Founder of Zenith Bank, Jim Ovia has unsettled the insurance industry, querying its strength in the financial service sector and other sectors of the economy.
Ovia, who is also the Chairman, Zenith General Insurance Company Limited spoke at Nigerian Council of Registered Insurance Brokers (NCRIB) 60th Anniversary event held in Lagos, with theme: “Improving Insurance Penetration in Nigeria – Leveraging Technology for Financial Inclusion”.
Represented by the Managing Director, Zenith General Insurance Company, Kehinde Borishade, he said all the entire insurance industry put together in terms of revenue or profit is not as big as the Zenith Bank which was formed 30 years ago.
He said the theme of the event is very relevant to the recent happening in the insurance industry and also the world of business generally.
Comparing the industry to the banking industry, Ovia said the banks have demonstrated and shown the importance and the result of technology in financial inclusion with its growth.
He said: “For example, just by introducing ATM machine, use of mobile wallets for cash payments and online banking, the banking space has been transformed while financial inclusion has been enhanced.
“Some of banks in Nigeria today have grown so big that they are global players. Imagine how these banks have grown right in our eyes. Look at their shareholders funds and capital base over the years.
The big question for every stakeholder in insurance industry is whether the industry has lived up expectation.
“Some 30 years ago directors of bank come to insurance industry to queue and beg for funds. Today all the entire insurance industry put together in terms of revenue or profit is not as big as the Zenith bank which was formed my 30 years ago.”
He however pointed out that the insurance industry has also been impacted, with increased operating costs, inflation in claims payments and failure to realize profits.
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“Nigeria is the largest economy in Africa, with an estimated Gross Domestic Product (GDP) of $514bn as at September 2022 according to World Population Review. The country is facing serious economic challenges with an estimated 2023 budget deficit around 5% of GDP approximately $25bn. Nigeria’s inflation rate of 20.8 per cent is also significantly higher than its top African peers.
“The insurance industry has also been impacted, with increased operating costs, inflation in claims payments and failure to realize profits. The regulator, National Insurance Industry (NAICOM), recently withdrew licenses of three companies, and is closely monitoring another five companies’ due various issues such as recording substantial operating losses yearly and inability to settle pending claims.
“Nigeria has the lowest insurance penetration rate of 0.3 per cent, amongst African countries with GDP sizes of over $100billion. Our insurance industry, accounts for only $2.27bn out of the $514bn it generates. This compares poorly to the penetration rate of around 40 per cent and 54 per cent in Europe.
Ovia noted that the reasons for low insurance penetration in Nigeria and Africa are financial illiteracy, affordability for low-income earners, cumbersome processes due to inadequate robust & sophisticated technology, gaps in the industry value chain and distrust of insurance companies
To improve insurance penetration, he advised insurers to make the on-boarding process easy and seamless with technology playing a major role; ensure industry information sharing is seamless, and incorporated into the underwriting process; reduce fraud risk associated with claims settlement and cost of operations, through technology; and improve consumers’ trust and confidence in insurance companies.