Paschal Emeka Egerue FIIN, FCIB.
The commendable role of National Insurance Commission (NAICOM) in Market Development and Restructuring Initiatives (MDRI) will always be applauded.
NAICOM’S further steps in the digitisation of interface with key market stakeholders and making critical returns and responses seamless online deserve commendations. However, beyond platitudes, the Nigerian Insurance Industry has remained very stagnant over a very long time and therefore a call for a new growth strategy is absolutely necessary.
In absolute truth terms, the strategies we have continued to adopt in this industry have never worked and to continue to retain these strategies will be nothing but insane.
It will be erroneous to measure the growth of this industry by premium figures that are not adequately adjusted for inflation or by the exponential performance of a few company which merely covered the gap created by the high mortality of underwriting firms due to recapitalization, liquidation, mergers and acquisition and other factors.
This industry cannot also measure it’s success or growth based on a few professionals that were privileged to be very wealthy out of insurance practice. A critical examination of the wealth of some of them will indeed reveal what is wrong with this insurance industry.
The critical index for measuring the performance of this industry is the insurance penetration level benchmarked with other markets. Of course, premium generation can never be higher or better than the insurance penetration level except if what we are doing wrongly includes things that are not within the ambit of the insurance Act.
The penetration level also inexorably leads or gives a picture of other ratios such as insurance consumption per capita and contribution of insurance to GDP of the country.
Since all these statistics by various study groups are low and continuously flat low over many years, any claim that the Nigerian Insurance Industry is growing must be wrong if not dishonest.
The time has come for the insurance industry in Nigeria to take the bull by the horn and redirect the industry to a path of sustainable growth. If nothing is done urgently, it is possible that this industry as it is will disappear and reappear in a structure that will be incomprehensible to the present practitioners and also come in a structure that will present severe difficulties for the present regulatory framework.
The whole world is changing or forced to change with the arrival of artificial intelligence and robotics; two technologies that will exploit the present internet of things to generate and analyze big data and turn same to gold mine to some obscure patent holders who may not necessarily be Insurance practitioners.
To recap, the potential of the Nigerian Insurance Industry is huge. This is obvious from the huge gap in penetration level. Insurance is undersold, under served and ill digested by the few consumers.
The penetration level has variously been put as between .3 per cent and .5 per cent What is very clear is that it is below one per cent and which means that 99 per cent of the huge market of Nigeria is not at the moment captured by the Nigerian insurance market radar.
This is why by Nigerian Stock Exchange report 2019, Nigeria is ranked 62nd in the world with premium generation of $1.64 billion or 0.2 per cent of global premium.
Nigerian Insurers Association (NIA) report 2022 indicate that out of 12 million cars on the Nigerian road, only 3.4 million are insured while 8.6 million may be roaming about with either expired Insurance, fake Insurance or no insurance. This is despite the fact that motor insurance is compulsory by virtue of S.68 of the Insurance Act 2003 and other legislations.
The picture is the same fo other classes of Insurance. Statista 2018 report indicated that only three per cent of Nigerians have health insurance and that this three per cent is preponderantly driven and paid for by employers. Same picture for group life which is driven predominantly by employers in compliance to the provisions of Pencom Act.
All through the history of Insurance in Nigeria, the stagnancy of the market have been blamed on factors such as low Insurance awareness, inappropriate pricing and risk profiling, low standard of living, inadequate access to information, poor products market fit, inadequate business and distribution channels, low public confidence, weak regulatory framework, poor knowledge of insurance or what PWC describes as lack of professionals that are adequately skilled in the market space etc. These and other reasons have continued to make the market fragile, fragmented and vulnerable, thus precipitating short and long term instabilities to which current prescriptions are unable to cure.
Thus the crucial question remains, what are the new things and new strategies that this market need to employ to change the trajectory of this market to growth within the fast changing environment that has virtually left the market behind. This is not something to be treated with levity. As it is, it has been difficult to grow the capacity of the market despite bouts of recapitalisation. This may be so because our conception of capital is essentially in terms of quantity of money and not efficiency of use of money for critical market development activities.
We have also continued to value money capital above human capital. In Insurance broking for instance, capitalisation and international accounting requirements have been a constraint to the emergence of perepheral retail brokers that will generate momentum for Insurance inclusion in the rural areas. For this fact, most Insurance companies and practitioners are located in the urban centres, predominantly Lagos, Portharcourt and Abuja while the vast land and and population of Nigeria remain uninsured.
For this reason too, we have a situation where our recapitalisation strategy fails because the recapitalised companies are chasing same few urban based corporate accounts.
The public sector business in Nigeria is mired in corruption and suffocated with numerous requirements that are difficult to meet. At the end of the day, only few companies have access to those public sector accounts.
While we expect that the coming into this market by foreign investors such as Sanlem, Old Mutual, Axa and othere will generate new momentum to move this market forward, it is the same unresolved market structural constraints that will hold them down.
What the entire Nigerian Insurance market needs is a declaration of state of emergency to enable the Industry truthfully understand;
✓ what is holding this market down.
✓ what legislation that is required in our present circumstance.
✓what type of regulatory framework will be suitable to the industry’s present circumstance especially towards creating unfettered access to critical public and public sector transactions.
✓what is definition of capacity in the present circumstance and what growth strategy, benchmarks and milestones shall the industry adopt.
✓ what products constitute insurance products in the emerging digital world, knowing that digitization has potential for cannibalization of every product and market through high velocity adaptation that aligns product to elements in the big data being collated and analyzed digitally.
✓what are the mandatory training required for current insurance practitioners in the present circumstance and what skills and knowledge benchmark shall the industry adhere to going forward.
The Nigerian Insurance Industry is a threatened Industry and something has to be done fast. A war has to be declared on the industry’s lethargies.
The era of self praise and masturbation should be gone. The Nigerian Insurance Industry need to face the reality of the present time and take critical steps to swim out of the lagoon it found itself to a blue ocean.
Paschal Emeka Egerue who is a general insurance consultant and analyst is the founding Managing Director of Enterprise Risk Insurance Brokers.
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