Insurance Industry’s Long Walk to Global Standards

The effort to repositioning Nigerian insurance sector to meet global standard, which was kick started by the sector regulator, NAICOM in 2009, is beginning to bear fruit. In this report, Ebere Nwoji examines the achievements so far.

The insurance industry going by positive developments that happened in the past few years has covered reasonable distance in its long walk to meet global  standardisation  and competitiveness.

The industry has achieved this from both regulatory and operational fronts.

A critical look at its activities shows that whereas in the past, while the regulator was faster in initiating and implementing regulatory programs that will reposition the industry to world class operational standard, the operators with their heavy weight of outdated and conservative business model drag the regulator backwards with the result that they often end up in disagreement.

Currently, what obtains in the industry is that operators are gearing towards by passing the regulator in initiating new business models that have been attracting the masses towards insurance patronage despite their eroded income caused by hard economic times besieging the country.

Evidence is on product innovations witnessed by the industry in the past few years as well as innovative regulatory models being dished out by the regulator.

Business outlook

For instance, in terms of business pursuit, operators are no longer clustering the corridors of federal government agencies in search of connections to be involved in the insurance of government assets and group life insurance of government workers.

Rather they have developed and are still developing a good number of retail insurance products that meet the current needs of Nigerians. 

Indeed, insurance market in Nigeria is fast opening up even among the rural dwellers due to availability of products that address their peculiar problems.

This is a major shift from what was obtained in the industry over the years during which operators keep on recycling outdated products especially life insurance products that hardly meet the demands of the present generation.

Analysts’ Expectation

Before now industry analysts had expected to see Nigerian insurers look critically into various professions like musical and other forms of arts, medical and legal professions among others and coming up with products that will cater for specific risks inherent in these professions .

But this has not happened until recently when some new generation firms put on their thinking caps and moved away from the industry’s culture of pursuing government’s group life insurance business to innovative products that will meet the needs of the people.

Industry Pace Setters 

One of such first insurance firms that initiated this was the Mutual Benefit Assurance which some years back launched 36 insurance products that could cater for the interest of Nollywood actors, law firms, politicians, churches, travel and tour agencies among others.

The company said the above policies fall within its general business, adding that there were others that fall within life business such as Lady life assurance policy, Juvenile life Assurance, pilgrim welfare insurance mutual, Benefits school fees Guarantees scheme among others.

According to industry observers, the above products, if well pushed into the market would definitely expand the market and position insurance in the minds of an average Nigerian as an industry worth patronising.

This is in line with the dream of the regulator NAICOM when it launched its market Development and Restructuring Initiative (MDRI) 13 years ago.

The initiative has the objective of transforming the insurance industry into a trillion naira market, create about 50,000 fresh jobs through the agency network system while raising the contribution of the industry to the nation’s Gross Domestic Products (GDP) significantly.

NAICOM had since after the launch of the initiative severally challenged the insurers to move in and tap from the opportunities existing in the industry through designing of products that meet the needs of the people.

Along the line the commission has launched the micro insurance initiative and has released the guidelines for its operations.

Currently, the commission is still issuing operating licences to micro insurance operators.

It has projected that opportunities in micro insurance business if well harnessed would inject N60 billion to the economy annually.

The Chairman, Mutual Mutual Benefit Assurance Mr Akin Ogunbiyi said his company saw opportunities in mass appeal innovative retail insurance products and has moved into the remotest areas of the geopolitical zones of the country organising petty traders, artisans okada riders, cooperative societies, members of Nigerian Union of Teachers and other small trade groups into small groups through which it has continued to administer insurance services to them.

Ogunbiyi said this has been yielding his company such huge premium income that government’s group life insurance has not yielded to it.

He said having explored opportunities in this area, his company has moved to the urban cities with products that address people in different professions such as the Nollywood actors and actresses who have suffered frequent death of its members in the past few years without any form of competition.

Insurance product for different profession

Before this, criticisms and calls for befitting insurance cover for Nollywood actors have  trailed the sudden death of actors like Enebeli Elebuwa, Peter Eneh, Sam Loco, Justus Esiri among others who were said to have suffered one ailment or the other before their death without any insurance or compensation for their dependants.

Indeed many Nigerians who witnessed the exit of these celebrities between 2011 to 2013 call for special insurance policies for them and other similar public figures, arguing that in advanced countries, their counterparts insure their various organs and parts of their bodies  used in  performance for about $50 per month.

Initially, insurers gave impression that such was not possible in Nigeria, as nobody would patronise such products but from what is happening in the country today, insurers have responded to this calls and have come up with array of products that would cater for the interest of the Nollywood practitioners.

Yearnings by Actors, Actresses

At the bi- monthly members’evening of the Nigerian Council of Registered Insurance Brokers held in Lagos last week, the popular Nollywood Actor Segun Arinze urged insurers to save Nigerian actors and actresses by coming out with insurance packages that would cover his colleagues in the event of health challenges and other calamities that might befall them.

He said he was tired of making donations to those already down with sicknesses.

He noted that the Nollywood market was a vast market for Nigerian insurers to explore and make money while at the same time contributing to the well being of the actors and actresses.

