Nigeria’s Insurance Industry Records 10% Growth Rate

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..As CHI Written Premium Hit N6Bn 

Yemisi Izuora 

There are positive signs that the Nigerian insurance industry is forward looking following industry performance indices especially in 2018 despite the harsh economic environment.

The industry was projected by analysts to grow at an average annual rate of 7.5 per cent in 2018, but available reports revealed a cumulative average growth rate (CAGR) peaking at 10 per cent. 

Factors responsible for the growth were listed to include a sterling performance by the life insurance segment.

Speaking at its Annual General Meeting, AGM, in Lagos, yesterday, thenManaging Director/CEO of Consolidated Hallmark Insurance Plc, CHI, Eddie A. Efekoha, said, Year in Year out, the Nigerian Insurance industry has continuously experienced its share of the challenges affecting the Nigerian economy, but the unique nature of the industry has come to bear as inflationary upsides affecting the costs of goods and services in other sectors have not reflected in premium rates for insurance risk covers. 

Efekoha, said rates have remained despite pressure from rising claims with instances of rates crashing in a market with low penetration of customers fuelled by intense competition by players, but despite the challenges the company remained committed towards ensuring the growth and overall profitability of its business.

Giving details of the company’s performance, the CEO, disclosed that the results of CHI performance in 2018 showed an improvement on the growth projections for the industry. 

“It is an all-time high rise in revenue, hitting a Gross Premium written of N6,864,879,525, an increase of N1,184,326,402 or 20.85 per cent over the 2017 figure. Business retention remains good, even as we have further energized our Retail and Agency segments to grow new business inflow into the group. 

The retail segments achieved a combined growth of 135% in 2018 on their 2017 performance. This is a testament on our last year review where we reported progress being made in the deepening of our footprints in the retail market segments. CHI’s revenue diversification drive was a major factor that aided the sustained financial performance through the challenging market conditions of 2018, further reinforcing its role as a formidable player in the Insurance Industry.

We have continued to fulfil our claims payment obligations to customers promptly amidst rising claims in the industry, with N4,787,135,023 spent on claims settlement in 2018 when compared with the N3,354,056,803 of 2017. The 42.72 per cent increase, though significant, is a reduction of the 93 per cent growth in 2017 claims expenses over that of 2016. 

The increase in the figure for 2018 is attributable largely to a few large one-offs with a single payment on a marine hull loss amounting to N2,174,399,976. Significant recoveries on overall claims expenses amounting to N2,983,861,126 were however made from our robust reinsurance arrangement.”, Efekoha said.

He explained that due to Management’s unrelenting efforts to ensure that the company is run efficiently, the firm recorded a reduction in underwriting expense and operating expense ratios in 2018, closing at 14.57 per cent and 18.6 per cent respectively, from 2017 figures of 24 per cent and 26 per cent respectively, an indication that the company is making more money with lower costs. 

He adds, “Our company has also increased it’s Total assets from N9,490,174,394 in 2017 to N10,802,944,013 in 2018, representing a growth of 14 per cent. Our capacity to undertake larger and more technical transactions has been greatly enhanced with the recent injection of additional capital through funds generated from a combination of the Rights Issue and Private Placement.

The equity stake of N734,500,000 by Niger Delta Exploration and Production Plc (16 per cent stake) is a testament to the confidence reposed in us and the great opportunity ahead of us.”

Reviewing the industry, Efekoha,said, “Of all the industry regulations released by the National Insurance Commission (NAICOM) in 2018, the Tier Based Minimum Solvency Margin recapitalization model caught operators unawares because of the level of capital increase required. Operation of the scheme was scheduled for commencement by January 1, 2019 though without compulsion to the operators on which category of insurance to play in. The three-tier model required operators desirous of playing in Tier to beef up their solvency margin from N5 billion to N15 billion. 

Life Insurance Operators who desired to continue in Tier One were mandated to boost their margins from N2 billion to N6 billion.

Our company as a non-life insurer was expected to have a solvency margin of N9 billion, to continue with underwriting of all risks including oil & gas, marine and aviation. Though later suspended and eventually cancelled, the policy left in its wake some market ripples, with residual effects on income. The situation is however gradually stabilising.”

