Joseph Inokotong, Abuja
The Federal Government has warned insurance operators to desist from fighting against the sector’s recapitalisation policy directive rolled out by the National Insurance Commission (NAICOM) in May.
It also urged the insurance industry to take advantage of the opportunities provided by it to improve their financial status. T
The government tasked the operators to explore available options including mergers and acquisitions as means of sustaining their continued existence, instead of resorting to fighting the policy due to inability to raise the required capital.
President Muhammadu Buhari gave the warning while declaring open the ongoing 2019 National Insurance Conference, themed: “Disruption, Innovation and Business Growth”.
Buhari said the Federal Ministry of Finance would collaborate with NAICOM and insurance sector stakeholders to achieve 40 per cent financial inclusion rate.
The president who was represented by the Permanent Secretary of the Ministry of Finance, Mahmud Isah-Dutse, said “the insurance industry has rules and regulations that all insurance companies must follow and this will cause them to struggle to understand and implement the rules, new technologies and innovations.
“With the recapitalisation directive issued recently, we expect operators to be truthful to themselves and consider all opportunities available for continued existence. While this could include mergers and acquisitions, it should not include fighting the policy just because you cannot raise the additional capital.”
On financial inclusion, he said, “as you are aware, it is a major policy thrust of this administration to ensure poverty reduction and financial inclusion of the majority of Nigerians hitherto excluded from the financial services.
The Financial Sector Development Organisation enhancing financial innovation access estimated that in 2018, 36.8 per cent of Nigerian adult population remained outside the formal sector.
“The Federal Ministry of Finance will collaborate with the National Insurance Commission and industry stakeholders to ensure that the target 40 per cent of inclusive rate by the end of 2020 is achieved as contained in the 2018 Reversed National Financial Inclusion Strategy.”
Also speaking, the Chairman, Insurance Industry Consultative Council, Eddie Efekoha, pleaded with NAICOM to give consideration to reasonable suggestions by the Nigeria Insurers Association (NIA) towards the recapitalisation process.
He said, “as we commence this round of recapitalisation, I plead with the National Insurance Commission to give favourable consideration to the suggestions made by NIA in its ongoing engagements so that the necessary guidelines, when released, will ensure that the objectives of this reform are fully realised. This recapitalisation exercise, like every past reform, presents both opportunities and new challenges.”
Meanwhile, the industry has been urged to do a rethink of its business strategy and align its operational practices to contemporary economic context of the Economic Recovery Growth Programme (ERGP) of the Federal Government in order to benefit from the potential of digital technology.
In addition, it was asdvised to embrace sustainable and inclusive insurance as well as exploit the benefits of the implementation of the second phase of Market Development and Restructuring Initiative (MDRI), among others.
The advice was given by the Federal Government through the Commissioner for Insurance and Chief Executive Officer of NAICOM, Alhaji Mohammed Kari, at the ongoing Insurance Industry Consultative Council’s 2019 National Insurance Conference in Abuja.
He said the need for radical reforms has become imperative in the advent of “disruptive impact on the insurance industry of a series of digital innovations in areas such as online sales technologies, machine learning, the Internet of Things, advanced analytics and virtual reality, among others.”
He informed that while these new technologies are already making it easier for consumers/policyholders to benefit from superior service and more choice as well as lower prices, there are corresponding challenges.
Alhaji Kari listed some of challenges to include cyber risk and crimes, determination of liability in driverless car accident, emergence of inter-sectoral competitors as well as disruptive social and technological changes.
“Therefore, in order to remain relevant and become a critical contributor to the national economy, the industry must consciously be proactive and organised so as to take advantage of the opportunities provided by these disruptive developments while at the same time curbing their corresponding negative impacts.
“It is important to note that firms will only benefit from digital technology only if they embrace its potential along the entire insurance value chain, including underwriting and claims management.
“This would therefore entail a rethink of the industry’s business strategy and alignment of its operational practices to contemporary economic context such as the ERGP of the Federal Government, sustainable and inclusive insurance as well as exploiting the benefits of the implementation of the 2nd Phase of MDRI, among others,” said the Commissioner for Insurance.
Mr. Kari stressed that from the regulatory standpoint, the need to exploit the opportunities of digitalisation and to tame the cumulative consequence of inflation and devaluation of the naira heightens the necessity for the ongoing reforms of the insurance industry such as expansion of the insurance distribution channels, financial inclusion, corporate governance enforcement, market discipline and professionalism.
He pointed out that the recapitalisation exercise is aimed at strengthening insurance institutions and increasing the spread of insurance in the country.
“Let me add that these reforms are in furtherance of President Muhammadu Buhari’s administration’s determination to revamp the economy as encapsulated in ERGP to ensure that the insurance industry becomes a significant contributor to the economy of Nigeria,” Kari added.
He said the National Insurance Conference provides a veritable platform for top government functionaries, investors, insurance practitioners and other stakeholders to discuss contemporary issues affecting the development of the insurance industry in Nigeria.
The theme of this year’s conference: “Disruption, Innovation and Business Growth”, he noted, is very pertinent against the backdrop of the need for the Nigerian insurance industry to remain relevant in an era of dynamism where operating in the same way is an assured route to irrelevance.
The representative of the Federal Government, Dr. Mahmud Isa-Dutse, who is the Permanent Secretary, Federal Ministry of Finance, tasked the insurance industry on the need to evolve innovative products and embrace technology to grow the economy.
He decried the low insurance penetration in the county and called on the practitioners to redouble efforts to ameliorate the situation.