The rise in technology and various distribution channels introduced by the National Insurance Commission (NAICOM) to further deepen insurance sales and penetration is threatening the role and relevance of brokers in the industry. In this interview by Omobola Tolu-Kusimo, the Managing Director, SCIB Insurance Brokers Limited, Mr. Shola Tinubu, says brokers need to be creative to be part of the new business regime that will be created through retail business with the aid of technology, amongst others. Tinubu is also the new President of the Nigerian Council of Registered Insurance Brokers (NCRIB). Excerpts:
What is it like being the NCRIB President?
I think it is an honour to be given this type of leadership role where one is able to better implement some of the ideas and concept that one has been incubating throughout one’s career. For me, this position is very clear. It is not like the executive president of Nigeria or the executive governor of any state. It is a non executive position. I do not expect that this is something I am going to do alone, I am going to do it with a team but it means a lot to me that at this point in time that I have actually reached this position.
As the new President, what is your vision for NCRIB and the brokage fraternity?
Essentially, the core vision that I have for NCRIB is the type that stands as a strong institution that can stand side by side with many of itspeers nationwide and even internationally. The standards for us are standards that we have been able to see and view. We are associated to the British Insurance Brokers Association (BIBA) and many of the standards that they apply there are what we have continued to look at and imbibe bit by bit. If I were to explain it differently,it is for us to have a NCRIB that is in position whereby from year to year, presidents come in and go. But the institution itself will be there to talk to government on institutional and professional issues. It should be able to relate with government on the economy and all the affairs that affect our members because essentially that’s our focus.
How do you intend to help your members maximise their potential towards achieving their set targets considering the role brokers play in the market?
First of all, you must look at the future for broking; the future for broking is going to be strong in the corporate sector. However, retail is a big thing coming. Insurance penetration is going to be reaching its potentials for us in terms of retail. But you will find out that the broker is still relevant in corporate business anywhere in the world, no matter what. For instance, as big as Shell International is, they have a big insurance department with technical advisers on insurance, but they still use brokers and they will continue to use brokers in the future. They even have captive insurance companies they run by themselves, yet they still use brokers. Sometimes they use brokers to run their captives. We even have a situation where our Nigerian National Petroluem Corporation (NNPC) captive is run by a broker as at date. So the role for brokers in corporate sector will always be there. In the future, the growth of the corporate sector in Nigeria will only be limited to the growth of the economy itself. There’s a bit of saturation for the existing corporate sector and therefore it is only when that corporate sector grows with new companies springing up and the existing company doing better; that is when you’ll then see bigger roles for brokers. The role will always be there no matter what, but I suspect that role will be influenced by the speed in growth of other sectors which will be the retail business. The retail business is coming around the corner and will be enhanced by the use of things like technology. What brokers need to look at is how they will remain relevant in the new market; that is going to explode because whether we like it or not, it is going to explode. It could be that it will be irrelevant in arranging technology platforms. Some entities that are not even brokers are arranging technology platforms for insurance. So why can’t brokers also be involved in doing so because we have an added advantage over them. They don’t know anything about insurance.
What are the other developments to expect?
Also you are going to see changes that you might not envisage because people love creativity. If you look back 15 or 20 years ago, you will find out that the market was playing a bit different especially with the advent of technology. So moving forward, we have to be prepared for the unknown and the organisations must be light on their feet. I also anticipate that there’s going to be the issue of regulation. Regulation is going to come and it is going to surprise us more and more because it is even trying to catch up with what is happening in the world. Presently, there is no regulation for doing internet insurance broking. But it will soon come out, otherwise we will have a space where people will do anything they like. So as things change, we are going to be seeing regulations role change as well. I believe that the future is extremely bright for brokers but there’s going to be effort that needs to be made in terms of creativity to be able to be part of the newly created business or those that will be created in the years to come.
How do you intend to re-direct your members to begin to take the retail business more seriously?
