The Nation Newspaper

Tag: Insurance

  • Pension reform impacts capital market, insurance, others

    • Insurance gets N304b annuity premium

    The pension reform has positively impacted on other sectors of the Nigerian economy, Acting Directing-General, National Pension Commission (PenCom), Mrs. Aisha Dahir-Umar has said.

    Mrs Dahir-Umar in a status report by the commission, said notably among the sectors that have benefitted from the reform are the insurance sector, the Capital Market, Corporate Bond Market and Rating Agencies.

    According to her, the reform facilitated the growth of Group Life Insurance and development of Life Annuity in the insurance industry.

    She stated that a total premium of N304.09 billion was paid to insurance companies  for the monthly Life Annuity as at December, 2018.

    She added that the monthly pension payment under the Life Annuity Scheme averaged N3.15 billion in December last year .

    She noted that this has significantly assisted the growth of the insurance industry in Nigeria, which is a special focus area under the Federal Government’s Economic Recovery and Growth Plan (ERGP).

    She stressed that the reform has also facilitated the development of the corporate bond market, deepened the Nigerian capital market and the development of rating agencies.

    She said: “Consistent with its track record of performance, the commission was able to record many feats from April 2017 to date. The number of registered contributors increased from 7.6 million as at the end of the second quarter of 2017 to 8.41 Retirement Savings Account (RSA) holders as at December 2018.

    “The size of the pension assets has grown from N6.42 trillion in March 2017 to N8.63 trillion as at December 2018. During the period, the number of Pension Fund Administrations (PFAs) increased from 21 to 22 with the licensing of NUPEMCO PFA, while the number of Closed Pension Fund Administrator (CPFAs) decreased from seven  to six with the exit of UNICO CPFA.

    “The Commission successfully defended the pension reform and neutralised four private Bills that attempted to undermine the Contributory Pension Scheme (CPS) and reverse the reform. We have also been able to introduce the Multi-Fund Structure of Investment of pension fund assets; approved a structured reduction of fees on net asset value of pension fund assets and concluded arrangements for the introduction of the micro pension plan for the participation of informal sector in the CPS”, she added.

  • Buhari’s victory is insurance for Ondo’s economic projects

    Tunji Ariyomo is the Coordinator of the Ondo Central Campaign Network and frontline promoter of the Buhari-Osinbajo’s re-election bid in Ondo State. In this interview with reporters in Akure, he spoke on why the people should vote for President Buhari.

    Your campaign train is seen everywhere in the state, especially in the Central Senatorial District. What are your candidate’s chances of winning?

    I have stated this times without number that the Buhari-Osinbajo ticket is a winning one. The president’s chance of success at the coming presidential poll is very high. On a daily basis, more and more individuals are flocking to support Mr. President. People are volunteering. People are taking up the roles of canvassers on the streets. I am leading the campaign at the heart of Ondo Central, the state capital; it is heartening to see young men and women daily reaching out to be part of the efforts. This is encouraging.

    Many Nigerians are of the opinion that the last four years have been economically tough for Nigerians. Don’t you think that can threaten the chances of your candidate?

    Thank you. There is no doubt that the entire world, not just Nigeria, is just emerging from the impact of the global financial recession. The wanton profligacy of previous governments in Nigeria masked the true state of the Nigerian economy pre-2015. That said, the Buhari-Osinbajo administration has launched high impact micro-economic initiatives that target the most vulnerable among our people. People today in their thousands and millions can readily identify with social impact programmes like N-power, like the trader-moni scheme and other social impact initiatives which can be accessed without requiring the traditional ‘long legs’ or being filial relations of those in charge as it used to be under previous leaders.

    How can the President win under such a circumstance?

    First let me say that there is no human organisation where you have more than one person that would not be exposed to typical internal wrangling and disagreement. It is a normal part of life. But I can state emphatically that Ondo State APC is united on the matter of the re-election of President Buhari and Vice President Osinbajo. That is a fact – regardless of any so called faction.

    That said, I must also state here that there are no factions in Ondo APC. Yes, people may have contending or even conflicting aspirations but we will continue to work to resolve such in the spirit of give and take. Recently, our members were happy and excited when they saw Mr. Governor and Senator Ajayi Boroffice embrace at a function. So, the party is united behind the Buhari-Osinbajo ticket.

    But some people in Ondo State claim that the state has not been fairly treated by the Buhari led administration in terms of federal projects

    I keep hearing this. But we need to be educated with facts. I concede that our people have the right to agitate for far more than we are getting, but what we have on-going and in the pipeline under Buhari are substantial enough to excite our people.

     

  • Stock Exchange delists Great Nigeria Insurance

    The Nigerian Stock Exchange (NSE) at the weekend delisted Great Nigeria Insurance (GNI) Plc share capital, ending more than 13 years of public quotation and listing on the main board of the equities market.

    The delisting was sequel to the request for voluntary delisting by the board of GNI, which opted to revert to a private unquoted company. GNI was listed on the NSE in October 2005.

    The NSE had  approved application for voluntary delisting by GNI, after the insurance company insisted on delisting its shares from the Exchange. GNI had been struggling to meet the stringent corporate governance practices at the stock market. The insurance company subsequently sought  approval to delist its shares.

    As part of the delisting process, Insurance Resourcery and Consultancy Services Limited (IRCSL), which owns majority equity stake in the company, had offered to pay cash consideration of 50 kobo per share for every share surrendered by minority shareholders. The exit price of 50 kobo was based on the highest price of 50, which GNI had traded in the last six months.

    The board of the company, however, assured that shareholders that intend to continue to be a member of an unlisted GNI shall be free to remain and they have no obligation to receive the exit consideration.

    In an explanatory statement on the proposed delisting, the board of the company noted that the voluntary delisting would shield it from any enforcement action that may arise as a result of the outstanding free float deficiency at the NSE.

