Why insurance is hard sell in Nigeria

insurance21 December 2014, Lagos – Insurance  business remains a hard sell in Nigeria today. This unpalatable news, according to industry stakeholders, is definitely not music in the ears of insurance companies and allied stakeholders, given the fact that the industry has been in existence in the country close to a century.

Although the desirability of insurance or otherwise has always been a hotly debated issue, a new study does appear to have driven the message home: more Nigerians won’t and don’t intend to take up any form of insurance cover if given the choice.

Outcome of new study

About 86.6 million Nigerians have no form of insurance cover, the Chartered Insurance Institute of Nigeria has said.

The President, CIIN, Mr. Bola Temowo, said this was the outcome of a recent research.

He spoke at the institute’s annual seminar in Benin, Edo State, according to a statement obtained recently.

“Available records indicate that 86.6 million Nigerians have no form of insurance, while 1.3 million adults, representing 1.5 per cent of the entire Nigerian adult population, maintain some category of formal insurance cover,” he said.

More damning verdicts

While the jury is still out contesting the veracity or otherwise of the survey which has shown that the nation is probably recording a recurring decimal in the insurance sub-sector as a result of diminishing patronage, a recent survey by NOIPolls has further indicated that nine out of 10 Nigerians don’t have any form of insurance.

According to the survey, among those that have 63 percent have vehicle/car insurance, 20 percent have life insurance, 17 percent have property insurance, 16 percent have health insurance and 16 percent have fire, burglary and travel insurance.

Also, a 2012 survey by Enhancing Financial Inclusion & Access (EFInA) showed that Nigerians are not insured against the most vulnerable risks: life, health and agriculture. Death and ill-health, the top two risks with an economic impact, are also the most widely experienced according to the body.

The EFInA survey revealed that most Nigerians don’t know where the closest insurance company, broker or agent is located and that users of insurance have the highest level of dissatisfaction with providers of financial services.

Why there is growing apathy for insurance

It is anybody’s guess why there is growing apathy for insurance by Nigerians.

While giving plausible explanations as to why many Nigerians don’t consider acquiring an insurance cover as a priority, Auwalu-Muktari, the Group Executive Director, Royal Exchange Plc, during an interactive session with some journalists in Lagos recently, said a number of factors were responsible for the growing apathy towards insurance.

The major hiccup responsible for the growing apathy for insurance, Muktari said, is the low level of disposable income.

“The only problem we see in the Nigerian market is that per capita income of the people is very low and people tend not to take insurance as a priority against other things related to them,” he said.

He, however, said it was heartening to note that the federal government has made group life insurance compulsory for all employers of labour with a minimum of five employees and there has been a turnaround in the fortunes of that class of the insurance business.

“I believe with the improvement in income regulation and other things, many people will come to take insurance and gradually we will get an increased participation by the insuring public in the country.

“Again, with the awareness campaign being embarked upon by the regulator, the Nigerian Insurers Association and some industry players like Royal Exchange that are trying to improve the insurance awareness and visibility, showcasing the need for individuals to be protected and have life insurance cover for their own benefit and the benefits of members of their family in case of death, I believe in the next five years, there will be a turnaround in the way and manner people take up life insurance in Nigeria.

“With the coming of retail businesses set up by the various underwriters and microinsurance, this awareness will get to the common man at the grassroots and they will embrace insurance as a way of life. Despite the low per capital income, there should be an increase in the rate at which people patronise the insurance industry.”

What NAICOM is doing

To revamp the insurance sector, the National Insurance Commission (NAICOM) had in time past come up with a number of measures, including raising the capital base of insurance companies in line with current economic realities.

Commenting on the different initiatives by the NAICOM, which is the apex body regulating the sector, Mr. Yekeen Adullahi, a broker with Leadway Assurance Plc, said the commission under the headship of Fola Daniel has not done badly thus far.

“NAICOM is currently doing very well. The commission has been coming up with good regulations that are moving the industry forward. All that is required is continuous cooperation among the members of the Nigerian Insurers Association so that we can be united and be able to turnaround the image and fortunes of the insurance industry in Nigeria,” he said.

Besides, NAICOM, The Nation learnt, also introduced the Market Development and Restructuring Initiative (MDRI), retail insurance, microinsurance, compulsory insurance and others. Corroborating this, Muktari said: “There are lots of things being done to make the people aware of what they stand to gain by taking insurance. It is not something that will automatically impact on the industry immediately, but, over time, the impacts will be felt.

