Nigeria at 61: Insurance Industry Migrating from Public Alienation

As Nigeria clocks 61, its insurance industry is gradually migrating from a position of public alienation to increasing acceptability, popular ascendance, and total reinvigoration through injection of foreign capital and expertise. Ebere Nwoji reports!

The Nigerian insurance industry, after 61 years of political independence, is one of the few sectors of the economy currently enjoying a major turnaround in terms of public patronage, recognition and commendation by the government and other stakeholders.

Indeed, the sector has in the past few years become the new found love of both the federal and state governments.

This is despite the upheavals in the economy, which has shoved various sectors into dire straits, with little signs of early recovery.
Currently, the insurance industry and its operators are beginning to reap the fruit of their labour underlined by the unrelenting effort at sensitising the public and creating awareness on the relevance of insurance.

On the part of government, the industry has witnessed a shift from the initial lackadaisical attitude to a preferred and revered sector worthy of patronage.

The sector’s journey towards government recognition dates back to the administration of former president Goodluck Jonathan, which had Dr Ngozi Okonjo-Iweala as the minister of finance and coordinating minister of the economy.

As the government was searching for alternatives to oil and gas for revenue generation and alternative means of earning foreign exchange, it courted the insurance industry operators by appealing to them that the administration looked upon the sector as emerging sector that would serve the purpose diversifying the economy.

But the industry found much favour in the sight of the present administration after its surprising role in supporting government during the COVID 19 period when all arms of the industry pulled resources together to offer N11 billion life insurance protection to front line health workers. The contract was fully paid for by the insurers.

Also, the insurers’ role in timely payment of claims to victims of damages caused by the hoodlums, who hijacked the EndSARS protest October last year, further endeared the industry to the government.

In appreciation for their support, President Muhammadu Buhari attended the African Insurance Organisation (AIO) conference hosted by the Nigerian Insurers Association (NIA) last month, and personally declared the conference open, while the Vice President, Professor Yomi Osibanjo, also graced the closing ceremony.

This, according to the Commissioner for Insurance, Mr. Sunday Thomas. was the first time a sitting Nigerian president was attending insurance event.

Before the conference, unlike in the past years, the federal government in the past two to three years had adopted a new culture of fully paying for the group life insurance of its workforce just as the Lagos State Government recently said it was partnering with over 150 insurance brokers who serve as intermediaries and 20 insurance underwriters for the purpose of providing end-to-end risk management services to its workforce.

Similarly, other state governments have recorded high level of improvement in buying group life insurance cover for their workforce.
At the individual and corporate level, the insurance industry is gaining much more acceptance by the people.

Rising from Oblivion

Industry observers told THISDAY that the various systems being set up by insurance firms are doing reasonably well as more and more people are patronising their products.

Findings by THISDAY show that both fresh graduates and those who lost their banking jobs now find solace in insurance marketing as many of them registered with the various agencies of insurance firms and are happy with their jobs.

According to them the level of patronage they get make the job look like the best job whatsoever.

Recently, a female agent working with FBNInsurance, Mrs. Sandra Nwakamma, told THISDAY that the level of acceptance of insurance especially savings related products that matures between five to three years among market women was overwhelming.

She mentioned markets in Lagos such as Oyingbo crayfish market, Balogun, oke Afa markets as centers of attraction in terms of insurance patronage.

She said traders in these markets patronised insurance impressively after the lockdown.

Asked why she thinks that was so, she said she could not explain but somehow attributed it to hardship experienced by people during the COVID lockdown, which perhaps made them to realise that there is need to set aside part of their business profit for the rainy day.

The former Commissioner for Insurance and Managing Director of FBS Reinsurance Ltd, Mr. Fola Daniel, told THISDAY that positive things are happening in the insurance industry.

According to him, the entry of foreign entrepreneurs and investors into the Nigerian insurance industry in recent times is probably the best that can happen at this time of Nigerian insurance sector development.

“Apart from capital inflow, a new culture of insurance business is being brought to bear on our local industry, affording the insuring public the benefit of insurance practice as obtainable in advanced economies.

“Other benefits include, new product development, specialist manpower and deployment of information technology to drive the business process.

The ensuing competition between the new entrants and incumbent industry players confer on consumers better services. The minimal contribution of the insurance industry to the nation’s GDP is a passing phase. With the reinvigoration of the industry through injection of foreign capital and expertise, financial inclusive products, environmentally sensitive and pocket friendly insurance covers, we are on the right track to increasing the insurance density in our clime,” he said.

Daniel said the biggest raw material for insurance growth was the middle class of the society.

“Our middle class is growing and so is their insurance needs. The government focus on infrastructural development, housing, small scale business empowerment, are veritable impetus to the growth of the insurance industry. It is envisaged that the growth will assume a geometrical progression”, he said.

The current Commissioner for Insurance, Sunday Thomas, speaking on recent positive developments in the industry, said NAICOM was working towards bring insurance services to all nooks and crannies of the country.

According to him, the commission has put in place 2021-2023 Strategic Plan with five goals designed to entrench effective and efficient service delivery, ensure safe, sound and stable insurance sector, adequately protect policyholders, and public interest, improve trust and confidence in the insurance sector and encourage innovation and promote insurance market development.

“We also know that with the engagement we have had with the Nigerian content, there is going to be an increase in the oil and gas business. As I speak now, we have a committee working on the guidelines to enforce the law in the Nigerian content. All the leakages we have had hitherto will be blocked,” Thomas assured.

