribution channels are limited and if nothing is done we will get to that point where the industry graph will point south because the corporate end of the market is almost saturated, Soladoye noted.
Modestus Anaesoronye