Stakeholders in the Nigerian insurance sector are working round the clock in a bid to take the industry to the enviable height of a N1 trillion premiums income, a target given by the Federal Government.

The industry regulatory body in Nigeria, the National Insurance Commission, (NAICOM) had in 2009 launched what it called Market Development and Restructuring Initiative (MDRI) as a way of facing the challenge of deepening insurance penetration in the country to raise the industry’s premiums.

With a population of over 170 million, an active economy and a well-capitalised industry, a 0.6 insurance penetration for Nigeria is appallingly low compared to 15.4 percent penetration in South Africa, 7.7 percent in Namibia, 3.4 percent in Kenya, and 3.0 percent in Morocco.

The new initiative therefore, has, among others, the objective of transforming the industry from N160 billion naira premium income to a trillion Naira industry. This, the commission said, would be done through the enforcement of compulsory insurances. It listed five compulsory insurances stipulated by the insurance act of 2003 for effective enforcement as: These are third party motor insurance;  Statutory Group Life Insurance Employee’s Compensation (which replaced the Workmen Compensation) Occupier’s Liability Insurance; Builder’s Liability Insurance and Health Care Professional Indemnity Insurance.

The commission, a few years back, conducted research on why insurance patronage is low in Nigeria. From the research, NAICOM said it discovered that Nigerians were not averse to taking out insurance policies for themselves and their assets as had been assumed; neither are they so poor that they cannot buy insurance but that the major reason was lack of awareness and knowledge of the workings of  insurance as well as non-availability of insurance products to grassroots consumers.

NAICOM therefore challenged the operators to move into the grassroots with suitable products and tap the existing opportunities.

By its original design, the first phase of the MDRI, which was between 2009 and 2012 was meant to achieve the objective of transforming the market into a trillion naira hub. However, this was not achieved at the targeted time as the industry’s premium remained at N300 billion as at December 2012, according to NAICOM, prompting the commissioner to declare that come the second phase of the initiative which will last between 2013 and 2017, the industry will achieve the target.

In line with this objective, the Association of Registered Insurance Agents of Nigeria (ARIAN) is currently working with relevant stakeholders to mobilise about 300,000 insurance agents to deepen insurance penetration in the country.    National President of ARIAN, Mr. Olamerun Gbadebo, who reaffirmed this to Business Hallmark in a telephone chat, revealed that there are over 20,000 registered insurance agents across the country. He also promised that this new move will increase this number initially to 100,000 and later to 300,000, saying  that this will go a long way in improving insurance awareness and acceptance among Nigerians.

He stated that the premium income of underwriting firms will increase, if this objective is realised, arguing that insurers would equally record better profits that will allow them declare dividends and bonuses to their shareholders. To this end, the insurance industry, he noted, would contribute meaningfully to the nation’s Gross Domestic Products (GDP) as well as ensuring that the FG’s target in the sector is realised.

According to him, “The motive of the FG is to drive the insurance industry to one of value proposition in the next three years. The best way to do this is through the retail arm of the industry, so that operators will not rely heavily on corporate or government businesses to survive. The market for the industry is enormous. We have over 170 million Nigerians and over 50 million insurable people in Nigeria.”

An agent with AIICO Insurance Plc, Miss Juliana Ifeoma, told Business Hallmark that her company is contributing immensely to insurance penetration by coming up with products that attract both sellers and buyers of policies into the industry.

“AIICO has also done well in giving quality training to their agents thereby empowering them to enlighten the masses better on the need to patronise the insurance sector.”

Lending credence to the argument for retail insurance, the Managing Director, Leadway Insurance Ltd. Mr. Oye-Hassan Odukale said insurance is a business that you do with a large number of people.  “You want to make sure that you touch people. One of the things we have been accused of in Nigeria is not reaching large numbers of Nigerians. That is low insurance penetration in the country. You penetrate insurance better by selling the product generally to a larger number of people,” he stated.

Industry Reforms

The industry under the regime of the immediate past commissioner, Mr. Fola Daniel, witnessed some reforms targeted at improving its fortunes. Some of these reforms include a more transparent accounting system as the industry migrated from the Nigerian Accounting Standard Board System to the International Finance Reporting Standard (IFRS). The industry also launched the Corporate Governance Structure and the Anti-Money Laundering structure in order to remain globally competitive.

Still in search of ways of growing the industry’s premium, the commission in 2010 launched guidelines on insurance of oil and gas business in Nigeria as a way of ensuring that the local content policy of federal government is implemented in the insurance industry.

The industry has also solved the lingering problem of heavy indebtedness in the form of outstanding premiums, which had been the bane of its growth through the enforcement of the “no premium no cover” rule, which had been there in the Insurance Act of 2003 but was not implemented. This took effect from January 1, 2013. The policy received very loud ovation from industry operators as they described it as the beginning of new things in the industry.

The above developments put together have no doubt placed the insurance industry on a better growth platform as could be seen from signs of growth shown by many firms in the system. The former commissioner said these efforts were made by the industry in preparation for meeting the vision 2020 target of becoming the 15th biggest market.

Given the high level of growth plan put in place by the regulator during the tenure of the last commissioner, he declared  that the ground has been watered enough for the industry to record significant growth in the nearest future.

He noted that the value of insurance contracts would rise to about N1 trillion ($6.4 billion) from N300 billion in 2017, adding that the industry would contribute about three per cent to the Gross Domestic Product (GDP), while penetration will  increase to 22.5 per cent from 10 per cent.

He also said compulsory motor-vehicle insurance, which makes up most contracts now, would remain at about 10 per cent by 2017, while life insurance would constitute seven per cent, general business insurance three per cent and petroleum companies’ insurance 2.5 per cent.

Little wonder foreign investors who see a lot of potential in Nigerian insurance market have moved to buy over existing but weak insurance companies. Some of these investors include Old Mutual of South Africa, INSIA, AxA Mansard among others. They are currently doing well in Nigeria.

One of the major growth plans, which industry operators have been able to achieve within the period is the development of the Nigerian Insurance Industry Data Base (NIID) by the Nigeria Insurers Association (NIA).

The NIID is a central system that allows all insurance companies to store all valid policy real-time. It is designed to serve the objective of developing a capacity to monitor and authenticate underwriting transactions within the insurance industry which would serve to reduce the incidence of fraudulent insurance transactions and policy certificates.

Industry operators have risen up to develop retail insurance segment by aligning efforts with mobile telephone operators in the distribution of insurance products to Nigerians.

Just two years ago, the proposed Nigerian College of Insurance became a reality as the institution has commenced programmes for Nigerian students. Through the efforts of the Chartered Insurance Institute of Nigeria (CIIN), insurance has been included as a subject of study in secondary schools in the country.