According to Olusegun Omosehin, the chief executive officer of the National Insurance Commission (NAICOM), a large number of Nigerians are yet to take out insurance as a means of financial protection against financial losses in the event of an accident or other disaster. He shares his insight on Channels Television’s News Night programme.
Enjoy the excerpts:
If you look at the landscape, how would you describe the Nigerian Insurance landscape?
There are some teething issues in the insurance industry, but the potential is there. But let me emphasise the potential. First, it’s an industry that is growing at double digits and there are significant opportunities in micro-insurance. For example, there’s high demand for low-end products that address the needs of individuals and even small businesses. There’s potential for growth for takaful insurance for example. Given the large Muslim population of Nigeria, Takayful is a product of faith. So, people tend to look for non-interest insurance products.
Due to the risk that has been brought on by technology adoption across the entire value chain of payments, banking, and financial services in general, cyber insurance may grow as a result. In a nutshell, I’ll say that the insurance landscape has great potential but also faces some of the challenges that confront us.
When the Central Bank of Nigeria (CBN) discusses interest rates, we are used to seeing double digits. What are the double digits in insurance?
It’s great when we talk about growth. Let’s break down this: when economists speak, they will say that while the country’s gross domestic product or national output has increased by about 3.5%, which is single digits, but when it has a sector that is growing at about 20% annually, that is significant. We are even growing more successfully than the economy itself, which is encouraging, and that is what I meant when I said our economy was expanding at a double-digit rate. Because the reason is simple: Nigeria’s insurance penetration is still very low, we are hoping this trend will continue for a while.
What’s the progress on insurance penetration in Nigeria?
About 1% of the country’s population is currently insured by insurance. Nigeria has over 200 million people. The insurance regulator’s long-term objective is to determine how to increase this rate to about 5% in ten years, and a lot of reforms and initiatives have been put together to accomplish this. We still have a situation where not very many people in Nigeria are adopting insurance as a risk management strategy because there isn’t much of the population adopting it as a culture for managing our risks. Instead, what you see is a situation where, perhaps, due to our socio-cultural beliefs, a social system is resembling itself.
For example, I’m sure you belong to various groups and associations, maybe an old student association, and what have you. You discover that whenever something happens, the group members are asked to contribute because that is our way of life. In some ways, you are donating $50,000, everyone makes it happen, and you provide financial support to the recipient, but insurance should be doing that.
What they (Nigerians) need to do at the beginning of the year is simply combine those resources into a pool, an insurance pool, and that will not be up to that. If the N50, 000 instances happen like 10 times in a year, you contribute 10 times, but for insurance, you only make that contribution once a year.
So these products exist?
Although it exists, many Nigerians are unaware of the value of insurance as a form of financial security. So, it’s a major problem and how are we dealing with this? We are embarking on mass education, public awareness, enlightenment campaigns and what have you. So, it’s a whole bulk of the work that needs to be done.
We’ve commenced a lot of this and it’s never enough, at least for now. In addition, I want to make sure that this interaction will help educate Nigerians about the advantages of insurance and how to make the most of its advantages, especially with the high inflation rate. So, you shouldn’t just be dipping money in your pocket, money that is not even there at every point in time.
Looking at the 1% insurance penetration in Nigeria, are the business community into insurance?
When I mentioned that Nigeria had a penetration rate of about 1%, the penetration rate was roughly 7%, which is roughly the global average, which is about 7%. So, we have some gaps to cover but interestingly the sector that is benefiting from insurance currently is the corporate segment of our society — all the big businesses, all the major multinationals: oil and gas, aviation, manufacturing, the major ones, they are taking up insurance, but what is the percentage of that compared to the total population?
So, when we are talking about penetration, we’re looking at the percentage relative to the total population. Relative to the total population, the majority of individuals are not taking up insurance. You can support that with a number of arguments. Some people choose to enroll in insurance as a result of societal factors. Some are brought on by concerns about public trust. The regulator is the National Insurance Commission, which is the government’s agency in charge of regulating, supervising, and promoting the sector’s development.
Consumer protection is our second priority, second only. We work in the insurance industry to protect consumers, so that when they have issues, they can turn to us because we are their voice. Our last line of work is to advise the government on insurance issues and make sure all of our crucial national assets are adequately protected.
You did a good job of separating those three parts, I appreciate it. Let me start with the insurance companies themselves. You are supposed to supervise them. How is that going?
It’s going pretty well. You are aware that insurance companies will be licensed and registered by the commission, and that they are organized by focus or line of business. We receive periodic returns from these registered companies, as well as regular monitoring of how they run their business to ensure the sector’s stability.
We have what we call the prudential requirements, which are requirements for determining a person’s financial status at various points in time and setting up specific regulatory requirements. In essence, our job is to maintain the stability of the insurance industry within that larger portion of the financial services industry.
So, let me move to the second part, the consumers themselves.
That’s the greater part of our work. The complaints bureau is a branch of the commission that handles complaints and dissatisfaction from the public and communicates with the operators. Therefore, these cases will be decided by an adjudication process, and I frequently inform you that if complaints are received within 24 hours, they will be resolved. Have there ever been any gaps? Yes, but those are things we are working on very hard to get around some of these issues right away.
I’m pleased that there is a process of reform taking place, some of which go beyond what you might initially think. Some of the issues even have to do with the regulatory and legal frameworks in place. The Senate has passed the 2024 Insurance Reform Bill, and it is currently awaiting approval from the House of Representatives. We’re optimistic that once the President approves this bill, the insurance industry will have a more stable legal and regulatory framework that will enable the regulator to take decisive actions when necessary, as well as give the operators leeway and the proper environment to operate.
And of course, the minimum capital requirement, which you can find in the new law, is one of the most important factors that has significantly increased the capital of insurance institutions, and that is to comfort the Nigerian people by allowing them to take their risk because we assume the risk from them and then let them go and take those risks.
I can tell you that we are there to support and protect the Nigerian people in the areas of claims management and ensuring that the operators fulfill their promises.
There’s a whole lot of reforms going on now but what will make it evident, and people can see, the Nigerian public, will be the passage of that bill. It will greatly aid in getting that information out there.
Source: Channels TV
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