    The board also noted that over the last five years, there has been little or no trading activity on the shares held by the minority shareholders, pointing out that shareholders were not benefiting from the continued listing as they were not getting any exit opportunity and their investments had been locked up and they found it difficult to dispose of their shareholding.

    The board added that the company has neither benefitted from the continuing listing as its shares continue to trade at a significant discount to the intrinsic value.

    It also said the delisting will afford the company opportunity to further an imminent corporate restructuring exercise to take advantage of emerging opportunities, noting that the company may consider  re-listing on the Exchange in the future if the market conditions are favourable.

    According to the company, the voluntary delisting would not occasion loss of business opportunities as there are similar unlisted insurance companies that are commanding significant share of the insurance market.

  • Lagos ex-workers to get health insurance

    The Lagos State Government will provide health insurance cover to workers who retired from the state civil service, Lagos State Pension Commission (LASPEC), Director-General, Mr. Folashade Onanuga has said.

    She spoke with reporters at the 15th Retirement Benefit Documentation seminar for employees’ in the state Public Service due to retire between January and June 2019, in Alausa, Ikeja.

    She said the government would ensure that former workers enjoy their retirement, noting that health is wealth.

    She stated that the state is also set to kick off health insurance for its workers

    She said: “Lagos State believes that health is wealth and wants to ensure that the state’s retirees are in the best health condition to enjoy retirement. The state has the interest of both its workers and exworkers in mind.”

    While calling on the would be retirees who have a terminal ailment to submit a medical report alongside their documents when processing their pension, she promised that the state would give such retirees preferential treatment so that they can take care of their health.

    She added that the state, through LASPEC,would assist its retirees to get their pension entitlements promptly, urging workers who would soon retire to ensure that they submit the needed documents six months before retirement.

    Warning that any worker, who fails to submit the needed documents would lose three-months’ salary, she added that the sanction was instituted to ensure that retirees were paid on time.  

    She, however, said the seminar was aimed at sensitising the workers who were about to retire on how to process their pension, as well as give them tips to live a long, healthy life.

    The Commissioner for Establishment, Training and Pension, Mr. Akintola Benson, said the government has the interest of retirees at heart and has, therefore, voted huge money for their pension entitlements since the inception of the Contributory Pension Scheme(CPS).

    The Head of Service, Lagos State, Mrs Folashade Adesoye, applauded the prospective retirees for thweir service in the last 35 years, noting that their dedication and commitment to service has made Lagos State an example for other states.

    She noted that the state government would not forget this gesture and would send them gifts on their birthdays.

    Also, the Permanent Secretary, Ministry of Establishment and Pension, Mrs. Rhoda Ayinda, urged participants to understand the two exit options which are: Annuity and Programme Withdrawal so that they could be well informed about them.

  • Uneasy calm in insurance over states’ involvement

    The National Insurance Commission (NAICOM) has set next month for the commencement of the licensing of states to sell insurance products. The policy seeks to enforce compulsory insurance, deepen penetration and create jobs. But, the move has unsettled operators in the industry. Some of them, especially brokers, fear that states’ addition as insurance intermediaries may throw them out of business. OMOBOLA TOLU-KUSIMO reports.

    Operators in the insurance industry, especially brokers, may have been up in arms against the National Insurance Commission (NAICOM) over the industry’s regulator’s release of the guidelines for State Insurance Producers’ (SIP) policy operation, which grants states the licence to sell insurance products. This may have angered the brokers, who are apprehensive that the policy, which takes effect from January 1, next year, may throw them out of business.

    NAICOM appeared to have drawn the battle line with brokers and other insurance industry stakeholders when, last week, it released the guideline for the operation of the newly introduced SIP policy. The move, according to the Commission, was intended to enforce compulsory insurance and deepen its penetration in the country.

    Insurance penetration, according to experts,  is a measurement of insurance relative to the size and extent of a country. It is the extent of insurance services within an economy. Available records indicate 0.35 per cent penetration rate in Nigeria, while South Africa, a comparable economy, has a penetration rate of 15.3 per cent.

    To get NAICOM more worried about low insurance penetration, the brokers, despite generating 90 per cent of insurance businesses, are said to have offices mostly in the urban areas, neglecting the rural areas or the grassroots. This, in NAICOM’s thinking, meant that rural dwellers are denied access to insurance services.

    This reason, among others, must have been why, under the new SIP policy guideline released on November 20, 2018, states are allowed to sell the six compulsory insurance products in the country.

    They include Third Party Motor Insurance; Builders Liability; Occupiers; Health Care Professional Indemnity; Statutory Group Life Insurance and Workmen’s Compensation. They can also sell other insurance products subject to NAICOM’s approval.

    But as altruistic and patriotic as NAICOM’s policy may appear, the move obviously did not go down well with insurance brokers. Many of them feared that with the new arrangement, their days in the market may have been numbered.

    Their apprehension is perhaps, understandable. Before now, only registered brokers and agents are permitted by law to act as insurance intermediaries between the insuring public and insurers in the industry.

    Although, the Commission had opened more channels of distribution like bancaassurance, micro insurance, among others, to sell insurance to the people, the latest addition of states as intermediaries was seen by not a few brokers as an overkill.

    The brokers believe that beginning from January, next year, when states start selling insurance products across the country, their continued existence in the business will come under threat.

    The insurance brokers’ fears may have been exacerbated by the policy guideline, which permits the states to transact business only with approved insurance companies that have branches in the states.

    What this means is that brokers whose offices are mainly in the urban areas will lose out in states where they have no offices, let alone branches. To brokers, the fear of losing business in those states is real.

