To encourage insurance companies to expand operations to the grassroots, the National Insurance Commission (NAICOM) is considering incentives that will make it attractive to them.
This is part of the commission’s effort to increase insurance penetration, drive financial inclusion and also increase wealth creation through insurance among majority of Nigerians.
The idea, according to the commission, is to encourage underwriting firms, brokers and agents to get closer to the grassroots by opening branches, outlets and partnerships to increase insurance presence and access to products.
“There are 25,000 agents in Kenya selling insurance to 40 million people, so Nigeria’s 200 million people should have at least 100,000 agents,” Coenraad Vrolijk, regional chief executive officer, Allianz Africa, told BusinessDay during his recent visit to Nigeria.
The road to achieving these 100,000 sales agents in order to deepen insurance penetration lies not in the cities but in the hinterlands, analysts say.
“We understand that the challenges why many insurance companies are not able to operate offices in the localities are as a result of economics of scale. We will support in this regard to help deepen penetration,” Sunday Thomas, acting commissioner for insurance/CEO, NAICOM, said.
In this regard, Thomas said the commission would encourage companies to have joint offices, shared infrastructure and co-habit for economics of scale.
Africa’s most populous country of 200 million people has insurance penetration of 0.6 percent, according to Insurance Penetration in Sub-Saharan Africa (by country) published in 2017 by Jennifer Rudden.
Nigeria came number 14 on the table, trailing behind South Africa at 16 percent, Namibia (6.69 percent), Lesotho (4.76 percent), Mauritius (4.18 percent), and Zimbabwe (4.09 percent), among others.
Insurance business has largely concentrated in the cities with little attention at the local governments and rural areas, accounting for why corporate businesses produced 73 percent and public sector 15 percent of the N491.8 billion total Gross Premium Income generated by insurers in 2019, according to figures released by Agusto & Co.
Going by geographical location, Lagos (83.6 percent), Abuja (6.6 percent) and Rivers (2.4 percent) accounted for 92.8 percent of the total Gross Premium Income in 2019.
Thomas said “while effort is being made to encourage deployment of technology to help insurance distribution, brick and mortar are still relevant”.
He said because of the rather low level of education in the rural areas, human beings still need to interact with consumers and insurance agents would play a key role in that regard.
Vrolijk said it is only by increasing the number of sales agents to about 100,000 that retail distribution could reach all over the country, and that would then be supported by technology.
NAICOM, it will be recalled, has licensed three microinsurance companies including Goxi Microinsurance Company Limited, Casava Microinsurance Limited and CHI Microinsurance Limited. These are expected to help deepen penetration at the grassroots, in line with the commission’s financial inclusion strategy.
Modestus Anaesoronye
