The general elections have just been concluded and businesses have commenced in full gear. To Anchor Insurance Limited Managing Director Augustine Osegha Ebose, the Federal Government needs to have a deliberate plan to improve on its budget timing to help businesses, including insurance, grow. He speaks with Omobola Tolu-Kusimo.
What are the issues affecting the growth of the insurance sector?
I would say the industry in general has not been up and doing like the banking sector and other sectors of the economy. I think there is need for us to do more. The umbrella body of the companies, Nigeria Insurers Association (NIA) needs to do more. I believe in the personality of the new chairman who, through his innovativeness, has brought some of his experiences to bear. For any insurance company to succeed, they must be backed up by legislation. If there is no enforcement from the government, insurance business will not grow. Let us take the building policy for example. People take facilities and they don’t have insurance. If people are asked to have insurance before they can do anything in the country, everybody will have an insurance policy.
The reason people have number plate today is because it is compulsory. The industry leadership needs to also impress it on the government that it needs to wake up and help the industry, which will in turn go a long way to help the government itself. The government does not have business to go for repair if its properties get burnt. If these properties are insured, insurance companies will come and fix it. There will be no need to budget for infrastructural repair if there are infrastructural policies in place. Most of the MDAs of government don’t have insurance and when they do, the pricing is low.
The regulatory body, the National Insurance Commission (NAICOM) needs to do more. The commission has helped us by one step forward with the enforcement of no premium, no cover policy. But like I said, they need to do more. The NIA needs to also have collaborations with security agencies. For example, why will cars in Nigeria not have third party policies? There is need for NIA to form a formidable team and have this negotiation with the government. If possible, call for a seminar or a workshop that will involve so many policy makers in the country to move this sector forward.
Are there other areas that need to be worked on?
Yes. Insurance operators need to do more campaign and awareness on the importance of insurance. The issue of micro insurance should be vigorously pursued. Not everybody has the opportunity of having much to do with insurance. If you look at the economy, you will find out that the microcosm of an economy also has the microcosm population. It is not everybody that earns huge salary. Some Nigerians will tell you that they have not eaten and you are asking them to buy insurance. These are some of the things that are not helping us, but if we create awareness and let them know that it is for their benefit, it will go a long way. In other parts of the world, insurance takes care of banks, but here the reverse is the case. This then means that there is a fundamental problem in the way we manage our campaign. The government needs to also spend more on enlightenment.
Some stakeholders have said the way forward for the sector is for operators to allow merger and acquisition among themselves to become a formidable force in the financial sub-sector. Do you agree?
I will not totally agree with those who say the only way insurance companies can move forward is all by acquisition. In other parts of the world, insurance companies are not the same. First of all, if a merger and acquisition is carried out now and investors invest in the industry, what will be the return? Will someone bring in N2 billion dollars with the current exchange rate and break even with the naira policy payment? Secondly, what will be the expansion time and at what time can you wait for your investment to materialise before you know that the company will not go under. Thirdly, for the investors in Nigeria, do you know what they are going through having invested huge amount of money in the industry? What has been their return? There are many foreign companies that have come to Nigeria. How many of them have survived? The insurance industry cannot be in abeyance with the economy. It is a microcosm of the economy so it cannot be said that because the industry investment is not robust enough that is why we are not growing. The investors’ confidence will only be boosted if the numbers are there. I went for a conference in Houston and we were told that after insurance, the next thing is oil and gas. I asked a question that how can insurance be bigger than oil and gas? They said the premium income for Houston economy alone is about $320 billion per annum. Then you ask yourself, what infrastructure can their insurance companies not buy and if I am an agent in Houston, what will be my capacity? And so, how many people will want to invest in the Nigerian economy and make returns and when will he make the return? Why is the government not encouraging insurance companies by allowing them to access their funds from banks at a cheaper rate and improve themselves? There was a natural disaster that happened in America where there was a claim in A&G. The government paid off on the company’s behalf. Can that happen in Nigeria? So, we need to make deliberate policy statements and policies that are enduring to uplift the insurance industry.
Where I will agree with you on this issue of merger and acquisition is in the area of reinsurance portfolio retention, which is down. But we cannot grow it by bringing foreigners and collapse some other local companies. Mind you, the industry today has employed many Nigerians and if they collapse, where will they be? So, there are implications for all these. We just need to look at it holistically. The thought by some that many of us do not want to step down from being managing directors and so, we are not interested in merger and acquisition is not true. It is not everybody that will lose being the managing director and nobody will be forever. You can only be managing director for a period of time. My own take is that if we must recapitalise, it has to be gradual.