    Already, an Abuja-based Non-Governmental Organisation (NGO), Transparent Protection Ltd, has threatened to sue the Commission over the SIP policy. The solicitors to the NGO, Mike Onyeka, informed the Commission of its intention to sue via a letter titled: “Notice of Intention to Sue Pursuant to Section 51 of the National Insurance Commission Act, 1997.

    The letter dated December 3, 2018, read: “We refer to a recent publication by National Insurance Commission (The Commission) titled: “State Insurance Producer Operational Guidelines, 2018”, expected to come into effect on January 1, 2019.

    “The said guidelines are ultra vires the powers of the Commission as enshrined in the National Insurance Commission Act 1997 and Insurance Act, 2003, and we hereby give you notice of our client’s intention to sue the Commission…”

     

    Details of SIP policy

    NAICOM spokesman, Mr. Rasaaq Salami

    said the policy is expected to boost premium income generation and the sector’s contribution to the nation’s Gross Domestic Product (GDP).

    A breakdown of the guideline revealed that the SIP shall be the government agency so licensed by the Commission to provide intermediary services as defined by the guideline and remunerated in accordance with the provisions contained therein.

    The states are to employ insurance officers, who have a diploma certificate from the Chartered Insurance Institute of Nigeria or its equivalent to act as SIP on their behalf.

    Similarly, an undertaking shall be signed by an officer of the state government not below the rank of a Permanent Secretary that the state undertakes and agrees that the sum of N2 million shall be deducted from accrued commission to be earned by the licensed SIP before payment of commission is made to the coffers of the government.

    Under modes of operations, the SIP shall maintain a separate insurance unit or department for proper monitoring of the activities of the agency with the insurance officer reporting directly to the Chief Executive Officer of the licensed agency.

    The SIP shall enter into a memorandum of understanding (MoU) as may be approved by the Commission with approved insurance companies established in its jurisdiction for the purpose of the placement and management of insurance business.

    In the same vein, the SIP shall only transact insurance business with approved insurers, which list shall be approved from time to time by the Commission.

    The Commission further stated that the key responsibilities of the agent shall be to facilitate the enforcement of compulsory classes of insurance within the state jurisdiction by ensuring compliance

    The agent will also exercise on defaulters the power to penalise them according to the states laws; maintain proper records of individuals and organisations bound by the requirements of the compulsory classes of insurance and monitoring the compliance.

    Also, a licensed SIP shall have the authority to facilitate sale of the compulsory classes of insurance and for its principal, the state government. However, additional insurance products may only be distributed by the SIP upon approval of the Commission.

    While licensing and registration fee is N2 million, renewal fee- N1 million;  levy chargeable on SIP business shall be 1.00 per cent of gross commission.

    The guideline further stated that commission payable to SIP shall not exceed 75 per cent of the commission payable to insurance brokers.

    Payment of premium for insurance businesses conducted under the guidelines will be subject to the provisions of Section 50 (1) of Insurance Act 2003 on No-Premium, No-Cover and the various guidelines issued by the Commission where appropriate.

    Such premium payment, the guideline said, shall be made directly to the insurer or lead insurer as the case may be.

    The Commission warned that from the commencement of the guidelines, no SIP should function as an insurance intermediary unless a license has been granted to it by the Commission.

    It warned that violation of the provisions of the guidelines shall attract penalty in accordance with the provisions of the extant laws. All individuals and private organisations are, however, disqualified from obtaining a license as a SIP.

     

    NAICOM woos state governors

    The Commissioner for Insurance, Mohammed Kari, has been wooing the state governors, assuring them that the policy will boost their states’ Internally Generated Revenue (IGR).

    For instance, in his remarks during his visit to Kaduna State Governor, Mallam Nasir El’Rufai, Kari listed other benefits that would accrue to the states to include the provision of genuine insurance products to the government and people of the states.

    He also said the new insurance policy will create employment opportunities for indigenes of the states and free state governments from the burden of having to compensate victims from its scarce resources in the event of occurrence of mishaps or natural disasters.

    Kari said the Commission was seeking the support and collaboration of states in enforcing compliance with compulsory insurance while they establish a physical presence in the states.

    He said: “Notwithstanding Nigeria’s vast population, insurance had a mixture of myth, misunderstanding and ignorance defining it. Cultural issues and attitudes have continued to hinder the role of insurance in fast-tracking Nigeria’s economic growth.

    “In keying into the Federal Government’s Financial System Strategy, which envisions Nigeria of being a world’s top 20 economy by the year 2020, the Commission initiated the “Market Development and Restructuring Initiative” (MDRI) in 2009.”

    The Commissioner explained that the programme had, among  objectives, the promotion of public understanding of insurance, the building of confidence in the Nigerian insurance market, and the enforcement and monitoring of compulsory insurance in Nigeria in order to grow premium income for the benefit of the economy, thereby increasing insurance density and its contribution to GDP.

    “Having completed the first phase of execution, which was devoted to awareness creation across the six geopolitical zones, the Commission is now at the verge of kick-starting the second phase of the MDRI project, which is focused on implementation and enforcement of compulsory insurance across the country,” Kari said.

    The Commissioner added that he believed that the collaboration being sought with the states will open up several opportunities that will be to the benefit of the states as well as the industry when consummated. “We have developed a guideline that will make it easy for execution of the collaboration and partnership,” he stated.

    According to him, achieving a higher level of insurance penetration is the collective responsibility of all stakeholders. He, therefore, enjoined all to support this drive as the Commission forges ahead in creating an enabling and sustainable environment for insurance penetration through value creation.

    Blue Pearl Konsult Limited Managing Director, Mr. Chris Obi, said insurance firms are not doing enough to collect, study and work on customers’ pain points, because if they do, the impact of insurance business on the economy will not be so low.

