Nigeria has outlined measures to transform the insurance industry which it considered germane to economic consolidation.
Yemisi Izuora writes that the National Insurance Commission, NAICOM which regulates the industry has provided a leeway to boost the sector despite seeming economic challenges.
Despite some challenges facing the Nigerian economy, thenNational Insurance Commission (NAICOM) is proceeding with its plans for various policies and initiatives to develop the insurance sector.
NAICOM is not even discouraged with the suspension of the recapitalisation exercise, COVID-1, #EndSARs and others.
Apart from growth, NAICOM aims to consolidate the sector, develop human capital, ensure financial inclusion, enacting a new insurance law, tap the African continental free trade agreement, and improve efficiency in the supervisory processes, according to a report in The Nation.
The Commissioner for Insurance, Sunday Thomas, has clearly said, “Our focus for the year basically is how to expose the market. So, the question is: What do we do to deepen our market? We believe that 2021 will be a great year for us.”
He added, “Part of the mechanism of developing the market was reaching out.We couldn’t do much of this because of COVID-19 and #EndSARs restrictions on movement. But we have been developing some things in-house that we believe will deepen the market.”
NAICOM registered four new insurance companies and one reinsurer last November, the first such licensing in around 35 years.
“Out of the four insurance companies that we registered, three of them are life companies that will be playing in the annuity market and this will be big for the sector,” Mr Thomas said.
He said that market development initiatives would include enforcement of compulsory insurance, introduction of microinsurance and expanding takaful.
Even experts see much growth potentials as the year 2021 starts amid fluctuations and challenges of budget implementation.
Although the recapitalisation mandated by NAICOM on insurance and reinsurance firms has been suspended by the court, the regulator is optimistic that it will vacate the injunctions and continue the exercise. The recapitalization is key to NAICOM to make the industry responsive.
Human capital development
NAICOM has equally identified the poor quality of human capital as part of the cause of why some insurers are ailing.
Thomas finds out that there are inadequate human capital for underwriting, claims and investment management; inability to recruit and retain quality personnel; as well as inadequate training and manpower development.
“We are pursuing the issue of human capital development with operators by making arrangements to have as many actuaries as we can have in the industry because we know the role of actuaries in risk assessment. This is one profession that is lacking in this part of the world.”
The Commissioner said the financial inclusion strategy has been central to the Federal Government’s developmental plan and the Commission has over the years invested hugely in the development of financial inclusion mechanisms which include the introduction of microinsurance and takaful.
So far, some milestones have been recorded in this regard with three standalone microinsurers and four takaful companies already granted approvals.
The effective deployment of technology to facilitate operations is among the key areas NAICOM will be emphasising this year, said Thomas. “Digitalisation of insurance business is no longer an option, but an imperative which we and the operators have to work towards its actualisation.”
The regulator is also keen in pushing companies to boost their electronic marketing mechanism to be able to drive insurance premium.
NAICOM had observed that the sector’s premium dipped during the COVID-19 lockdown as many insurance companies could not drive sales electronically.
Thomas, charged the operators to be innovative.
He said, “In addition, one of the major challenges for insurers was the inability to market/sell insurance products to consumers which, in turn, reduced the premium income.
“This has necessitated the need for a robust online automated marketing and feedback system in order to reduce the dependence on in-person sales and marketing.”Thomas noted that suddenness of the COVID-19 pandemic imposed immense pressure on all businesses including insurance business.
Pressures faced by consumers in the form of reduced finance and business activities, lack of access to credit, expiration and wastage of perishable goods, temporary or permanent business closures and employee contract terminations, life threatening illnesses and deaths all combined to increase the propensity for claims, he said.
Considering that most losses arising from the pandemic were not adequately covered by existing insurance policies, he said, it had become obvious that current insurance product offerings were not adequate to respond to emergent risks and needs of our society.
“There is, therefore, the need for a review of conventional insurance products in order to upscale the value proposition of the Nigerian insurance industry,” he said.
Thomas said the industry could not continue to ignore the impact of unforeseen events on individuals, businesses, and the insurance industry as a whole.
He said it was important to also state that the work-from-home trend which was gradually becoming the norm heightened the need for digitisation in the Nigerian insurance industry.
According to him, insurance companies were now deploying technology for remote working to enable companies to expand their mode of delivery of products and services to customers.
African Continental Free Trade Agreement
On this Thomas said, ‘’We believe that with the free trade area, movements of goods will be enhanced. It is important to us in the insurance sector because last year, we started something that would tend to harmonise insurance transactions among West African English-speaking countries.”
