The Nigerian credit market needs to be opened up to assist in bridging the gap of low insurance penetration bedeviling the insurance industry, analysts have said.
Nigeria’s insurance penetration according to recent statistics stands at abysmally 6.5 percent, while the contribution to the nation’s Gross Domestic Product (GDP) is less than one percent with a population of over 170 million people.
The analysts made their views known at a seminar on “Retail Insurance Business- a Begging Challenge,” held in Lagos and organised by HR Nigeria Limited, consultants and actuaries. They believe that the country’s underdeveloped credit system, which has failed to bolster demand for supporting products including consumer goods and services is a major factor slowing insurance penetration.
They stated that other markets within and outside Africa succeeding in insurance are strong in the offering of credit facilities to the populace, and this in itself creates an immediate need for insurance. According to them, insurance provides support for mortgages, loans, car financing, as well as asset acquisition, which do not only drive purchases but also increase penetration of insurance.
They also asserted that credit in itself creates an immediate need for insurance, support for mortgages, loan acquisitions, car financing as well as asset buying particularly household equipment.
Looking at other challenges bedeviling the insurance industry, they observed that there is a perceived lack of confidence in the insurance industry, the key concern resonating that “insurers do not pay claims.”
Beyond that, they also identified the lack of regulatory support for non-traditional distribution channels namely “corporate agents” for insurance like mobile network providers and bancassurance.
Some practitioners, however, brought the regulator – the National Insurance Commission, under fire because they felt that the best way to invoke change was by regulatory changes especially in becoming less stringent on licensing of alternative distribution channels.
The Managing Director, Custodian and Allied Plc, Wole Oshin, said the issue mentioned is important and needs the attention of NAICOM. He said NAICOM need to liase with the Central Bank of Nigeria (CBN), otherwise achieving penetration like other markets would be difficult.
Jim Roth of Leapfrog Investments stressed the importance of understanding the target market, stating that compulsory insurances, mobile insurance as well as partnerships were distribution channels that succeeded in other markets. He said that another successful approach undertaken by Leapfrog to improve the perception of trust of the insurer was by partnering with a well-known, trusted non-insurance brand.
He however faulted the traditional agency route of selling insurance, which is currently the major model here.
The Chairman, Claims International Limited, Ope Oredugba, stated that efforts must be geared towards reaching out to the emerging consumer group, with the kind of products that will not only meet their development needs but also reasonably affordable.
NAICOM Deputy Commissioner, George Onekhena stated that the Commission was already looking at distribution and may soon come up with a policy on the development. He however, stressed that a major challenge facing the development of the industry is premium leakages, and called for strategic efforts by operators to reach out to the mass of the uninsured public.
He noted that poverty is a major problem in our society and many cannot afford to buy insurance. He said a strategic effort to empower the populace would bring them closer to insurance.