    Speaking at the 2018 Almond Insurance Consumers’ Forum in Lagos, Obi said there are a host of other factors responsible for low penetration of insurance services in Nigeria. “Whatever they may be, we are face to face with a huge challenge and a huge opportunity, embedded, being reward for doing the right things that make all the difference.

    “On the long run, from research findings, insurance business is well correlated with economic growth in all countries, developed and developing. We have to agree Nigeria is grossly under insured in coverage and that alone is a great challenge and opportunity for national economic growth,” he said.

    According to Obi, it has long been known across the developed world that insurance contributes positively to growth and development. This, he said, is why developed countries always concern themselves with favourable policies, which create the best environment for insurance to operate, including making several insurance products mandatory for individuals, firms and government agencies.

    “The resulting massive fund, collected as premiums, explains why insurance commonly own banks, among other prime assets in developed countries. The reverse appears to be the case in Nigeria, where most banks own insurance companies. The advanced nations appreciate the positive link between insurance depth and economic growth,” Obi said.

    He added that the developed countries’ laws make allowance for even more penetration for the benefit of individuals, firms and government.

    “With insurance, an individual is assured continued enjoyment of his property even in the case of theft or material damage. With insurance, firms can engage in high risk investment and receive high returns mostly as a result of pooled risks. For government, insurance purchase mitigates the fear of natural disasters like fire, flood, among others,” the expert said.

     

    States show interest

    The Commission’s drive for insurance penetration through the policy may have hit the right chord with some states. Already, it has secured the consent for partnership from states such as  Ogun, Oyo and Kaduna.

    It was learnt from competent sources that some of the states have offered the Commission free plots of land to open branches to promote and deepen insurance in their respective states.

    For instance, in an address delivered by Oyo State Governor Senator Abiola Ajimobi at the opening ceremony of the Annual Education Seminar of the Chartered Insurance Institute of Nigeria, in Ibadan, he said insurance is beneficial to all.

    While announcing the state’s offer of a free plot of land to the Commission to build a branch, Ajimobi said the state has also decided to set up a Global Micro Insurance Agency, which will be private sector-driven and further demonstrate the state’s commitment to the insurance concept and its attendant values.

    Ajimobi said: “Insurance facilitates economic growth by investing premium funds, protecting individuals, industry and commerce, communities and nations from economic impact of losses, thus, removing the anxiety of losses.

    “In developed countries, many people and many companies use insurance services. For this reason, insurance is considered a major part of the service sector. Insurance also forms a vital part of the economy. In these countries, people trust insurance and therefore, insure all assets in insurance companies.

    “But in developing countries, insurance has not developed yet to its full potentials. This is largely due to problems such as misinformation about the industry and management deficiencies in insurance companies. But chief among these reasons is distrust of people for insurance.”

    The governor said it was, therefore, imperative for the industry and the practitioners to take practical steps towards addressing these issues. “There is the compelling need for the Institute to deal with the negative perception people have about insurance, some of which are being fuelled by primordial beliefs.

    “You also need to be deliberate in delivering quality service ….and superior value to your customers. I must add that adapting policies to the ever changing situations of your respective publics will surely advance the profession and its prospects nationwide. Also, high premium is a major disincentive for a lot of potential customers,” he added.

    Ajimobi further stated that it was necessary for the Institute to look for ways to introduce minimal premiums in order to make insurance products less elitist and more inclusive. “The more the merrier. We must also not overlook the menace of quack and fraudulent practitioners, who have given the industry a bad image,” he said.

    He said for them in the state, they appreciate the value of insurance and the need for their people to enjoy a certain degree of protection against the vagaries and vicissitudes of life. “Our government also understands the critical role that quality education plays in ensuring sustainable socio-economic development,” he said.

    The governor added that in these regards, the Oyo State Government has continued to make huge investment in the development of the health and education sectors. He said, for instance, it launched a N50 billion Healthcare Endowment Fund for the restoration and transformation of government hospitals and health centres in August last year.

    “At the same time, we established a Health Insurance Scheme, first in the country, which is an innovative strategy designed to ensure unfettered access to healthcare services by residents of the state, most especially the vulnerable class.

    “This scheme, which has recorded a huge success within a very short time, almost 60, 000 subscribers have already signed-on. It’s a system where contributors’ funds are pooled to deal with the financial burden of healthcare in times of need,” Ajimobi said.

    His Ogun State counterpart, Governor Ibikunle Amosun, has also embraced the Commission’s new SIP policy idea.

    While speaking at the 2018 Insurance Professionals’ Forum organised by the Chartered Insurance Institute of Nigeria (CIIN) in Abeokuta, Ogun State capital, Amosun assured that the state was ready to partner NAICOM and other industry operators.

    The governor, however, expressed hope that insurance professionals would find ways to position the industry to take its rightful place at the heart of the ongoing technological and economic re-engineering process.

    He stressed that as major players in the country’s economy, professionals must come up with robust ideas, improved and more practicable recommendations that can further entrench the industry as an effective cushion against probable shocks in the new non-oil economy.

    Amosun stated that without doubt, the public perception of insurance as a critical ingredient of not only business, but also life generally, was still an impediment to the growth of insurance practice in Nigeria.

    He, therefore, said it was imperative for the Institute to map out strategies to capture more businesses and more Nigerians into the insurance net.

     

    Operators kick

    Despite the Commission’s push to drive insurance penetration and the states governments’ commitments to partner it in this regard, operators, especially brokers, are not excited by the new policy. For instance, the President, Nigerian Council of Registered Insurance Brokers (NCRIB), Mr. Shola Tinubu affirmed that brokers are jittery over the policy.

    Tinubu said while it is premature for him to comment as the Council has called its relevant committee to look into the policy and come up with an official position, his members are already panicky. He said the policy will expose them to competition with states and other government agencies.

