AS the Federal Government explores ways of revamping the economy, one vital area it can harness its potential is the insurance sector, according to experts in the industry.
In separate interviews with The Guardian, the experts posited that as in developed economies, an improved insurance sector could boost the nation’s economy.
But the level of insurance awareness in Nigeria is one of the lowest on the continent. The Nigeria’s insurance sector ranks about 65th in the world and sixth amongst the leading eight insurance markets in Africa – South Africa, Egypt, Morocco, Tunisia, Kenya, Nigeria, Algeria and Mauritius – and contributes about 0.7 per cent to the Gross Domestic Product (GDP) of the economy.
Insurance density in Nigeria (premium per capita) is approximately N1,200 per person, compared to South Africa’s N102,000 and Kenya’s N3,120.
At present, with a population of 168 million in Nigeria, only about five to 10 per cent of those who should be insured are covered by any form of insurance, compared to the situation in most developing and developed countries where up to 90 to 95 per cent of the population are insured in one form or another.
A leader of the insurance sector, Prof. Joe Irukwu, said: “Modern insurance and the economy are so closely interwoven and so dependent on each other that neither can one function efficiently without the other. They are, in effect, inseparable. Just as no modern economy can survive and grow without insurance, no insurance industry anywhere in the modern world can thrive under a weak and badly managed economic environment.”
According to him, although the Nigerian insurance industry is relatively young compared to its counterpart in Europe and America, it has nevertheless played a very useful role over the years in relation to its traditional functions of risk bearing.
He said: “To remain relevant, the industry should be a lot more creative and innovative by introducing policies and programmes that respond to the current needs of the insuring public. .
“The increasing involvement of the banks in the insurance business and the movement towards the harmonisation of the concept of a united, strong and viable financial services industry, should be constructively exploited for the collective and mutual benefit of the insurance sector, the banking industry and all other sectors of the financial services industry.”
Also, the Chairman, ENI Consulting, Tom Ogboi, said: “Various government policies from the military era have completely wiped out the middle class in Nigeria. This is the group that pushes personal insurances – the retail market. The middle class are those who accumulate savings for investment, entrepreneurship and mortgage financing. Government policy has not encouraged the middle class to grow, they are the people who buy insurance.”
In his reaction, the Managing Director/Chief Executive, FBN Life, Mr. Val Ojumah, said that despite the huge population, the majority of the people are poor and not literate. This translates into very low disposable income and lack of awareness. With poor public infrastructure, high unemployment and poor social welfare system, the result is that the majority of the people are hardly able to satisfy their basic needs of food, clothing, housing and education for the children.
With the above scenario, he said, insurance could hardly be a priority. Insurance as a risk management tool, ideally, should provide first level security but under the above situation, coupled with cultural beliefs, insurance is very much at the bottom of the pyramid of needs. This is primarily the major cause of the low insurance penetration.
According to him, other causes of low penetration can be traceable to the supply side. Industry operators have been lagging behind in the global development of the business itself. Companies have been trading with very low capital, which means they can hardly afford very experienced and professionally competent employees to drive innovation, research and development activities, which can create more consumer-friendly products and ensure an efficient and low cost distribution system for the business.
“My thoughts on the way forward is primarily to address the low penetration, including redesigning our manpower development structure to address our areas of greatest needs and ensure the right products for the right people. Our distribution channels also need to be reviewed for cost efficiency,” he said.