According to him, The National Insurance Commission (NAICOM), during the year being reviewed also introduced the State Insurance Provider (SIP) policy under which new insurance distribution channels were to be opened. The Commission said this was in furtherance of its policy to diversify insurance distribution in Nigeria.

The SIP was to be an agency of state governments and licensed by NAICOM to provide intermediary services as designed by the guidelines issued by the Commission. However, like the Solvency Based Minimum Capital policy, the SIP implementation was aborted prior to its implementation in January, 2019 due to agitations from market players led by intermediaries.  

The regulator continued with the implementation of guidelines released a year earlier – including the Bancassurance Operational Guidelines and the Revised Guidelines for Microinsurance. We have since taken advantage of the latter which was meant to facilitate registration and approval procedures for entering bancassurance relationships between banks and insurance companies. 

Our collaboration with some banks in this regard has led to opening of payment channels for ease of premium remittance by customers. The registration process for our microinsurance subsidiary is at an advanced state with the hope of commencing operations soon. Implementation of other regulatory priorities by the Commission continued in 2018. 

These include the commencement of the industry rebranding campaign on both traditional and social media platforms. The project which is being jointly funded by industry operators and NAICOM has since entered a second phase in the plan to ensure better awareness and positive perception of insurance.

Looking forward, he said that the implementation of the company’s Five-Year Corporate Strategy plan has continued with increased vigor, following the setting up of a full-edged Strategy function. 

“Our internal processes are being reviewed to achieve operational efficiency and eliminate lapses;  while our Technical Operations have been restructured into a Strategic Business Unit (SBU) model to drive greater efficiency.

Our technology space is also being upscaled with more premium placed on revamping alternative and E-commerce channels to drive brand awareness, product distribution and in effect, revenue growth. We now have a 24/7 live chat with our esteemed customers on our website. Our customers now not only buy our products online through our portals on all social media platforms, but also buy from other external channels driven by our strategic partnerships. It is cheering to also note that payment of renewal premium can now be done by them through these channels. Our risk portfolio shall be continually diversified to avoid exposure to large concentration of risks while ensuring adherence to our reinsurance treaty arrangements to aid mitigation from effects of large/catastrophic claims.”, he said.

Also, in view of low visibility which the entire insurance industry is yet to overcome corporate actions are being taken to embark on media campaigns that will drive brand visibility of our company, in addition to the efforts being made by the industry.

Efekoha, was bold to say that the company’s efforts to contribute to a better society especially through efforts to ameliorate the hardship experienced by the less privileged in its immediate operating environment has made the firm to continue to donate items to various orphanage homes spread across different locations including Abuja, Port Harcourt, Yaba, Surulere, Lekki and Anthony Village.

“Our Annual Essay Competition for students offering insurance and actuarial science in tertiary institutions has continued to attract the keen interest of participants nationwide. The winning prizes have since been increased, while all first prize winners in previous editions have expressed their preference for Consolidated Hallmark as their first choice of employment. They all joined our workforce. Meanwhile, efforts are in the offing by Management to further expand the scope of our CSR activities.”, he revealed.

He also said that premium value is placed on human capital development as members of staff have continued to benefit from local and international training programs to aid their job performance in line with its belief that human capital remains the most vital asset of an organization. Also, on the job training is ongoing to complement external training programs.

“Other Human Resources initiatives include the full implementation of our online Enterprise Human Resource Management Solutions portal for Performance Management and staff data capture/Management. Culture transformation of the over 200 strong workforce is taking place while succession planning is an integral aspect of the HR Policy. We are equally designing a career growth framework that will ensure we derive maximum value from our workforce.”, he said.

Efekoha, said that 2019 is gradually unfolding with hopes of a more positive economic performance,,adding, We hope as an organization to harness the existing potentials from the continued growth of the national economy with the successful conclusion of 2019 general elections and the  federal government rolling out policies that will further enhance ease of doing business.

We are developing products to address the emerging risks in the society that require insurance protection.

For us at Consolidated Hallmark, it has been 12 years of determination to continually improve on our records of performance. It is heartwarming to note that there have been incremental progress, Year on Year in overall company performance during this period of stewardship.”

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