    His words: “Our fear majorly is the fact that the SIP guideline not only allows the states to sell compulsory insurance products, but also permits them to sell other insurance businesses if they so wish.

    “We are aware that the Commission is looking at how to deepen penetration. The Commissioner thinks that we need to get our distribution better and so if brokers are not expanding to the frontier, it has to do something. But whatever the Commission is trying to achieve should not kill other businesses.”

    Tinubu argued that making the states agents will not add anything more to the pool. “Maybe the Commission is thinking that perhaps if the state governments generate commission from the sales they make, they will be serious in entrenching insurance in their states. But I believe strongly that this is not the solution,” he emphasised.

    An insurer, who did not want his name in print, wondered how insurance companies with no branch in some states in the North for instance, will be bothered by the policy. He said insurers are more concerned with looking for money to raise their capital base than putting money to build new branches in the states.

    Another insurer accused the Commission of not seeking operators’ views before introducing the new policy guidelines. He said NAICOM failed to consider operators’ concerns before releasing the guideline.

    But, the President of the Association of Registered Insurance Agents (ARIAN), Mr. Ademola Fagbayi, thought otherwise. He said the association was in support of any industry initiative that will deepen insurance penetration and increase contribution to the GDP.

  • Juju, esusu, ajo ‘taking over insurance’

    MANY Nigerians prefer juju, esusu and ajo to proper insurance, the Managing Director, Blue Pearl Konsult Limited, Chris Obi has said.

    Obi, an expert in insurance, spoke while presenting a paper on the theme: Relieving customers pain points in insurance through exceptional service delivery at the  Almond Insurance Consumers Forum held in Lagos.

    He said there was need to adopt an industry- wide offer of exceptional service delivery to deepen insurance business in a large country like Nigeria.

    He stated that customer pain points arise as a result of feelings of customers on processing of premiums, claims, whether they are on time or delayed, truthful or rigged and so on.

    He was worried that many insurance firms were not aware of level of customer pains and were not taking steps to do things right, adding that if they did, the insurance industry would not be recording 0.3 per cent insurance penetration rate.

    He alleged that the firms were not doing enough to collect, study and work on customer pain points, because if they did, the impact of insurance business on the economy will not be so low.

    He said the situation could easily be corrected by adopting exceptional service delivery as a philosophy.

    He stressed that insurance business can only thrive in situations of trust that insurers will not renege on their promises to the insured.

    Moreover, he said the situation of our laws, especially in insurance, has been stagnant for too long that both insurers and the insured do not feel fully protected.

    He said: “Are we not facing a situation of very low level of trust between insurance companies and the insuring public? Insurance business can only thrive in situations of trust that insurers will not renege on their promises to the insured. Moreover, the situation of our laws, especially in insurance, has been stagnant for too long that both insurers and the insured do not feel fully protected. Even the available laws are poorly enforced, so that there are no consequences for breaking insurance laws, especially by insurers. In sum, lack of faith and confidence have seriously eroded the trust that must exist between insurers and customers and only a change in the insurance paradigm and offer of a rebranding of insurance can flip the situation.

    “People are resorting to alternatives in Nigeria. The extreme religiosity of millions of insurable Nigerians is partly to hide from insurance issues. They have conveniently wished away the existence of risks in their lives. They will say, “I reject it.” And coupled with low levels of disposable income, for many, they do not want to listen to insurance salesmen. It is not justified to describe them as failure of insurance industry to relieve their pain points. Some people resort to a doubtful and bogus “African insurance” or some popular Juju, for personal protection instead of life insurance, auto, accident and property insurance.”

    He pointed out should literacy rate rise in Nigeria in future, these irritant pain points might disappear, while trust and confidence would return and insurance penetration go up.  He urged the operators and regulator to sponsor lobbyists for the promotion of educational reforms in support of higher literacy rates.

    He advised that the firms should prevent the negative experience of customers by giving excellent service and capture feedback from clients, especially the negatives, and resolve issues elaborately to the confirmed satisfaction of customers.

  • Insurance sector weakest among others, says Kari

    The insurance sector is now the weakest link in the Nigerian economy owing to its low capital base, the Commissioner for Insurance, Mohammed Kari, has said.

    Kari, who spoke on the sideline of the 2018 Insurance Education of the Chartered Insurance Institute of Nigeria (CIIN) held in Ibadan, said the development is saddening.

    He said the sector which ought to provide risk cover for other sectors seemed to be losing its ground as parties it should secure are breaking new grounds leaving it behind.

    Citing the recent action of the Central Bank of Nigeria (CBN) to raise the capital base of Micro Finance Banks and Mortgage Guarantee Banks to N5 billion and N6 billion respectively, he said it has become crucial for insurance companies to increase their capital.

    He noted that Life insurance firms presently has N2 billion capital base; Non-Life, N3 billion; Composite N5 billion and Reinsurance N10 billion.

    He stated that insurance anywhere in the world is the mobiliser of funds and provider of security, noting that you cannot provide security if you don’t have capital.

    The Commissioner expressed worry that a sector that should insure the aviation and other high ranking sectors, should not be seen to have capital less than that of microfinance banks.

    He further stated that the consumer is supreme in the Commission’s responsibility of protection of stakeholders.

    He said: “The consumer is supreme in our responsibility of protection of stakeholders. The essence of regulation is to protect the consumer principally including the shareholders. You will be surprised that when we did the letter of categorisation and advise insurance companies. A lot of them see the need for it and they indicated where they wanted to be.

    “The Tier Based Minimum Solvency Capital (TBMSC) that we introduced to the sector does not compel any company to capitalize. It is mostly about categorisation of the companies. It is wrong for any operator to say they must be in Tier 1 category because others are there. It all depend on the model of operation. The two biggest player we have in the industry has 75 per cent of their businesses from Tier 3. So operators can survive in any Tier they find themselves. If they don’t appreciate the Tier they find themselves, then they should upgrade to the Tier that they aspire to be.

