By Henry Uche, [email protected]    


Although
many insurance players would insist that the sector literally sailed in the tempest for the greater part of President Bola Tinubu’s administration, it does not discount the fact that the industry holds enormous potential that can rapidly grow the economy if strategically harnessed.

From a more dispassionate lens, it is an undeniable fact that the scathing economic realities spread across the entire business spectrum and are not confined to the insurance industry alone.

This explains why various stakeholders are calling for deeper collaboration and sincerity of purpose to harvest the inherent economic benefits the insurance sector offers.

The pains

Over the past year, insurance operators have cataloged numerous events and developments that have adversely impacted their businesses. They assert that the period has been characterized by stagnation and negative trends that, if left unchecked, could potentially cripple the sector and sink many businesses.

Commenting on the insurance sector’s journey in the last one year, an expert who pleaded anonymity, said there are no reasons to clink glasses.

He said: “To start with, what has been the contribution of government ministries, departments, and agencies towards gross premium written in the last one year?

“If government agencies are not patronizing the sector under review through insurance of their assets, then the last one year is as good as achieving nothing.

“The only significant thing that has happened in the last one year is the appointment of Mr. Olusegun Ayo Omosehin, as the new Commissioner, while Sunday Thomas takes the exit door. The government claims they are creating wealth, but I ask which wealth are they creating without insurance of those wealth (if any)? It’s the same business as usual, nothing has changed.

“The federal government has not shown any interest to embrace insurance, but sadly, tried to borrow pension funds of senior citizens who have suffered and contributed for the growth of  the country to finance some projects. It’s scary.

“Mr. Sunday Thomas hit N1trillion Gross Premium Income for the industry  before he left, maybe the new Commissioner would talk to his boss (Tinubu ) to tilt towards insurance as we talk about financial inclusion.

“This is paramount because you can’t relegate insurance to the back, as long as the economy is concerned, insurance is the only business that guarantee the sustainability of any wealth” he maintained.

In a telephone interview with the Head of Insurance Department, Lagos State University, Dr. Abass Olufemi, said the sector was stable at the moment but needed to be revved up. According to him, the new NAICOM Chief would have to fast track some of the unmet plans, programs and policies of the immediate past Commissioner of Insurance, Mr. Sunday Thomas.

“I know the sector among others is not doing bad. But due to the obvious economic headwinds, the new NAICOM boss must speed up and fast track whatever plans he has (as I learnt he is meeting stakeholders) to get in their support for the growth and thickening of the sector.

“Whatever he wants to achieve, he should be on the fast lane, as well as fine-tune everything he has for better repositioning. Insurance should be given its due place of honour as it were. “We must head to the right direction as the sector remains indispensable to overall economic development” he stressed.

Additionally, there are grave concerns over the allocation of N9.6 billion for Group Life insurance for government employees as many insisted it was low. It equally created significant confusion and concern within the industry. Insurers questioned whether the amount was intended as the full annual premium or merely a partial payment. This uncertainty disrupted business planning and financial stability.

In 2020, insurers received N15 billion for government workers’ Group Life insurance, and in 2022/2023, the government appropriated N24.7 billion, a 64.7 per cent increase from 2020. However, insurers reported receiving only 50 per cent of the approved premium, attributing the shortfall to the government’s declining revenue and subsequent negotiations to reduce premium payments

Another issue was revenue deductions and the imposition of a 50 per cent revenue deduction on government agencies, including the National Insurance Commission (NAICOM). Many said it hampered the Commission’s ability to cover its operational costs. This policy strained the industry’s regulatory environment and hindered effective oversight.

Inflation was a major spoiler of events. Persistent double-digit inflation, hovering at around 33 per cent on the average, exacerbated the challenges for insurers. The rapid increase in asset replacement costs means that insurers face higher liabilities, as the cost of replacing insured assets significantly rises over short periods.

Fingers were also pointed to regulatory quakes as the non-renewal of former Commissioner for Insurance Mr. Sunday Thomas’s tenure, despite his substantial contributions, created instability and uncertainty within the sector.

Historical delays in premium payments and budget shortfalls, as seen in previous years, continued to plague the sector. These issues impacted the financial health of insurance companies and their ability to meet obligations.

The gains

The appointment of Ayo Omosehin as the new Commissioner for Insurance has infused the sector with fresh hope and optimism. Industry stakeholders are eager to see the potential reforms and enhancements his leadership may bring.

Again, there is a strong expectation that the long-awaited consolidated insurance bill, anticipated since Buhari’s administration, will be signed into law under President Tinubu. This legislation promises significant reforms and modernization for the insurance sector.

