In the last few years, insurance penetration in Nigeria has been somewhat low despite laying claim to being Africa’s largest and most populous economy.
This is due to the fact that the country’s penetration level is less than one per cent (measured as insurance gross premium written as a proportion of GDP) among notable African countries – South Africa (14.7 per cent), Kenya (2.8 per cent), Angola (0.8 per cent) and Egypt (0.6 per cent).
Similarly, the sector’s insurance density (a measure of industry gross premium per capita) is still one of the lowest when compared to peers – South Africa (US$762.5), Egypt (US$22.8), Kenya (US$40.5) Angola (US$30.5) and Nigeria (US$6.2).
According to a report, Nigeria’s insurance penetration in the non-life insurance business was a mere 0.2 per cent in 2015 and sadly, non-life insurance penetration levels in smaller and less-endowed African countries like Kenya and Morocco were high, same for life insurance penetration, which remained low in Nigeria.
It is, however, not a surprise that the situation has even affected investor sentiment of insurance stocks trading on the floor of the Nigerian Stock Exchange (NSE).
A cursory look at the turnover of these insurance companies is frightening as losses are recorded year in, year out leading to 3/4 insurance stocks not trading at par value and of course some of these companies look at delisting as a way out to ease the pressure on them by both the NSE and National Insurance Commission (NAICOM).
Although, the Federal Government envisions an insurance industry that can rank among the 20 largest markets in the world by the year 2020, that is looking like a fantasy
The fact still remains that Nigerians still shy away from insurance and even buying insurance stocks because the link-the brokers- remains unnoticed.
Brokers constitute about 80 per cent of distribution channels of the gross premium (the total premium of an insurance contract before brokerage or discounts have been deducted) and are important in marketing of insurance products and also help their clients to outline risk management strategies, which are suitable for their profile.
This makes them the very vital link for the insurance sector in order to drive growth and contribute to the gross domestic product (GDP) of Nigeria.
Experts are of the view following the N10 billion new capital base recommended by the National Insurance Commission (NAICOM) for general insurance business by June 2020, it is the first step to looking at avenues to changing the narrative of insurance especially in the capital market.
According to these experts, achieving the goal will mean the insurance industry wholly embracing financial inclusion as well as developing the technical capacities to meet the emerging challenges of financial inclusion and micro-insurance. Hence, this therefore calls for more dynamic strategies to deepen insurance reach amongst the vast populace.
Speaking during the Capital Market Correspondents Association of Nigeria (CAMCAN) quarterly forum in Lagos recently, the Managing Director of Sunu Assurances Nigeria Plc, Samuel Ogbodu, while commending the NAICOM for increasing the capital base of various categories of players in the industry, said the new era would open doors for new products, reduce challenges posed by liquidity in the sector, strengthen financial inclusion as well re-open new regulatory windows.
Ogbodu said the proposal would not only help to consolidate the sector with provision of more buoyant opportunities for large ticket transactions but also position insurance companies in the country as big players, instead of serving as agents to foreign insurance underwriters.
He said: “Insurance brokers would have more creative roles to play towards harnessing the benefits of the new capital base and the Nigerian insurance sector if well-positioned would take its rightful place in the country’s economy. I am sure that insurance companies at the end of the recapitalisation programme would be able to take up opportunities hitherto taken by foreign companies”.
Ogbodu also said NAICOM needed to implement the compulsory housing and transport insurance policies to deepen insurance penetration in the country.
Also speaking, Industrial Head, YOA Insurance Brokers Limited, Ladi Oyekan, said the ideal insurance penetration had not been attained based on the country’s penetration figuresß.
He said low disposable income in the country was affecting insurance penetration, hence the sector was working towards monthly premium payment, which would make it easier for policy holders to drive financial inclusion in the industry.
His words, “Most Nigerians think and say to themselves that they have Jesus or Allah protecting their properties and lives but we are trying on our own part as brokers to ensure that penetration goes on a positive side and we are looking at our population because for you to make an impact in terms of retail products, you need to have the population and right now Nigeria is having that population but the problem is how do we source for funds? People are earning below normal average but however we have to come up with interesting way of trying to do insurance.
Insurance premium is always like a one year premium paid ahead but what we have been doing from our perspective is to ensure that we come up with a mechanism that will ensure people will book the premium without any issue. our regulators are now looking at us to say yes, you can do whatever you want to do but how do you address the issue of claims? so we are at that point that we will still get things rightly done so we believe if we can make a flexible way of premium payment and bring out products/service just like our banks are doing now and the way our international counterparts are operating, until we get it right, insurance penetration in Nigeria may not go far”.
For his own part, Managing Director, Sina Elusakin, GRS Insurance Brokers Limited, said, “There is no disposable income and when you look at the turnover of these insurance companies, it is not even encouraging and this sends signal to those who want to buy shares in these companies. Worse still, rather than growing, insurance companies are groaning and this is because there is no formidable bodies unlike when a bank falls and the Central Bank of Nigeria (CBN) runs to its aid. Unless the government steps in and take responsibility, penetration will continue to dip”.