    “As a regulator, nothing in law says I cannot forbid a company from doing a Tier business which he or she has no finances for. It is an inherent duty of the regulator to do that. The CBN ruled on capital because they taught that it is the best way they can develop their regulated entities and this is the way we also think we can regulate our regulated entities. We can’t do otherwise because the operators activities at the capital market is not as buoyant. Our operators have not been paying dividend so people will put money in them. Not to shore up their capital or follow the categorisation plan is to say we don’t want to help them. But the reverse is what we are seeing now which is that they don’t want to be helped and it can’t continue like this.’’

    NAICOM had in July introduced the TBMSC structure. The Commission described it is a complimentary measure to the ongoing implementation of the Risk-Based Supervision (RBS) programme.

    The policy trust of the recapitalisation programme is to enable soundness and profitability of insurers through optimal capitalisation; support the stability of the financial system; introduction of proportionate capital that support the nature, scale and complexity of the business conducted by insurers; a 3-Level TBMSC model; specifies capital requirement for each Tier Levels, based on risk classification for each Tiers; no mandatory injection of fresh capital fund by insurers; no cancellation of licence of any operator is anticipated subject to solvency control levels and specifies intervention levels.

    Others include and specific actions to be taken by the Commission and operators on various levels of impairment of the TBMSC; to open up licensing window to interested investors at higher Tier Level; and restructuring of capital resources for improved liquidity and claims settlement.

    But some shareholders have prayed to a Federal High Court in Lagos to stop the Commission from implementing the TBMSC, a prayer which has since be granted through an injunction by the court.

  • How insurance can break poverty cycle

    Insurance is one of the primary solutions identified for breaking the poverty cycle in pusuit of the Financial Systems Strategy (FSS2020) goals. But, two years to the lapse of the timeline, experts warn nothing may be achieved if the government fails to tune up the industry, reports Omobola Tolu-Kusimo.

    Without insurance, the poverty and ill health cycle of any country will continue. This has led to the recognition of insurance in the Financial System Strategy or FSS2020 as crucial to breaking the cycle.

    Everyone is exposed to risk either through normal everyday existence or the enterprises that they may embark upon. Insurance enables peace of mind, which enables people to take more risks with expected  higher returns.  Insurance also acts as stabilisation against shocks in case risks materialise.

    For example, health insurance access reduces the likelihood a household has to sell some of their productive assets, like cattle, in order to take care of the health costs of any family member.

    Therefore, the importance of insurance in achieving financial inclusion vision by 2020 and ending the cycle of poverty in the country cannot be over-emphasised.

    Financial inclusion simply means making insurance services readily accessible to all and providing access to useful and affordable financial products and services that meet the needs of every individual.

    Currently, poverty and unemployment remain major challenges facing the country. As 2020 beckons, the Federal Government has shifted its focus on insurance operators and the regulator to achieve the strategic goals.

    The target is that by 2020, the number of adults in Nigeria with access to payment services will increase from 21.6 per cent to 70 per cent, savings will increase from 24 per cent to 60 per cent, and credit will increase from two per cent to 40 per cent.

    It is also anticipated that insurance penetration will grow from less than one per cent to 40 per cent and pensions from five per cent to 40 per cent.

    At present, Nigeria lags behind inclusion targets across every measure and is not on track to meet the targets by 2020.

    Experts say operators and regulator in the industry would need to brace for the purpose of saving mankind. They need to pay attention and invest in inclusive insurance markets because of their promise for the future and government expectations thereof.

    Enhancing Financial Innovation & Access (EFInA) 2016 survey estimated people living under extreme poverty at 60 per cent and pegged the rate of unemployment at 24 per cent due to economic growth’s inability to trickle down to the poor.

    The survey also showed that the total adult population, that is, individuals from 18 years and above in Nigeria, is 96.4 million.

    The questions, however, posed by industry operators, the regulator and other stakeholders at the 2018 IICC National Insurance Conference in Abuja were: Can the country eradicate extreme poverty & increase shared prosperity? Can technology and insurance help us on this mission? And can we achieve financial inclusion vision 2020 in two years?

    Founder and Chairman, Zenith Bank, Jim Ovia and Managing Director, SystemSpecs, John Obaro, are positive. The National Insurance Commission (NAICOM), insurance operators and other stakeholders also believe so.

    But despite all agreeing that the poverty cycle can be eradicated by 2020 by leveraging the use of technology, many noted that the danger in achieving this goal is the fact that the government is yet undecided whether or not to use technology to drive financial inclusion.

     

    Experts’ views

    Ovia challenged NAICOM, the Nigerian Communication Commission (NCC) and the Central Bank of Nigeria (CBN) on financial inclusion.

    He said for the financial inclusion vision to be achieved by the Federal Government, NAICOM, NCC and the CBN needed to agree and approve the use of mobile telephones to sell micro insurance to the poor and excluded adults in the country.

    He said before now, the three regulators have found it difficult to approve mobile telephones to be deployed by insurance operators to sell insurance to the public.

    Ovia, who spoke at the conference, said while NAICOM has released a new micro insurance guideline in this regard, this will not change anything if operators would still need to sell the product in the traditional way.

    He decried the fact that the industry has not started using mobile technology for micro insurance, noting that this has been the bane to deepening insurance penetration and achieving financial inclusion.

    He said: “NAICOM has a new guideline on micro insurance, but it has not been deployed through mobile telephony. The Commission can’t deploy micro insurance through the traditional ways. It should be done through new means, which is technology.

    “The NAICOM, NCC and CBN need to approve mobile telephony for the distribution of micro insurance urgently.”

