Source- Guardian
Like other sectors of the economy – banking, manufacturing, aviation or agriculture, the insurance sector had its share of the effects of the recession. The development prompted some industry watchers to insist that President Muhammadu Buhari must reshuffle his cabinet urgently in order to revamp the economy.
The insurance sector plays an important role in the development of a nation by transferring risks from businesses and individuals. In many countries, the industry actively plays a leading role in the stability and efficient diversification of risks and thus contributing immensely to economic development.
However, in the case of Nigeria, the sector plays a passive role in economic development despite its huge economic potential that remains largely untapped.
The current economic crisis occasioned by high inflation and low disposable income have significantly impacted on the performance of insurance with most individuals and corporate organisations sacrificing their insurance budget to meet more pressing needs.
Nigeria Re in its 2016 report said the insurance industry had largely remained underpenetrated with insurance density (insurance premium as a percentage of the gross domestic product, GDP) at 0.225 per cent.
Specifically, the coverage level for insurance services is very low in Nigeria, with approximately 1.5 million policyholders out of over 170 million people patronising insurance products.
Similarly, the retail segment has witnessed increasing terminations of insurance policy, and insurance companies had to adopt robust risk management frameworks and deploy cost optimisation measures to ensure obligations to customers are met.
About 30 per cent of insurance firms have not yet presented their 2015 financial records, just as about 95 per cent of the companies recorded losses and unable to pay dividends to their shareholders.
The late implementation of the Federal Government’s budget compounded Nigeria’s economic woes. First, the missing of the original copy of the Appropriation Bill by President Muhammadu Buhari, and secondly, the padding imbroglio, all conspired to delay government’s spending and consequently hindered the ability of the Ministries, Departments and Agencies (MDAs) to engage in renewals and payment of new insurance policies.
Due to the economic crisis, many insurance firms increased the targets for their marketing departments’ with some threatening not to pay salaries if they failed to meet their targets.
Furthermore, the Contributory Pension Scheme (CPS), which had grown into trillions of naira over the years, slowed down recently following the inability of many employers to keep up the pace of contributing to their workers’ Retirement Savings Accounts (RSA).
Also, the issue of capital inadequacy remained a militating factor against insurance firms’ capacity to independently handle or underwrite big accounts in the oil and gas, aviation, marine among other high risks sectors of the economy like their contemporaries in developed countries of the world.
The Minister of Finance, Kemi Adeosun, had earlier in 2016, said: “The insurance industry needs to recapitalise. Capital levels were last raised in 2007. To take true advantage of the opportunity in the industry, we must recapitalise and reposition. The top three banks have capital in excess of N300 billion each. The top three insurers have capital of between N14 billion to N25 billion.
“Increased capital will provide funding for publicity and product development. It will raise the clout of insurance companies in policy formulation and will enhance our capacity to hire the best people and deploy the technology and marketing, product awareness and investment needed to support the industry.”
While the industry awaits the recapitalisation, NAICOM tried to instil good corporate governance among the operators. With the assistance of the Economic and Financial Crimes Commission (EFCC), the Commission recovered over N66 million stolen by unnamed former Chairman of an undisclosed insurance firm. It is also trying to recover the value for shares fraudulently acquired by some company directors without payments.
Speaking on the expectations for 2017, the Managing Director/CEO, Mutual Benefits Assurance Plc, Segun Omosehin, said: “The task of maintaining a vibrant and disciplined insurance industry rests with the current generation of insurance practitioners. Whether at the underwriting or broking end, concerted efforts must be made at every available opportunity to remind ourselves of the onerous responsibilities of bequeathing a healthy industry to next generation.”
The Managing Director/CEO, Enterprise Trust Insurance Brokers, Paschal Emeka Egerue, recently said Nigeria’s performance remained dismal and unacceptably bad especially when compared to the size of the economy, as there are enormous opportunities.
He said: “The total premium volume generation for Nigeria is $1.86billion and ranks 58th in the world. Kenya’s total premium volume of $1.52billion ranks her as the 64th in the world. But while insurance penetration in Nigeria is 0.6 per cent of GDP, Kenya’s is 3.4 per cent and is ranked 44th in the world.”
Similarly, The President, Nigerian Council of Registered Insurance Brokers (NCRIB), Kayode Okunoren, said insurance is critical to the global economic market, noting that it should start playing an active role in the nation’s economic development through intensive lobby and policy advocacy.
The Managing Director, Anchor Insurance Company, Ademayowa Adeduro, encouraged all Nigerians to embrace insurance, saying it is “the best product I can ever sell to anybody now.”
Shareholders of insurance companies across the country are unhappy that their companies have not paid them dividend for years.
The National Chairman, Progressive Shareholders Association of Nigeria (PSAN), Boniface Okezie, who also spoke on the development noted that low level of insurance penetration in the country and its contribution to the GDP, is responsible for the below par value at which most of the listed insurance stocks are being sold on the NSE.
Going forward, a source at FBNInsurance, who spoke with The Guardian, noted that “The expansionary budget of N7.2 trillion by the Federal Government in 2017 offers significant hope for the insurance industry if duly implemented. The budget includes a capital expenditure of N2.24 trillion representing 30.69 per cent. This presents insurance opportunities for group life of contractors and employees and insurances for all various projects and assets to be executed.”
Insurance sector bugged by low penetration in 2016, upbeat about 2017