Insurers’ Responses

Also in recent times more insurance firms have come up with more innovative retail products that address needs prevalent in Nigeria.

For instance, penultimate week, Allianz Nigeria, launched funeral insurance policy to cater for expenses associated with burial ceremony in Nigeria. Before then, Leadway Assurance has launched similar product.

Anchor insurance launched job loss insurance cover to cater for the needs of Nigerian workers who were thrown out of jobs due to general economic crunch plaguing many businesses leading to downsizing in the number of their workforce.

Old Mutual Insurance launched terminal ailment insurance that would aid those affected with terminal diseases to seek for medical treatment abroad. 

AIICO insurance and many other life insurance experts are out with children’s school fees insurance that helps parents pay their children’s school fees with ease.

African Alliance insurance on annual basis make impressive outing among Igbo traders in Onitsha, Aba and other eastern states with retail and investment related products including Takaful insurance.

These are to mention but few and these insurance firms are pushing these products into the market, using agents and digital insurance marketing tools.

Recently, Afriinvest insurance brokers came up with a product that enables Nigerians in diaspora renew their vehicles papers and insure their assets at home in the comfort of their room abroad. 

The company before then had launched the Afriinvest 247 a digital insurance marketing solution that extends insurance products to Nigerians at home and abroad.  Heirs insurance few weeks back came up with her motor insurance specially designed for female drivers.

Industry watchers said these are good signs that Nigerian insurance industry is on the verge of meeting its counterparts in the developed world.

Also in the list of retail insurance products pushed into the market by Mutual Benefit Assurance include Event centre Insurance, Fast Food Restaurant Insurance, Mosque Insurance, Land lord Tenant Insurance, sales shop and Super Market Insurance, Micro Finance Bank insurance SME comprehensive Insurance Celebrity Life insurance, Senior Citizen plan and Income Continuity insurance among others.

Ogunbiyi explained that the company has designed these products not to serve as micro insurance products but as retail products, adding that the company through study has discovered that accessibility is main problem of insurance in Nigeria.

Also insurers are beginning to venture into special risks insurance line of business like their counterparts abroad after years of jettisoning such line of business.

The claims paid by the industry on #Endsars protest is a testimony to this. Aside  these developments in product designs, the insurance industry has in the past few years witnessed series of reforms .

NAICOM’s Notable Regulatory Reforms 

These reforms include enforcement of compliance with compulsory insurance in line with the Insurance Act 2003, the sanitisation and modernisation of insurance agency system, wiping out of fake insurance institutions, and introduction of risk-based supervision of institutions under the regulatory purview of the Commission. The successful migration to the International Financial Reporting Standards (IFRS) by insurance companies.

The effort of the commission in facilitating financial inclusion of low income earners in the country in the area of insurance services through micro-insurance, agricultural insurance and Takaful insurance. 

Establishment of code of corporate governance to strengthen governance in the insurance companies.  These initiatives aligned with the strategic objectives of the insurance sector as articulated in Nigeria vision 2020. These objectives are to ensure insurance credibility and protection for policy holders. The latest among these reforms is the recent digitalisation of the industry’s operations.

Indeed, the commissioner for insurance Mr Sunday Olorundare Thomas said he was  not looking back on his on going efforts to see that operators in the sector digitalise their entire operations.

Insurance industry analysts were of the view that one of the reasons the insurance sector has been backwards among other finance services sector of the economy was conservatism.

According to them, the sector does its things in its own way and this has remained the bane of its growth

But since his assumption of office barely two years back, Thomas has determined to move the industry from manual system of operation to digital system. Thomas, in September last year, announced the digitalisation of all NAICOM’s operations.

In addition to this, Thomas recently informed the insurance Chief Executives to get prepared for migration to IFRS 17 next year warning that there was no going back on that.

This according to him is to position the insurance sector in Nigeria as global competitive sector. Thomas is also not blinking over quality service delivery and prompt claims payment in the industry.

In one of his meetings with insurance company directors, he insisted that directors that sit on the board of insurance-firms must be grounded in insurance matters.

He explained that this would help to ensure efficient service delivery.

“The times in which we require more prudent management of resources in order to meet all stakeholders expectations, including ensuring quality return on investments. Our focus must shift to service delivery which will make our companies to seek more reasons to settle client’s claims and less reasons for repudiation of claims”, the Commissioner stated.

Persisting Challenges

However, while the industry prides itself in the achievement of the above feat, the operators said they are still faced with challenges such as Poor patronage of insurance products by Nigerians and inability to enforce the various compulsory insurances.

They noted that the only compulsory insurance which enforcement had been effective is Motor Third Party Insurance.

According to the insurers, for compulsory insurance like builders and building under construction insurance a lot still need to be done as industry is not yet near its enforcement.

Also eradication of fake insurance institutions and their fake certificates is another giant challenge to the industry. Till date activities of fake insurance sellers still rob the industry substantial premium.

Also inability of operators to participate in the insurances of oil and gas as well as aviation insurance is still a challenge as large shrunk of businesses from these sectors still go abroad.

The need to achieve success in micro and retail insurance penetration among Nigerians is still a major problem facing the operators and the regulator.