After about fifty years of insurance operations in Nigeria, contribution of the sector has been rated low compared to available potential. The industry this time has come together more than ever before to reposition for increased contribution to economy. Funmi Babington-Ashaye, chairperson, Insurance Industry Mega Conference Committee in this interview with Modestus Anaesoronye shares her thought on state of the industry, mega conference and prospect for growth. Excerpts
Looking at the potential of the nation’s insurance industry, how would you access its contribution to GDP?
As you may be aware, the penetration of insurance in Nigeria is extremely low when you look at the country’s population and also far less than one percent when you consider its contribution to GDP. Recently rebased GDP shows contribution of the industry is about 0.4 percent which is quite low compared to the potential of the industry. This unacceptable phenomenon can be attributed to low product innovation, highly fragmented insurers, negative perception of the industry by the public, poor communication of insurance value, poor infrastructural development and low size of middle class, etc.
Another reason is the state of the economy because it’s when the economy is doing well that there will be infrastructural development, and a lot of insurance can happen. There is also the issue of operators focussing more on corporate insurance where we currently have 75 percent of our premium income, with very little attention in growing the retail which is where insurance growth rests.
We need to confront and overcome these challenges if the nation is to realize the full potential of Nigeria’s insurance industry.
We have a huge population in this country and so if you have products that are tailored towards this mass market, definitely the penetration would be much higher. But today, a lot of individuals do not have access to any form of insurance and do not really understand the benefits due to lack of awareness and also probably as result low product innovation that actually addresses their needs. That is why we are planning to reposition the industry so that we can increase our contribution to the economy and to the GDP.
We want people to realise that insurance is important in their life both as individuals and as corporate institutions. It is buffer and for the protection of assets. And it’s important for the overall economic development.
Given the growth potential, how much can the industry do for the nation’s economy?
It’s very clear that we have the population. And is evidenced by the way foreign insurance firms are coming to take position in our market. For instance, AXA, the global insurance giant acquired 77 percent stake in Mansard Insurance plc, Old Mutual, South Africa wholly acquired oceanic Insurance; Sanlam South Africa acquired 55 percent of FBN Life Assurance Limited while Greenoaks Global Holdings Limited also acquired 92 percent of Union Assurance Company limited.
We must leverage this confidence in our market to impact the Nigerian economy. Indeed, if appropriate measures are put in place, insurance could be at the beginning of an s-curve growth for the country.
If they the foreigners have not seen anything in the insurance industry they wouldn’t have come. What are they brining here – technical knowhow, innovative products which are making insurance thrive in their different jurisdictions.
This is the first time all the arms of the industry is coming together to organise a conference. This is called ‘Mega’, what is unique about it?
As an industry, we have realised that we have some challenges, and to address these challenges and reposition the Nigerian insurance industry for sustained growth and development, the Insurance Industry Consultative Council (IICC), which comprises the different arms of the industry, has put together The Insurance Industry Mega Conference holding in Abuja at Transcorp Hilton Hotel, from 26th to 28th July 2015. The Theme of the conference is “Developing Insurance Business for National Growth”. It is unique as we shall be having an international speaker of repute, the Managing Director of Swiss Re come to talk to us. Abuja has also been chosen as the venue because of the importance of government support in repositioning the insurance industry. We have realised that without the commitment and involvement of government, it’s going to be difficult for insurance to move to the next level. So, we have the commitment of government on this conference, they are going to participate and they have assured us that communiqué from this forum would be given adequate attention.
Many have said there is need for a synergised eco-system for the insurance industry; could this mega conference be one of many to be seen?
Definitely. Last year the insurance industry came together to form the IICC to have a single voice on any issue relating to insurance, single voice on any issue relating to government. We decided that it’s important for us to address our issues as one industry and pursue developmental programmes that would help the sector’s development. One of such programmes is the Mega conference coming up next week, where all the practitioners and arms of the industry will come together to look at the challenging issues and proffer solutions on how to take the industry to the next level.
Nigerian insurance industry has been rated second in Africa. Being an operator in the market, what does this mean for you and would you say the industry is overregulated?
I think we need more regulation. Fine, we are trying but we are not there yet. It’s only when we become number one that we can say we have really done well. Looking at all the parameters, we have not actually started. Insurance is hugely untapped. We need to do more. For me, i would say that regulation has helped in achieving a sanitised market and an industry that is ethically driven. Our market today is well respected in terms of professionalism. Although it takes a while before you see the benefits because we have seen a lot of reforms by the current insurance commissioner. We have seen the ‘no-premium no cover’, which has enhanced market liquidity. Companies can now pay claims more easily, and companies can pay dividends to shareholders compared to what was happening before when you have more of paper profits. It can only get better.
If this conference comes out successfully, one can without doubt say that the insurance industry in Nigeria is set for a new phase of growth. Does this meet your position?
Yes, it does. I must say that we have made all the necessary arrangements and ground work to make the conference a success. So, if all the indices are right, and we are able to communicate to the government the outcome, and they are able to live up to what they have promised, i can tell you that there would be boom in the insurance industry soon. We would have laid a solid foundation for the next phase of growth. More foreign investors both within and outside would want to come in because the coast would have been clearer for more growth and better returns for shareholders.
What is your advice to the public?
To the insuring public, what I want to say is that this is the beginning of a new dawn. The insurance industry is awake and we have good regulations. We are aware of issues confronting the industry and we are up and doing to confront all those issues. Issues of claims settlement, we have been able to get over that and companies are adding value. They pay claims, and promptly too, but the problem is that we have not been communicating all these values to members of the public. If you don’t communicate the values you are adding to people, nobody will get to know, and I think it is a major problem.