    He pointed out that evidence has shown that appropriate financial services can help improve household welfare and spur small enterprise activity while economies with deeper financial intermediation tend to grow faster and reduce income inequality.

    Similarly, it is established that digital technologies can play key role in addressing poverty eradication within a balanced mix of responsible regulation, relevant skills and accountable institutions.

    He highlighted some examples of financial products, such as credit, savings, insurance and payment systems.

    “Credit helps to improve the productivity of micro enterprises or to cover health expenses; savings contributes to pay for children’s education, health care or meet other financial obligations; insurance offers protection against the financial impact of unfortunate events such as illness, accidents, burglary/theft etc; and payment systems facilitate easy movement of funds to complete financial transactions for example sending money from far away cities or abroad to family members back home.”

    He said micro insurance cannot be deployed successfully, using the conventional method, adding that the only system which have been tested and trusted is the mobile technology.

    According to him, insuring life will take about 40 years if the old method of deploying insurance is used, but with mobile technology, 12.5 per cent contribution to the nation’s GDP can be achieved.

    He further said to achieve 80 per cent target of financial inclusion by 2020, financial experts should be more innovative and creative in their business.

    The Zenith Bank chairman was of the view that insurance remains one of the best tools to break poverty circle and ill-health in the country.

    Commissioner for Insurance Mohammed Kari urged insurance operators to organise information technology forum where all stakeholders will be brought together to enhance decision making.

    He said the insurance sector plays a vital role as it helps to reduce the poverty line, helps entities and individuals manage their risks and protects them from negative adverse effects of unforeseeable events.

    Speaking on the financial inclusion strategy, he said: “In 2012, Nigeria launched the National Financial Inclusion Strategy (NFIS) to reduce the percentage of adults that are excluded from financial services from 46.3 per cent in 2010 to 20 per cent in 2020. The strategic goals are driven by a broad range of co-ordinated interventions, including simplified Know Your Customer (KYC) regulations, agent banking, micro-insurance and consumer protection principles.

    “In the area of microinsurance, NAICOM has been working with Deutsche Gesellschaft fur Internationale Zusammenarbeit Gmbh, GIZ of Germany and our own Enhancing Financial Innovation & Access (EFInA). The relationship with these two bodies have culminated in a well-documented diagnostic study of the Nigerian market, several seminars, workshops and trainings on microinsurance for both operators and staff of NAICOM and the industry at large.

    “In December 2017, the Commission went a step further and invited the Toronto Centre, Canada, to conduct a training session in Abuja for insurance operators and regulators in the West African sub-Region.”

    He said financial inclusion is the collective responsibility of all and called on stakeholders to support the drive of the sector as the regulator forges ahead in creating an enabling environment for insurance penetration and increasing access to financial services and products.

    Obaro highlighted the role of technology in achieving financial inclusion and how it can be leveraged to attain set targets in Nigeria.

    According to him, there is need for the Federal Government to leverage technology for financial inclusion.

    “Technology has demonstrated a strong potential to help improve access to and quality of financial services for the unserved and underserved. Exciting technology innovation is happening in emerging markets and very much in Nigeria through new products and services launched by start-ups and through partnerships with banks and corporates.”

    He, however, said the Federal Government is undecided about the model (bank-led or MNO-led) to adopt for financial inclusion.

    He said policy makers, including NAICOM and NCC, needed to facilitate policies that reconcile financial stability and financial inclusion.

    “They also need to be intentional in financial literacy efforts and have constant line of engagement with industry,” he averred.

    Kari said a cursory look at the access to financial services in Nigeria indicates that there is a huge deficit in terms of financial inclusion, which insurance is a veritable part.

    “Statistical analysis indicates that Nigeria requires aggressive and strategic developmental efforts towards reaping the benefits of her abundant potential. This has become an imperative rather than an option if ordinary Nigerians, who have no access to financial services must be brought to the fold,” he said.

    Economic Associates Chief Executive Officer (CEO), Ayodele Teriba said people have to first sort out other pressing needs before thinking of insurance.

    According to him, it is only a population that has means of income that can buy into insurance.

    He siad it is only an individual that has a monthly income that can afford to buy insurance.

    According to him, citizens  of a country where its population is absolutely poor will find it difficult to think of insurance.

     

    Power of digital finance

     

    According to Bill Gates, in a country where three quarter of its people have mobile phones, digital finance offers the potential to boost the economy from top to bottom.

    Right now, more than 50 million Nigerians are at the whim of chance and informal economy. With access to digital financial tools, they can cope better with disasters that threaten to wipe them out, build assets and gradually lift themselves out of poverty.

    “Consider the impact this would have on businesses. Out of the 37 million micro, small, and medium enterprises in Nigeria, more than 99 per cent are micro. According to the best estimates, digital financial services will create a 12.4 per cent increase in Nigeria’s GDP by 2025. Meanwhile, oil accounts for about 10 per cent of Nigeria’s GDP…,” he said.

     

    Distribution strategy

    According to Ovia, digital distribution is a key component of enabling financial inclusion. For example, just to insure one million lives, the traditional distribution mechanisms can take up to 40 years if not more in some developing countries.  However, the same number of people can be reached in less than one year via mobile operators.

    “Prudential Plc our global partner at Prudential Zenith, achieved a  rapid take up of micro-insurance products via mobile technology in Ghana. Their mobile offering saw a take up of about 1.5 million people in just over 12 months.

    “In 2014, micro-insurance coverage had reached three million people, an increase of over 200 per cent from 2009. This figure was largely due to a loyalty insurance scheme delivered through a partnership between Airtel, MicroEnsure and African Life Assurance Zambia,” he said.

    He said there are many players on the global financial space via digital channels.