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Despite numerous challenges, the insurance sector has shown remarkable resilience. Companies are strategically adjusting to economic volatility by revising risk assessment models and premium calculations to better account for inflationary pressures.

The ongoing dialogue between the government and the insurance industry, particularly regarding budget allocations and premium payments, signifies a collaborative effort to resolve issues. This engagement, though challenging, is a positive step towards establishing more stable and predictable policy frameworks.

Summarily, while President Tinubu’s first year has posed significant challenges to the insurance sector, including budgetary confusion, regulatory strain, and economic volatility, it has also opened opportunities for new leadership, legislative reforms, and strategic resilience. The industry remains hopeful for a more stable and prosperous future amidst these complexities.

Challenges facing insurance marketing

An analysis done by Curacel over the years, selling insurance in Nigeria has remained an arduous endeavor despite significant advancements and changes within the sector. However, embedded insurance holds the potential to overcome these challenges by integrating insurance products with existing services, thereby increasing awareness, accessibility, and trust in the insurance industry. By directly addressing these obstacles, the Nigerian insurance sector can pave the way for sustained growth and development.

Several cultural and socioeconomic factors contribute to the difficulty insurance companies face in connecting with potential customers. Here are some key challenges:

Lack of awareness and understanding

Many Nigerians lack awareness and understanding of insurance products and their benefits. The general population is often unfamiliar with various insurance policies, how they work, and the value they provide. This knowledge gap makes it challenging to convey the importance and relevance of insurance.

Trust and credibility issues

Insurance companies in Nigeria face significant trust and credibility challenges. Many people have encountered difficulties in obtaining insurance claims or perceive insurance companies as untrustworthy. Such negative experiences and perceptions deter potential customers from engaging with insurance providers.

Cultural and religious factors

Cultural and religious beliefs heavily influence attitudes towards insurance in Nigeria. Some individuals view insurance as contradictory to their cultural or religious practices, leading to resistance. Overcoming these barriers requires targeted education and awareness campaigns to address misconceptions and demonstrate insurance compatibility with personal beliefs.

Perception of financial burden

Many Nigerians perceive insurance as an additional financial burden rather than a protective measure. With limited disposable income and numerous financial priorities, insurance is often seen as a luxury rather than a necessity. This perception makes it difficult to persuade individuals to allocate their resources toward insurance premiums.

Access to insurance services and distribution channels in Nigeria remains limited, particularly in rural areas where insurance companies have little presence. This lack of access hampers the ability to sell insurance policies effectively.

Major challenges facing insurance companies in Nigeria

Navigating Nigeria’s complex and constantly changing regulatory environment presents significant challenges for insurance companies. Stricter regulations and compliance requirements impose a heavy administrative burden, impacting operational efficiency and the ability to innovate. Compliance costs divert valuable resources away from core business activities, impeding growth.

Inadequate infrastructure and technology adoption

The Nigerian insurance industry grapples with infrastructure limitations and slow technology adoption. Outdated systems and reliance on manual processes result in inefficiencies, delayed service delivery, and increased operational costs. The lack of robust infrastructure, such as reliable internet connectivity and sophisticated data management systems, exacerbates these challenges, hindering the adoption of advanced technologies like artificial intelligence and data analytics.

High rate of fraud and lack of effective prevention measures

Fraudulent activities, including false claims, policy manipulations, and identity theft, present substantial challenges. These practices lead to financial losses and erode customer trust. Insufficient preventive measures and weak enforcement contribute to the persistence of fraud. Implementing robust risk management systems, enhancing data analysis capabilities, and fostering collaboration with relevant authorities are essential to combating fraud effectively.

Limited product diversity and innovation

The Nigerian insurance market needs more product diversity, which hinders its ability to cater to specific needs and demographics. A lack of product innovation prevents the industry from attracting new customers and expanding its market reach. Traditional insurance products often fail to address emerging risks or evolving consumer needs. Insurers must prioritize developing innovative products covering areas like cyber risks, renewable energy, and microinsurance to adapt to the changing landscape and tap into new market segments.

Conclusion

While the challenges are substantial, the potential for growth in Nigeria’s insurance sector is significant. By addressing issues related to awareness, trust, cultural perceptions, financial burdens, and access, as well as improving regulatory compliance, infrastructure, fraud prevention, and product innovation, the industry can build a more robust and resilient framework. This approach will help insurance companies better serve the Nigerian population, ultimately driving sustained growth and development in the sector.


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