New employments will spur economic growth, boost uptake for insurance – Ademeso
The nation’s insurance industry would contribute more reasonably to the economy if government could look into the sector’s tax challenge as well as enforce insurance compliance amongst MDA’s. Larry Ademeso, managing director, Custodian Life Assurance in this interview with Modestus Anaesoronye shares his thought on the operating environment, government policies and future of the market. Excerpts
We are getting to the end of the year, and now in the period of insurance renewal, how is business looking given the political environment?
The year is no doubt almost drawn to a close. And for us as an organisation, we are optimistic that we will achieve the goals set for our self at the beginning of the year. To that extent, we are grateful to God and already looking ahead for 2016. With the positive vibes we are getting from government, we believe it will impact on operations next year. We are also hopeful that government will overcome the issue of dwindling oil prices which did not allow it spend in the current year. Government is quite determined to spend on infrastructure and we hope this will reflect on the economy by next year.
Beyond expenditure on infrastructure, which other areas in the economy would you be expecting government to tackle for growth?
One area again, is the determination of government to cut leakages. If it’s able to tackle corruption and refocus on spending, the economy will feel the impact. Recently, we attended a meeting with the Commissioner for Insurance and the new minister of finance who was represented by the director budget finance; it was clear from the minister’s presentation that government would pay a lot of attention to agriculture which will reduce unemployment and of course, help deal with inflation. Inflation this year was about 9.4/9.5 percent, I believe that if we are able to reduce food imports massively, it would help reduce inflation. These are positive vibes i see in the economy, which are conducive for business.
The challenge of the insurance industry is that of deepening penetration and increasing the sectors contribution to GDP, what do you think insurers could do to address these challenges?
The area that quickly comes to mind is the uninsured segment of the society, just as you have the unbanked segment of the society. Like we have said earlier, if government efforts to create employment works, and many people get involved in economic activities, definitely there will be disposable income in the hands of many. Of course, people will have extra to buy insurance. So, they could start to take insurance to protect themselves, their businesses as well as their dependants. Currently, what is happening is that people are struggling to meet basic needs of food, shelter, health, children’s school fess, and so insurance comes at the lower end of their priorities. But once you get many people off the unemployment bracket and they begin to earn income, they can now think of savings and security. And of course insurance comes to mind. NAICOM through the Market Development and Restructuring Initiatives (MDRI) is currently driving the industry programme to get many people insured through micro insurance and Takaful and with time it can only get better.
Issue of product rating and pricing has been identified as another major challenge affecting growth of the sector, how far has this been addressed as an industry?
As an industry, we have always had an agreement as to what should be the standard, but the challenge has been that of enforcement. I think that whilst the operators have the obligation to ensure that businesses are rated professionally, we can also call on our regulators and our reinsurance companies because they also have a role to play. If an underwriter gets the business and no reinsurer takes it, they won’t need anybody to tell them to do the right thing. I believe that from the point of view of regulation and reinsurance, apart from the responsibility of individual companies the issue can be largely addressed.
Specifically, what is the current market situation looking at renewal and consumer behaviour given the lull in the economy?
I think the traditional consumers are quite conscious of the risk inherent in their business and so for them it’s a culture to take insure annually for protection of their business. For this group, we don’t have problem with them. The only challenge we have is with individual consumers, and as i said earlier, it has to do with the disposable income in their hands. For the corporate, i don’t think there is much problem because they are conscious of their insurance to protect their business and keep them going should anything happen. Of course the rating issue, that is, the cut-throat competition in the industry is the only challenge i feel is affecting renewals.
A new minister of finance has just been appointed, what would you be expecting her to tackle urgently to give insurance industry a leap for survival?
The first issue is on taxation on insurance premium. We have been lamenting for a long time over the issue of unfair tax obligation to the insurance business as opposed to other financial service providers. The industry body through the Nigerian Insurers Association (NIA) had made representation on this to the National Assembly on how it can be resolved. I believe is one area that the new minister should focus on.
Secondly, as a consumer, government should take advantage of insurance to protect its assets, as only very few government agencies are currently complying even on statutory covers. I am aware there was circular in the past that mandated government agencies and parastatals to insure their asset, but whether they are complying with this in part or in whole is one of the challenges that should be looked into. So, it’s another area the new minister will need to look into to ensure they are complying, that there is budget provision for it and that there is proper disbursement of the fund to pay for premium.
Today, our environment is challenged with emerging risks of insecurity, terrorism and kidnapping. As a life company, how prepared is the Nigerian insurance industry to tackle this challenge and provide compensation to affected victims?
The market is prepared and deep enough to manage these emerging risks. If you talk of insurance protection for our courageous and gallant officers who are tackling insecurity in the North Eastern part of the country we are there for them. As an organisation, we are one of the underwriters for this risk and we clearly understand our role, to provide succour to them and their families when the risk crystallizes either for incapacitation or death as result fighting insurgency. On the other types of risks, we are prepared as an industry. But on whether we have specific policies for these risks, we are working with our reinsurers to deal with the emerging developments.
Of recent, flooding has assumed a dangerous dimension in many parts of the country causing serious damages to farm lands, factories and homes, what role has the insurance industry played in this regard?
Insurance has been involved to a large extent particularly as it affects homes and factories. The only area where we have limitation is agric insurance because there is almost a monopoly in that area as we have only the Nigerian Agricultural Insurance Corporation providing cover for majority of the farmers. But for individuals with the right policies, they are quite covered when such risks occur.
Custodian and Allied plc no doubt is a major player in the industry, with huge strides in market share, good returns to shareholders as well as growth of the market, what has been working for you?
First of all, we leverage on strength of the group as a financial services company with interest in general insurance, pensions, trustees, properties and of course life insurance, which is the area i manage. I think the group has afforded us the opportunity to tap into enormous opportunities within the group, expand our product offerings to members of the public, which has impacted on our operations and bottom-line.
But as an organisation, what are you doing differently?
As an organisation, we place huge premium on our human capital and we rely a lot on our IT infrastructure to drive our operations. These are two critical areas that have assisted our processes. Then, when it comes to claims experience, we take it very seriously and our brokers can attest to this. We are known for meeting our claims obligations as at when due. And I am sure you would have seen our advert pay offs: ‘Insurance is no stories’.