    “It is not just the fancy names, such as Hippo, Lemonade, Oscar and Nutmeg that define these players. They are seriously disrupting the insurance and other financial models to bring financial products to people originally considered uninsurable. These players may be on a global scale in other markets, but they are beginning to look at African markets as well.

    “We have already sighted the innovative example of Prudential Life Insurance Ghana, which achieved 1.5 million policies in 12 months, using mobile phone technology. Prudential Zenith, Nigeria together with other insurance companies is now ready to deploy micro insurance products in the use of mobile phone technology as soon as both the NCC and NAICOM could collaborate and approve to do so.

    “I would like to encourage the NCC and NAICOM to collaborate and approve the use of mobile phone technology in distributing micro insurance products in Nigeria. We must be aggressively innovative, if we are to achieve the targeted goal of 80 per cent financial inclusion by 2020 in Nigeria,” he said.

     

     

  • NAICOM: 41.6m Nigerians excluded from financial services, insurance

    About 41.6million Nigerians are excluded from financial services, including insurance services, the National Insurance Commission (NAICOM) has said.

    The commission also said 40.1 million who live in the rural areas are excluded from any form of financial services.

    Commissioner for Insurance/Chief Executive Officer, NAICOM, Mohammed Kari, disclosed this at the ongoing Chief Executive Officers’ retreat of the Nigerian Corporation of Insurance Brokers (NCRIB) in Uyo, the Akwa-Ibom State capital.

    Mr. Kari, in a statement endorsed by NAICOM’s Head, Corporate Affairs Department, Mr Rasaaq Salami, in Abuja yesterday, said in the past five years, the Gross Written Premium of the industry hovered between N300billion and N320billion.

    He said: “The Nigerian adult population which consists of people from 18 years and above is 96.4 million, out of which 59.6 million are living in the rural areas. Among this rural populace, 40.1 million are excluded from any form of financial services. Additionally, the Nigerian formal sector provides income to only 7.9 million adults, representing 4.2 per cent, whereas 41.6 per cent are excluded from financial services, including insurance.

    “This offers a huge opportunity for “the future broker” to provide desirable services to close these existing gaps and enhance the general performance of the industry.

    “What this signifies is that the figures are not growing in the same proportion if the enormous potential at the disposal of the sector is to be used as benchmark.

    “A cursory overview on the access to financial services in Nigeria indicates that there is a huge deficit in terms of financial inclusion to which insurance is a veritable part. Statistical analysis indicates that Nigeria requires aggressive and strategic developmental efforts towards reaping the benefits of her abundant potentials.

    “This has become an imperative rather than an option if ordinary Nigerians who have no access to financial services must be brought to the fold.”

    He also said the commission had taken steps to create the legal framework and enabling environment for insurance business to thrive in Nigeria.

    “Having taken due cognizance of these indices, NAICOM over the years had taken steps to create the legal framework and enabling environment for insurance business to thrive in Nigeria.

    “The Commission had evolved several market development initiatives and platform to upscale insurance awareness and access, channels of distribution, product development to guarantee a stronger and viable insurance sector in Nigeria.

    “The Commission expects the industry operators particularly, brokers and underwriters to continuously take advantage of these initiatives to grow not just their respective business but the industry,” he added.

  • ‘Insurance promotes economic growth’

    The insurance industry promotes economic growth and development by protecting firms and organisations, NEM Insurance PLC Group Managing Director, Tope Smart has said.

    He made this known at the Business Journal 10th anniversary lecture and awards on ”Infrastructure and economic growth: Exploring the strategic alliance” held in Lagos.

    He said through the protection, firms’ financial stability was enhanced by the insurance company which cover.

    Smart said the industry also promotes entrepreneurship, encourages innovation and the vitality of the market; offers relief and, by so doing, reduces pressure on the government; increases financial intermediation through the creation of liquidity and savings through life insurance products and promotes of risk prevention, thereby                                                                 contributing to sustainable and responsible development.

    He pointed out that insurance, through life insurance companies, provide funds for long investment in the real economy.

    He said: “In the absence of a risk transfer mechanism like insurance, economic activities would be much lower and hence will result in economic  loss. Insurance also helps to smooth out the volatile economic condition. Also, in the absence of insurance, human behaviour, particularly risk aversion would either lead to avoiding these activities or excessive precaution and both of these actions would result in an economic loss.

    “Also to be noted is that risk transfer mechanism will reduce fear, anxiety, frustration or demoralisation which can reduce productivity in the environment. It encourages creativity, innovation, entrepreneurial activities and trade that are vital for sustainable growth.”

    On insurance contribution to world’s Gross Domestic Product (GDP), Smart said: “According to Swiss Re, insurance contribution to the world’s GDP was 6.23 per cent in 2016. Insurance contribution to the GDP of developed countries is very significant.  For instance, in Japan, the GDP is 11 per cent, while in areas,  such as North America, it is about eight per cent.  In United Kingdom and the Netherlands, the figure is about 12 per cent, while for France, it is about 10 per cent.

    “However, in Nigeria, the penetration rate is still very low.  Insurance contribution to the GDP is still less than one per cent.  Efforts are on to increase this figure significantly in the coming years. Researchers have concluded that based on their findings there is a significant and a positive relationship between insurance and economic growth globally .”

    He said it was also interesting to look at another perspective of insurance, relative to investment in infrastructure; various forms of benefits can be mentioned.

    “Research has equally shown that there is a linkage between insurance, infrastructure and economic growth. For example, investment in infrastructure leads to quality of life. This automatically leads to improvement in mortality rate and consequently reduce death claims under life insurance.

    “Also, good roads will reduce the number of accidents thereby leading to reduction in claim on motor insurance, goods in transit Insurance and group personal accident insurance, among others.  This will, ultimately, lead to a better, stronger and a healthier insurance industry,” he added.