“The MDRI revolution has been on ground for about three years now, and in the next few years, all these things would have come to pass as people will now have more knowledge about insurance. The industry is also trying to create more insurance awareness through advert placement and by sending people to the grassroots.”

In line with the Insurance Act 2003, NAICOM introduced the “no premium, no cover”, all aimed at not just improvement in the industry but to achieve integrity and quality of income generated by the industry.

Other institutional efforts to expand insurance reach

A number of interventions have been put in place to help raise awareness about insurance in recent times, one of which are the pet project of Miss. Funmilola Ogunsola, winner of the Chartered Insurance Institute of Nigeria (CIIN) Beauty Pageant for 2014/2015.

Speaking during the grand finale of her pet project tagged: ‘Teens for insurance’, the beauty queen highlighted the importance of insurance, lamenting that less than 1% of people in the country is being insured. Ogunsola explained that the project was geared towards sensitising secondary school students across the country on the need to be insured.

She further explained that an online essay competition, titled: ‘The Significant role of insurance to the development of an economy’, was organised to create awareness for insurance. “We don’t have up to 1% insurance penetration in Nigeria and this project was out of the desire to reach young people,” she said. “I must say that I feel very glad with the results recorded. The entries for the essay competition were mind-blowing, so much that it was really difficult for my team to decide an eventual winner.

“I really hope that parents embrace the benefits of insurance and secure these kids’ future as soon as they can.”

Seun Banwo, a member of the CIIN, who also spoke at the event, said the initiative was aimed at making youths realise the importance of insurance.

He also commended the federal government for approving insurance as a subject at the secondary school level. “What Funmi has done with this initiative is to attract the younger generation to insurance, because insurance has a very low penetration in Nigeria,” he said.

“Thankfully, the federal government has just approved that insurance be a subject to be taken during the senior school exams and to be taught at senior secondary school level.

“We hope that in the next few years, insurance would have moved up from the 1% awareness rate it has presently, to a much higher level.”

Light at the end of the tunnel

Temowo is optimistic that judging by the current record of Nigeria’s insuring population; such would receive a boost and improve the industry’s profile in global ranking.

According to him, the federal government also envisions a fast growing insurance industry that will contribute substantially to making the nation’s economy one of the 20 largest markets in the world by the year 2020.

Temowo said there was a need to improve the industry’s marketing machinery and develop an action plan for actualising the financial inclusion strategy in the delivery of insurance products and services to the critical mass, comprising the low income earners.

He said the CIIN would focus on the maximisation of existing and emerging channels of distribution to deepen insurance penetration.

“The significance of insurance in the life of our nation cannot be over emphasised. These trying times are fraught with several risk factors for both individuals and corporate bodies. As risk managers, it behooves us to increase the tempo of our campaigns for insurance awareness in order to get more Nigerians to embrace insurance with minimal compulsion,” he said.

He said the CIIN had continued to explore all platforms of propagating insurance education and promoting general financial literacy.

“Our training and retraining programmes are being intensified, while creating new channels for capturing the younger generation and ensuring that they embrace insurance consciously as a course of study,” he said.

For this reason, Temowo said the institute sponsored the production of an insurance textbook for secondary schools and had commenced the donation of copies of the book to over 2,000 public secondary schools in the country through the state Ministries of Education.

The institute, he added, also acknowledged the dearth of insurance teachers in schools and had embarked on a train-the-trainer project in order to equip the teachers with the minimal skills required for teaching the subject.

He said this had reinforced the inclusion of insurance as a course of study in secondary schools by the federal government.

Temowo said, “The campaign for insurance awareness has become the collective concern of the entire insurance industry. The Insurance Industry Consultative Council, the body comprising all arms of the industry, has also taken positive steps towards sensitising government agencies on the pivotal role of insurance in nationhood.”

The CIIN boss said the council of the institute had also adopted measures geared towards involving all stakeholders in the campaign.

He said it had recently been appealing to insurance institutions to adopt a secondary or tertiary institution close to them and support such institutions with their employees as volunteer teachers who would take time off their official schedule to teach insurance courses in the schools.


Ibrahim Apekhade, The Nation

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