‘Power sector reform will create insurance opportunity for assets, group life’

As businesses restrategise to meet their full-year projections after the first quarter, AIICO Insurance plc, a major player in the nation’s insurance industry, believes it is well positioned to deliver customer value and a rewarding year for its teeming shareholders. BusinessDay reports on this interview with the organisation’s top management. Excerpts:

What will be your assessment of the business environment in the first quarter and how has insurance fared with the budget execution not in place?

Talking about the first quarter, we all know that for us to be able to plan, we must have a working budget in place, and this we all know has just been recently approved. At AIICO Insurance plc, we have been able to set target for ourselves and to a large extent, we have been able to perform reasonably well and are set to achieve them, judging from all that has happened in first quarter.

Looking at the financial environment in terms of what has happened in the first quarter, from the micro insurance point of view, the government has been able to keep the inflation rate down to single digit. In terms of growth, it is about seven percent now; this tells us that there are a lot of potentials and opportunities for the insurance industry in the market.

On the political terrain, there have been a lot of security issues which has affected us in terms of lives and properties especially in the northern part of the country; the ‘Boko Haram’ situation readily comes to mind. This tells us that on our own part we are expedient and have created an extension in terms of the Fire and Special Peril.

Opportunities are there to grow the market. The recent privatisation of the power holding which has been structured into the DISCOs (Distribution Companies) and GENCOs (Generating Companies); there is projection of growth in this sector as their assets will ultimately be insured and this will boost the insurance sector. The new owners will definitely employ, thereby creating opportunity for the group life in that area.

On the micro level, our regulators have been able to assist the industry with the ‘No Premium No Cover’ policy. Claims in the books of insurance companies has reduced with a boost in cash inflow of most insurance companies. Insurance companies all over the world look at their investment returns and also underwriting profits, so with more cash coming in, there are possibilities of good returns.

How far has AIICO Insurance been able to meet up with first quarter projection and what is your target for the year?

For an organisation to measure up itself, talking about the first quarter, it has to set targets and drive the team. The leadership has been able to get involved in the whole process. We set a target of about N31.7 billion for 2014 in terms of our top-line figure, and judging by these unaudited results, we have not done badly at all in this first quarter.

For the Life and General business we have done cumulatively N8.616 billion for the first quarter. With these in the first quarter, we see the trend continuing in the second quarter and at the end of the year translate to profit for our shareholders.

For AIICO what has changed in your operational model since coming on board of the new management?

AIICO is on a transformation path, it is evolving and dynamic as we have placed our customers high and above everyone else. It is imperative to note that we have taken our customers to heart in all our projections. We plan to remain connected and keep paying attention to our customers’ needs. It is easier to satisfy your customer when you know his behaviour pattern.

The two primary changes as experienced in the environment is another factor we have taken into consideration. For example: the digital revolution has made the customer more technology savvy and aware than ever before.

Secondly, the demographic and expectation of the customer has changed, the typical customer of 10 years ago is not the same as today, their expectations and positions are different. As such, we are repositioning our people to be able to adapt to satisfying those needs, expectation and lifestyles of these emerging pool of customers.

One of the key things we’ve done in recent times is redefining the company’s structure; as opposed to being configured along business lines of Life and Non – Life (which existed prior to now) to customer type which helps determine if the customer is a corporate customer or a retail customer knowing that even if they are retail or corporate, we have Life and Non-Life products for them.

That is how we are configured internally. We have also translated this into our growth in market and distribution model because the operating model of a company does not end with what goes on inside the company; we understand that the experience is not complete until the customer enjoys the benefit of business.

We have about 54 million people under 30 years of age in Nigeria; that is the exactly the entire population in South Africa. When we compare that to how big the South African insurance industry is, in fact if we remove just 30 years and under, we can potentially be bigger than South Africa.

But to make all of that happen we have to ensure that the customer is happy and is also happy to advocate those experience; these are what we believe will sustain growth in the long term.

The industry is very different from what it used to be, but our ultimate goal is to create value for our customer.

Do you see the new guideline on Micro insurance changing the face of the insurance sector in Nigeria? What is AIICO’S plan for micro insurance?

Micro insurance is about the biggest talk in Nigeria right now. Kudos to the regulators as they have taken a leaf from the books of more advanced countries such as Indonesia, Malaysia, even Ghana as they all have some form of framework for the Micro insurance business.

It is a welcome development from NAICOM because in Nigeria a country of over 165 million people, we have majority of her population living below poverty line. It is therefore important that as we focus on infrastructure, we should equally extend insurance to them.

The regulator is doing very well in that regard. They have taken the right approach by seeking support from global players and external organisations.

AIICO is doing very well too as the biggest retail insurance business in Nigeria; we have machineries that transverse the length and breadth of the pyramid. We have been very innovative in this regard and also have a unit that is responsible for that business where products are being developed to get to the very bottom of the pyramid. We are establishing strategic partnership with the micro finance banks to enable us reach their customers and partner with them and extending our products to them as well.

We also work with trade and market associations. Many of these people belong to the bottom rung of the pyramid. These associations are not informal but semi-formal, and we are partnering them to get to their members and update our KYC.

We are also talking to the telecoms operators, this will enable us convert their high penetration speed as a means to reaching our customers. The need by our customers for proper health care is also important as everyone both men and women want to be in good health, we have health insurance products.

Our partnership with Multishield is doing very well in that space. Our combined product Aiicoshield is also making very good progress in that segment of the market.

It has been a very successful experience for us so far, though there is still a lot to be done in that direction. We are anticipating greater success and I am sure the opportunity is waiting for all the insurance players that are focussed in that segment of the market.

Do you think the insurance sector really needs bailout as being canvassed by the NIA?

Insurance too is a part of the financial sector. For the banking Industry to be bailed out by the AMCON takeoff, the insurance industry is no different. Even though we have our Re-Insurers backing up our risks, Insurance companies do have liquidity issues when paying out claims especially when it is more than their retention capacities.

By and large, a lot of insurance companies were affected by the capital market disaster and their shareholders funds were also affected. Most investors will ask for the balance sheets and look at shareholders funds before doing business. I will consistently advocate that the Government extend the bailout opportunity to the insurance companies as well.