At the national insurance conference this year, the speaker, Mr. Tony Elumelu, told us that capital goes to where it is welcomed. It’s very instructive and you can see it in many areas. If there is money in a particular area and people can see it, people will move into that business. If brokers are not moving into retail, its because they are not seeing money in it. Some of them are trying and burning their fingers. They are running around spending money to employ agents and they are not getting enough money to be able to pay their expenses. So the real issue you are going to find is that if you have a medium that makes money, you’ll see people spend their time going there. But we haven’t even seen that. Even insurers have still not shown money coming out of retail. Many of them have tried; some of them have also burnt their fingers and stepped back a bit. Some of the top five insurance companies have said they are not going to go that way no matter what anybody says. These are companies that have money to move in that direction. I think the real issue is creativity and innovation and I strongly believe that technology is going to be what will open one of the doors to that area. If you look at the success stories in Kenya or other countries, you will see technology playing a significant role. It is true that the regulator is looking for ways to deepen the industry and it’s not just looking for a way out on the broking side but the entire industry. The regulator is looking at what can loss adjusters, insurers and brokers do to help that mission. I think it is their major mandate as NAICOM to try to do that. What we want to do is to work hand in hand with the regulator to be able to see how the regulator can be a facilitator or a catalyst for this business to happen. To be able to show people where it makes sense in terms of making more money. No entity, whether insurance company or broker is going to move into a business just because they want to deepen insurance penetration in Nigeria. The business must make financial sense and that’s why we need to get a model that works and I think putting our heads together, some of those things will happen.
What are the challenges brokers are facing?
Brokers are not immune to the general problems in Nigeria- political, economic and the likes. More recently, the economic challenges that we had as a country has been a blessing. Sometimes if we don’t have the challenges or if your challenges are not too significant and abrupt, it is a tendency that does not breed creativity. For example, we have always known that we should be concentrating on agriculture but because of the challenges in the past few years that caused a change, people now say let’s look at agriculture better. The price of oil collapsed and everybody is now concentrating to look at things that have always been there. So it occurred to me that on the economic side, the challenges that the brokers have faced is diminishing market. Many of our clients have started running into challenges. Some closed down, some were not even able to pay their premiums and many more issues. We started competing for the diminishing of the corporate market and therefore to address that we need to be able to open up on businesses like retail or the alternative market. One of the things that brokers also need to do is product development. We need to key into product development. Insurers need to do it as a core for themselves but if they don’t do it definitely brokers should now wake up. We are only selling insurance products but when they refuse to develop new products then maybe we should develop those products for them. This does not necessarily mean creating a product that has never existed. It may be just putting together something that exists elsewhere but is relevant to the market here. We have people now thinking of cyber risk but we are not looking out selling cyber risk. But cyber risk insurance is there, it exists. Some part of it are inside the normal crime policy and money policies that we have but its about extending it to be able to do more and allay the fear of the market. So product development will do that. Our brokers are also looking at regulation. The cost of regulation, not just directly monetarily but in terms of the amount of time that is taken to be able to meet required and genuine regulation. This is something that we need to address immediately but I also think that technology is something that would assist in that area and it is also something that we would be looking at.
Do you think insurers are doing enough to support market development?
Well I don’t know any example of those kinds of areas. Most of what brokers want to sell are insurance products. It is true that we have some consultancy and risk management services but most of our products are sold through black market and they want their market to grow. What I will do as the new president of the NCRIB is to work together along with our Executive Secretary, the new president of the Chartered Insurance Institute of Nigeria (CIIN), the chairman of the Nigeria Insurers Association (NIA), NIA Director General, NCRIB CEO and the Institute of Loss Adjusters. This time it will be with action in our spirit. We have had discussion in the past but we haven’t had a floor where we are operationally working together to move some of these industry objectives. The tendency is that when you talk and go back, you’ll concentrate on your core objectives of your own group. Sometimes at the expense of the global objective and except you have a group working together continuously looking at that, you will not achieve anything. We have now made a commitment to work closely together and report back to all the bodies that we belong to.
Insurance is evolving with technology. With the introduction of the new distribution channel by NAICOM, would you still say that brokers still have a job or would have a job in the future?
Well, I understand where that thinking is coming from because I can see that there is a creation of a channel by the regulator that seems not to have encouraged the broker participation on that channel. This is one of the issues raised at the national insurance conference in Abuja where we had an open forum with all the parties there including the commissioner for insurance and the brokers were able to respond. At the event, the commissioner made his point when he said that if it is true that this particular channel that has been created has not encouraged brokers on, it is not the only channel. He said we should get up and be creative, noting that we can create retail channel as well. I think that sometimes when you are pushed to the wall, you can decide to go on your own. So when the business begins to roll out of this channel more than even the channels that have been created, it may now be a situation where people begin to think and now come to your channel or continue to buy from both. This is because the insurance penetration is so low that you will find out that you are going to look for various ways of making the connection with the eventual client. So I try not to see things from negative perspective but I look at opportunity that rises from it. One of the things I said is if anyone has ever been at retreat, every time you are trying to do your SWOT analysis, 90 percent of what you see as threat also come up with opportunities. Some people see NAICOM as a threat and they are managing it as a threat. If you look at it from the other side, you will realise that there is an opportunity. We are going to build a good relationship with the regulator. Some people are saying this is difficult. I don’t agree because if you don’t understand what NAICOM wants to achieve, you may not be fully appreciative of the way they are going about their goals. But if you understand the way they want to go and alien with it, you will find them even aliening with you more because you are the one that is even getting them to their goal post better than they may be thinking they want to get on their own.
