4 October 2011, Sweetcrude, Lagos- Mr. Debo Ajayi is the Managing Director & Actuary serving Middle East Africa & South Asia of Milliman Actuaries & Consultants. Ajayi is of the view that the entry of multinational players into the Nigerian insurance market is a positive development which carries with it expectations of a better future. He spoke with Rosemary Onuoha of Sweetcrude.
Growth of the insurance sector
There is no insurance industry that has ever attained a respectable penetration without life insurance being the dominant line of business. Anywhere in the world, if insurance is going to have a meaningful penetration, the life business must be more than the non-life. Wherever you see the reverse the penetration is also low. So in the case of Nigeria, penetration is low and likewise the life insurance result. In South Africa, penetration is very high and life insurance business premium is in multiples of non-life. It is the life business that promotes insurance not the non-life. You cannot have life insurance without Actuaries. The reason life is smaller than non-life is that the core experts that you need to give life are not available. Right now insurance is like an appendage to the Nigeria budget. How can we move from this appendage to a force to be reckoned with by the federal government? We have to build the necessary technical base to make that happen. One wonders if many of the MD’s of Life insurance companies are experts in life insurance. May be they are there mainly because of their management skill not because of their expertise in life business. This has to change and when they change they are going to see life insurance become a major sector of Nigeria economy and that is part of the agenda of TAF Consulting Group. Being an actuary is a global credential. A qualified Actuary can work anywhere in the world. In other professions there are road blocks to face. There are countries with special visas for Actuaries. It is a global borderless credential. This is the story we are going to tell young Nigerians that ‘see how much you can earn, see where you can work, and see what you can do.’ Hopefully, with resource on ground to help train them to achieve that they would buy that story.
Reasons for low insurance penetration.
There are several reasons why the penetration rate in Kenya is in multiples to that of Nigeria. One, in Kenya you have a lot of multinational players. Such trend is beginning to come into Nigeria so we expect the future in Nigeria to be better than the past.
Another reason is the regulatory environment. The regulator in Kenya is more proactive, it engages in industry issues and Insurance Association is very active in promoting insurance and insurance companies. For example Kenya now has a mortality study, while statistics here (Nigeria) is not assembled. There is better statistics in Kenya. The due process may not be perfect but it is there. So the environment in Kenya is far better. The emphasis in retail business is much better in Kenya. The Nigeria market concentrates more on the corporate business. In corporate business there is a lot of stiff competition. In fact, the winner of corporate business is often the loser, may be from under pricing and he would find that out later, and then, the business moves to another insurance company.
For the training that is coming up in Ghana between October 23 and 26, I and another expert who has helped banks and insurance companies for many years are going to talk on product strategy. How do you graduate in your relationship with banks knowing that the banks are not experts in insurance? How do you introduce them to insurance and the type of products to use? And then the same process applies to the banks. How can insurance companies tailor their process to match that of the banks rather than telling the banks what to do? They need to understand the banks and come up with the right solution that fits their situation. There is also the motivational model. How do you motivate them to make sure that the results are acceptable? Banks executives are used to waiting for people to come. How do you give them orientation that fits? The second part of the training is on mobile phone technology, which is the use of mobile phones in the financial services sector. An average Nigerian has two mobile phones. So the mobile phone has become a very common thing, even in the rural areas. How can the insurance industry take advantage of the mobile phones to be able to impact lives even in the rural areas where they may not have branch offices and where it may be too expensive to operate an agency. So, we want to use the experience of Kenya as an example. Experts from Kenya will tell us how they have done it in Kenya. The penetration rate of insurance in Kenya is more than double that of Nigeria. They will also tell us how they use mobile phones in premium collection, paying claims, paying commission. For instance in Kenya when you are starting a journey, through your mobile phone, you can buy travel insurance, you transmit the request and you get your confirmation and you are covered. We want to talk on how to make it happen, the challenges and issues that it poses, the IT infrastructure that is required to support such system and the kind of product you can sell through that facility.
The promoters of the training programme are the West African Insurance Companies Association (WAICA) and TAF Consulting Group. Milliman Actuaries & Consultants is the sponsor of the event. TAF is a UAE based consulting firm that is focused on helping the insurance and financial services sector to develop technical manpower and IT solutions. They are focused on designing financial security strategy that fits the environment where they are required. Milliman is one of the largest actuarial firms in the world with over 54 offices globally. Milliman is also based in Dubai and serves Middle East, Africa and South Asia.
Nigeria motivational model
The motivational model for insurance in Nigeria is not robust enough. It does not actually give the proper incentive to the distributor. Also what may be considered as bribe in Nigeria is actually not bribe in other places. It becomes bribe because it is not stated as part of the compensation on paper. So when you speak of motivational models in the case of bancassurance you want to make sure that you identify the role that you want each bank staff to play right from the front desk person all the way to their Manager. What role do you want them to play and concentrate so that they are all working as a team? When I was with AIG, I actually helped to design model for Citibank, Standard Chartered Bank in the Middle East. Everybody gets compensated and the energy and the motivation and the commitment that it creates become a win-win situation. They also have to believe in the product we are selling. It is not just any product. So your motivation model, product, promises, all have to work together for a pleasant outcome.
Becoming an Actuary
I finished from University of Lagos back in 1985 and by the time I was leaving the country for studies in Canada I already had about six actuarial exams and of course I was the only one with that type of achievement. You would have expected for things to get better and better over the years but unfortunately it is actually going the other way. There are a number of reasons for that and one of which really is insurance industry has not invested enough in actuarial manpower development. Also the environment in Nigeria has not provided enough exposure to these people trying to become Actuaries. Particularly also with the nationalisation of a lot of insurance companies, the Actuarial profession has not been appreciated as they should be. But in terms of the future this is one of the reasons why TAF Consulting Group is coming into West Africa. It is here to develop, train and mentor Actuaries. To help them pass professional exams, give them necessary exposure and to develop the manpower resources that the insurance companies require. TAF Consulting Group is going to be conducting researches, surveys, studies that would enhance professionalism of the insurance industry. I know Nigerians have the intellectual capacity to succeed as Actuaries. In Pakistan where I have employed Actuaries from, many there don’t even have first degree. From A levels they went directly to write and pass professional exams. In fact it is after becoming qualified Actuaries they go back to do in service programme to get their bachelors and their masters. So, can it be done in Nigeria, it can be done. However, we will need the insurance companies to support this type of effort. When TAF Consulting Group comes in for example, it’s going to really require the cooperation of insurance companies in sponsoring students to the programme. We are going to need the regulator. The regulator is actually key to the success of the industry. We are going to need the support of the regulator in sponsoring people to the programme as well. We are going to require the insurance participation whether NIA or CIIN or WAICA. We are going to need them to support this type of initiative. If we can train 50 Actuaries over the next three years, that will be a real boost to the industry. Fortunately the guideline for 2010 by NAICOM requires all life insurance companies to have actuarial department. How many of them actually do right now? I don’t know