In 1994, before the new Act came, the position we were then is still the same position we are now because of the currency devaluation. The Commissioner for Insurance Mohammed Kari said we need to go back to recapitalisation to make the industry vibrant and, in fairness to him, I agree. But I think that there must be a process.
NAICOM has introduced the new accounting standard the International Financial Reporting Standard (IFRS). Do you think the industry is ready and how prepared is Anchor?
Anchor is very prepared and it has been discussed by the management. We are already putting it in place for implementation. We are not against regulation because we like to play by the rules. I think the new accounting standard will improve the industry. It will make us to adjust so that even if we are not doing some things right, we can begin to do them right. I remember when IFRS 4 policy that we were using before the new IFRS 9 came on board. We were complaining, but today we are used to it. I think we are all working to comply with the IFRS 9. Life itself is not stereotype. We should always think of development if we want to grow. Growth in every way and not just in premium income. I know that there are certain things that they want to check. Like the banking check system, which has been helpful. I believe the reason they are coming now is to improve the loss of insurance in the sector.
What is your take on rate cutting and unhealthy competition?
Marketing is an art of war. If you are coming into a business in an industry that is regulated, there are many things that can be done. NAICOM can regulate and say this is how it should be. But if I have to take a business for 10 per cent and I make losses, nobody is going to advise me to do a reversal. So, for those who want to do them, good luck to them. But for me, appropriate pricing is very necessary for our growth in the industry. However, my concern is not the competition of rate cutting, but more of the risk appetite of the industry in Nigeria. Like we talked about recapitalisation to improve a set objective and awareness creation. If this is done, there is no company in Nigeria that can take the risk of Nigerians. We are underinsured and these are some of the things that we are going through. Have you ever seen a competition that is fair, even in football?
In the insurance industry, nobody gives you power because the world is so wide for everybody. I don’t believe in the category of managing directors who say there is one insurance company that wants to oppress you from growing. Nobody has the right to say that you should not grow. If they are making policies for you to fall, make policies that will make you grow. No two companies are the same. If as a managing director I come here and I have deliberate plan to grow, can another perceived big company come and tell me not to grow? No. So, my colleagues should look more at ways of improving themselves than talking about those who are cutting rate. If I cut rate and don’t pay claims, the clients will not come back to me next time. At Anchor, we insist that third party motor insurance is N5000 as stipulated by government, but how many people have complied? So like I said, marketing is an art of war.
Nigeria just concluded its general elections and businesses have commenced in full gear. What are the macro-economic conditions that will drive Foreign Direct Investment (FDI) and economic growth?
If government policy remains the same it will be a familiar terrain. But I think the government needs to look at deliberate plan to improve on its budget timing. If budgets are not released on time, the economy suffers. It does not lead to policy direction, but if policies are released on time, it will help businesses a lot. Even after the election, there is the fear that some ministers will leave and so many things will change. These are some of the things that investors will be looking at. If the economy does not move, insurance policies will not move as well. We look forward to the government coming up with deliberate plan to improve the micro-economic policies such as employment and not increasing taxes.
But the Federal Government is already mulling the idea of increasing tax to fund minimum wage. Is it a bad idea?
For me, I will not say increase in tax is not good, but increasing it at this time will be counter-productive. Besides, it has its advantages and disadvantages. The more people you employ; the more group life policies will be underwritten and so there is a multiplier effect concept. But having to increase tax now would be counter-productive for me as a person and not as a company. Nigerians as it is today have a lot of tax that they are paying. The government can look for other ways. It can look at increasing tax on goods like tobacco, wine and other things that are not compulsory, but habits. If you want to smoke, drink, or use make-up, you should pay heavily for it. But things that have to do with life and deliberate life policies should not be increased. If the government increases VAT generally on all services and goods, it will be killing investors’ spirit. People will not invest when at the end of the day they will not have risk returns. So, too much taxes are not good for the economy.
Should the government embrace insurance more if we go by the dictum that ‘charity begins at home’?
Of course, there should be a deliberate policy for governments at all levels to insure all asset of governments. What stops the government from having a broking firm that will bring returns for it? Why will government spend so much on recurrent expenditure because there is fire outbreak in a building? Why will government not have content policy for its software and copyright and other items? Why will government not insure the lives of its workers? I think there should be a deliberate policy by the government that all assets of government should be insured. Every member of staff in Anchor is insured and it should be so for every entity.
You were appointed Anchor’s managing director in February, 2018. Can you let us into what you have done to drive the company’s growth?
Like you rightly said, I was appointed by our Board of Directors in February, 2018 and got confirmed by NAICOM in March, 2018. For any new MD/CEO, you will want to see how changes can be made in the company. You want to see where the company was, where you want to be and where you want to go. One thing I identified was to look at the company itself and the human capital within the system to see where we need strength, where the weakness was, where our strength was and where opportunity would also be.