Some industry observers have expressed worry on the issue of rate cutting. How are you going to help reduce or eliminate the menace?
It came up at insurance forum at Abeokuta where we were discussing and we were actually challenged by the paper presenter who wasn’t an insurance person a technology person. He just couldn’t understand some of the things we were doing. Let it be clear which is part of one of the things the presenter said, it is first of all not the regulator’s job to manage rate. It is the opposite of their responsibility for a regulator to be looking at managing rate up. Their responsibility is to bring rate to the lowest possible position. Other regulators are doing it. For instance, telecom regulators are trying to make insurance telephoning cheaper. There is nothing like Glo’s rate is cheaper and they want to punish Glo. Their concern is that If Glo can do it cheaper why not MTN? This is what they do and that is the job of a regulator. It is not to protect the pricing of the large fat cat enterprises but to ensure that the insuring public gets value for money. So on the qualitative side, NAICOM has right to ensure that companies are solvent and are doing the right thing as well as ensure that they pay claims. If any company likes, it can sell insurance at zero premium but it must pay all claims at a point in time. Going back to the issues as you have presented it, in my own opinion, it is very rare for you to find anything called rate cutting. Meanwhile, you have to get the definitions of rate cutting, assuming that there is a specific rate you shouldn’t go below which has been signed off like a bible by the industry regulator. So the bible has come from heaven, this is the rate and anyone that goes below it is has engaged in rate cutting. But when there is no such bible or when there is no such rate, what can be done? The question also is, have you ever heard or seen any individual accused and punished for rate cutting? Why it can’t happen is because it is an emotional matter. it is not looking at something that is really cogent and until we now go back to our statistics and ensure that we can find out what appropriate rating is supposed to be, and advertise it, people will start moving towards the rate. This is because you have made them know what the scientific rate is supposed to be then us being to move as close as possible to it because if they go below that it will be a problem. So what we said at the conference is that, the same group of people are going to meet. The people are the new Director General of the Nigeria Insurers Association (NIA), Chairman of NIA , ILAN President and I as the new NCRIB President, NCRIB Executive Secretary. We are going to look at the issues properly and then come up with solutions to them. I believe where it is going to end up is for us to understand what rating is supposed to be and move into trying to make people know what it is. I studied Actuarial Science in school and I thought I was coming to the industry to crack the numbers so that we can tell people exactly what the pricing is. During my youth service year, I went to various schools as part of my primary assignment to tell them about our vocation and what subject they need to choose to be able to study like insurance etc.
Insurance industry has witnessed significant reforms geared towards improving customer services to enhance the image of the industry. What is your assessment of the reforms so far?
If you take 2006-2007 as a base year, that was the time when things started happening, it was a good move by the powers that be at the NAICOM. It was always very difficult when claims are made, we find ways to avoid paying such claims without saying we would not pay. We had recapitalisation of the insurance companies and the entities became stronger. They were able to invest in their work and processes. They hired qualified staff and management to drive the company. We no longer have this bad stigma called small print in the industry. You cannot find any insurance company that would not respond positively to claims payment. It is no longer thug of war, it is getting better. Heavy claims that would not have been paid are now being paid without delay. You remember the Nigerian Bottling Company policy worth billions of naira, the industry rose up to their responsibilities and paid the claims. The market has changed significantly because of the recapitalisation that took place in the industry. In terms of the recapitalisation, the commission was the driver of the process, they did it well and in the end, all the insurance companies that wanted to remain in business either funded it or form partnership and merged. There are quite a few of them that pulled their resources together and it was good for the industry. However, organisations should not be dictated to by the regulator on capitalisation, the practitioners and the company themselves know the type of risks they write and the funds that are required. Don’t forget they also have additional capacity, by way of reinsurance. When you insure and reinsure you are more or less buying additional capital from the reinsurers to add to the capital that you have on ground so that you are able to meet your claims obligations to the customer. If you know the risks you are writing, you should be able to know whether the capital that is available to you matched the risk, if that is the case you know how to seek for additional capital either by way of rights issues or any other form of raising capital. It should not be imposed by regulatory fiat, it should be that those running the business should be able to determine the level of capitalisation needed to enable them drive the process and market penetration.