On the need to expand the sector, the NAICOM boss said, two Takaful insurance companies have been licensed in addition to the existing two, adding that the Commission is conscious of the fact that insurance sector is knowledge based which informed the on-going development of more actuarial analysts capacity in the industry as the first step of having more qualified actuaries in the country.

“We know that the drivers of the economy are those at the lower levels of the pyramid and so we are taking financial inclusion very seriously. It is now a national policy. For the insurance sector we are far behind, but we are doing a lot of catching up. To this effect, four micro-insurance companies have been licensed and an additional two are on the verge of being licensed,” Thomas said.

Trillion Naira Market

He said the target of the sector operators and regulator is to achieve the projected trillion Naira market as projected by the regulator since 2009. The industry’s premium hovers around N530 billion.

Analysts said before now, the insurance sector had maintained the position of poor cousin of bank and the least among all arms of the finances services sector in terms of its contributions to the GDP of the economy.

According to them, it had also remained a sector most neglected and jettisoned by the populace as Nigerians hardly want to put their money in the sector either in form of investment or policy purchase making the industry and its operators look like outcast.

Indeed, though the industry is much older than Nigeria as an independent state, having been in operation for over a century, its stage of development, compared with its sister sector, the banking industry, is far from satisfactory.

This situation had persisted over the years until in recent times when the success mentioned above were achieved.

But despite the successes recorded so far, the insurance industry is apparently still battling with a lot of issues that have retrogressed attainment of its potentials.

Notable and most current among the challenges is the ongoing effort by the regulator to address the low operating capital syndrome, which has been impoverishing the industry as most of the big ticket businesses that are supposed to shoot up the annual premium income and profit of the industry go to foreign insurers due to lack of financial capacity of indigenous insurers.

Several efforts by the regulator to scale up the industry’s capital base have met serious opposition from different quarters.
Another challenge is implementation of some aspects of Insurance Act 2003, around which revolves the growth of the industry, but which has been dormant over the years.

The industry in January 2013 successfully enforced the ‘no premium no cover” law which non-implementation over the years plunged operators into huge debt that nearly destroyed the industry.

The result was the industry’s inability to pay claims when risks occur and the inability to handle capital-intensive accounts which were often taken abroad.

At present, the industry operates on cash basis and is well positioned to pay claims and handle big accounts.
The industry is also faced with the challenge of final passage of the 2020 Consolidated Insurance Bill that will replace the 2003 insurance Act.

The Consolidated Bill holds much to the advancement of the industry as it is expected to address most of the problems stagnating the growth of the industry.

Considering the above scenario, industry critics said after many years of Nigeria’s independence and the exit of British insurance managers from Nigeria, while other sub-sectors of the economy were recording success and growth, the insurance industry, remained a toddler for several years mainly due to low capital base as the capital base of operating firms was ridiculous when compared with those of their counterparts in other sectors of the economy or with capital base of banks.

On several occasions and under its various leaderships, the National Insurance Commission( NAICOM), under late Chief Oladipo Bailey, late Emmanuel Chukwulozie and Fola Daniel conducted major recapitalisation exercises that upgraded the minimum capital base of the industry from N50 million, to N150 million then to the current N2 billion for life underwriting companies . Again from N20 million to N70 million, to N200 million, then to the current N3 billion for general business underwriters, and from N90 million to N5 billion for composite companies and N10 billion for reinsurance firms.

Recapitalisation Exercise

The Chulwulozie-led recapitalisation exercise raised much dust and after that, subsequent efforts to raise fresh capital of the industry continued to meet opposition.

With the available capital, the regulatory body resolved to face the challenge of deepening insurance penetration in the country to raise the industry ‘s premium..

NAICOM captured this in what it called Market Development and Restructuring initiative (MDRI), which it launched in 2009. The initiative has objectives of transforming the industry from N380 billion naira premium income to a trillion Naira industry. This the commission said would be done through the enforcement of compulsory insurances

It listed five compulsory insurance policies stipulated by the Insurance Act of 2003 for effective enforcement.

These are third party motor insurance, Statutory Group Life Insurance Employee’s Compensation (which replaced Workmen Compensation),
Occupier’s Liability Insurance, Builder’s Liability Insurance and HealthCare Professional Indemnity Insurance.

The commission launched these insurances in the six geo political zones of the country and declared that enforcement should commence in March 2011.

The MDRI also has the objective of creating 50,000 jobs through the agency system. The initiative was also targeted at fighting against fake insurance practice in Nigeria.

At present, despite the gradual public acceptance of the industry, it is still struggling to meet its target of N1 trillion premium income.
One of the major growth plans which the industry operators have been able to achieve within the period is the development of the Nigerian Insurance Industry Data (NIID) base by the Nigeria Insurers Association (NIA).

The NIID is a central system that allows all insurance companies to store all valid policy real time.

Also 61 years after independence, Nigerian insurance industry has built its own indigenous college of insurance to address the problem of lack of trained professionals.

Also the educational arm of the industry, the Chartered Insurance Institute of Nigeria (CIIN), few years back, in collaboration with the Ministry Of Education obtained approval for inclusion of insurance as a subject of study in senior secondary schools in the country.
These are signs of growth and developments in the industry within these years.

The industry has also formed a consultative committee comprising of executive members of various arms of the industry. The relevance of the committee is that hence forth, the industry will begin to speak with one voice in any matter of interest rather than speaking separately as individual arms. This according to industry analysts will make the voice of the industry noticeable to government in any matter that affects them.

A case in point where the consultative committee worked out for the industry was the COVID 19 support to government.

At present, a major growth area calling for operators’ intensified efforts is ensuring that underwriters and brokers develop and promote retail insurance, which, at the international level, is now the cash cow of insurance industry.