What we did in my first one hundred days in office was to look at these things and identify them. First, we identified that we needed to have a robust ICT infrastructure to help us grow our online retail business like the third-party policy. We looked at our underwriting processes because it’s a major issue in the industry. We also visited our claims and look at those that were not paid and why they were not paid. We paid all outstanding claims and negotiated where necessary, paid and moved on with the business. We moved on and grew premium income in three months by 82 per cent. I am not sure there is any company that has accomplished such growth in a short space of time.
Our policy holder’s portfolio has increased, we now have a branch network in Gombe to look at the deep north of the country because we are already in Kaduna and other parts of the country. We have an ICT system for all our branches to have daily interactions within the branches. We also look at infrastructure; we had to move away from our old office to a business district area like Ahmed Onibudo in Victoria Island. I believe that environment is key to growth and that necessitated our relocation. Our premium income and staff strength have grown tremendously. We have effected other changes like product innovation and I can boldly say that things are looking up. This and many more are the things we have been able to accomplish in one year of taking over the baton.
What fundamental strategy as a CEO do you think will make Anchor competitive among other competitors?
One thing I discovered when I joined the company as executive director is that the company was not well known. That was why we had to embark on awareness creation and came up with a lot of TV commercials. If you want to do business with someone, you have to know him or her and so it is for a company. If you don’t know a system you cannot deal with it. The staff attitudes towards business negotiations were also looked into, among many other strategies that we deployed.
How strong is Anchor in terms of revenue generation and claims profile?
Strong is relative except you are doing a comparision. But if Anchor were to compete with itself, I will tell you that we have made a giant stride in terms of where we were and where we are now. The premium income as at 2017 and 2018 was a paltry N1.9 billion to N2.1. But in the last one year, we did N3.4 billion and in any mathematics indices, the growth is geometric. We were able to change our indices because of the human capacity development and some of the innovations we developed. And again as regards the claim, we have strengthened our reinsurance. I found out that our reinsurance was not so deep in terms of part of the reinsurance processes to cover our liability in area of claim. We have also paid off all our reinsurance payments, so in case of eventualities we will not be left bare. One thing we have also done is to look at our surveys and probe into claims made by our clients. This is because fraudulent claims come in various ways. We also devised a strategy to put our scripting in terms of our payout and it has paid off. We now have robust pre loss survey and post surveys attitude while we increased our security appetite in terms of physical evaluation of some of these things, not just hearsay. And we have put that across the country to make sure that we tell our loss adjusters our way forward. With all of these, our claims level for this year dropped considerably. We are very serious with our claims responses, except when there are few arguments. In claims processes, it is neither here nor there because the onus is on you to prove that you have a genuine claim. For example, somebody had an issue with us with our branch in Ibadan. We found out that the car that we insured was not the car that got burnt. So, such a person cannot claim to have a valid case. But we will pay valid claims immediately. If we don’t pay claims, then we have no business to be in insurance industry. We sell services to make clients happy and the fact is that if you make someone happy, he or she will never forget you.
Are you investing in a portfolio of technology investments that are aligned with future opportunities?
We are going virtual/iCloud in the next two weeks. The new server we ordered will be here very soon. We have also engaged a foreign organisation in terms of our Customer Relationship Management (CRM). This will revolutionise our office. Once we go on iCloud, some of the things we do will become very robust and speedy.
What stands your company out?
We have many policies that meet Nigerians’ daily need. We are the first company to enlist loss of employment policy. We realised that people lose their jobs and may not be able to meet their daily needs again. We designed the product to help quell the pains within the period that they are out of job. As it is now, we just signed an agreement with a bank to insure all their staff against the loss of employment and to also be part of their investment. If you take a soft loan from the bank to buy a car for instance, and in the process you lose your job, we will pay one percent of the loan as a salary, which, of course, is very good for the staff. We will pay the one per cent to the bank on your behalf and your life is at peace. More so, we are also coming up with some deliberate policies that will help the lives of Nigerians like the micro insurance and agric policies. As we speak, we are already in partnership with three major agric organisations and we will be having meetings soon to look at areas where we can help. We want to improve farmers in the areas of ICT. We want to be able to access claims made by farmers by sending a drone to assess the place to see if what the person is saying is true. We don’t necessarily have to be there. So, we are going virtual.
Where do you see the industry in the next five years?
For Anchor, the next five years will be glorious. I also expect that with the evolution of new ideas, technology and other new trends, insurance companies will thrive. In the next five years, I see insurance companies growing to at least 50 per cent of what we are doing at the moment, based on the new trends and awareness that are coming up. The next five years are looking very bright.