He added, “e expect this to enhance our access to businesses from another jurisdictions. With bigger capacity, we will be able to retain more and also bring in more businesses to the country.”
Strengthening Insurance Consolidated Bill
The NAICOM is seeking for the passage of the Insurance Consolidated Bill, 2020 to drive the development of the sector.
Thomas said, “We have so many compulsory insurances that one can hardly find in any other jurisdiction. The problem has been enforcement and lack of cooperation among operators. With the advancement and deployment of present-day technology it is expected that all compulsory insurances will be adequately enforced.”
The proposed insurance Bill now before the National Assembly, when it becomes law, will assist tremendously in growing the insurance sector, said Thomas.
Collaboration With Stakeholders
Experts in the insurance industry have also called on the government to create stronger regulatory policies and enforce existing ones to stimulate growth in the industry.
Though, according to a few industry experts, looking at how the sector closed last year, it is expected that the issues and discussions that dominated last year would continue.
Yet, formulation and implementation of insurance policies, effective communication system, technology, innovative products, and services, as well as strategic partnerships, top the priorities of stakeholders in 2021.
The Managing Director at Law Union & Rock Insurance Plc, Adeduro Ademayowa, said the capital project in the 2021 budget, estimated at N3.85 trillion roughly about 30 per cent of the budget, is expected to generate economic activities. If all projects are insured, he said, they are capable of generating roughly N50 billion to N80 billion for the insurance industry.
Ademayowa said the events trailing the suspension of the recapitalisation of the industry were not unusual looking into history.
“NAICOM meant well for the industry, therefore the suspension isn’t a setback. The industry will rally to support the initiative to give insurance a good footing,” he said.
According to him, the expectations are not many but most have to do with operators rather than the regulator.
“We need to collaborate more to make the industry attractive to young ones and investors. Over competition is making us lose the essence of business,” he said.
The Executive Secretary, the Nigerian Council of Registered Insurance Brokers (NCRIB), Fatai Adegbenro, said more businesses and contracts are expected because of capital projects in the budget, which will require insurance policies.
“We are optimistic about a better business year. If things work as planned and the new insurance act is implemented, it will be a better year for the industry.
“The regulator is dedicated to growing the industry, and the #EndSARS protest was a blessing in disguise for the industry because it revealed the relevance of insurance to the government and Nigerians,” he said.
According to him, the industry is doing a lot to boost national economic development but very little of its relevance is known, especially given the prevalent trust deficit in the relationship between the industry and Nigerians.
He added that, in dealing with trust issues, communication is a key ingredient for success.
He said the industry needs to communicate effectively with the public, including existing and potential policyholders.
He said: “It is most surprising that the industry has continued to seemingly take communication for granted as compared to other financial services providers in this digital age. Effective communication entails an exchange of information and data between parties.
Incidentally, policyholders have increased their correspondences to the industry regulator and operators but have not received as many responses. Do you know that Nigeria sits 8th position from the bottom among African countries in terms of insurance penetration? This is unacceptable and a critical reason to emphasise communication as a strategic step to see the adoption of insurance go up.
“New products, collaborations, and partnerships necessary to enhance insurance awareness and deepen penetration could not be given due attention last year due to the many challenges faced by operators. These are the areas we expect more positive actions from operators in 2021.”
Also, moving forward, NAICOM, has disbursed an undisclosed amount to the College of Insurance and Financial Management (CIFM) to train 60 professionals as Actuaries in the industry.
Dr Yeside Oyetayo, Rector CIFM who made the disclosure in Lagos, explained that an actuary is a person who compiles and analyses statistics and uses them to calculate insurance risks and premiums.
Oyetayo said that following the release of the fund, the college had conducted the first scholarship qualification assessment on Dec. 22, and some candidates had been notified of their success.
She noted that another qualification assessment had been scheduled to hold on Jan. 29.
“The fund disbursed covers registration of 60 candidates, their course materials, tutorials and mock examinations
“Due to the social distancing order induced by COVID-19, we are doing online tutorials in conjunction with Nigerian Society of Actuaries and the first set of scholarship awardees will write the Certified Actuarial Analysts (CAA) exams in May,” she said.
NAICOM had on January 23, 2020 announced full sponsorship of 100 practitioners in the insurance industry to be certified as Actuarial Analysts, toward developing the market in the next five years.
The Commissioner for Insurance, said that the initiative was in partnership with CIFM, Nigeria and was aimed at developing necessary professional skills and talents to drive the insurance sector.