09 December 2014, Abuja – The Coordinating Minster for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, on Monday said the federal government was committed to growing the Gross Written Premiums (GWP) in the insurance sector to N1trillion from the current N300 billion within the next three years, with a further objective to increase it to N5 trillion within the next decade.
Altogether, she said the insurance sub-sector is expected to generate $30 billion in gross premiums in the next ten years.
She added that ongoing reforms would ensure that about 100,000 people would be employed in the insurance sector compared to only about 30,000 people currently.
Speaking in Abuja at the opening of the 2014 National Insurance Summit themed: “Transforming the Nigerian Insurance Sector: A Three Year Agenda,” which was organised by the National Insurance Commission (NAICOM), the minister said government was keen on re-invigorating the insurance sector including other strategic sectors with high potentials for growth and large job creation.
She said: “Unleashing the latent energies of the insurance industry to create more jobs and boost economic development is one of our strategic responses to close the gap created by the economic challenges we are confronting at the moment.”
Citing the huge progress so far recorded in banking and pension sectors of the economy in the past decade, the minister said the insurance sector could even be better if effectively harnessed.
Okonjo-Iweala also said going forward, government would give “more teeth” to NAICOM to strengthen its enforcement mechanism for compulsory insurance which could further form a basis for accessing certain benefits including registration and renewal of documents as well as mortgage facilities.
She said as a way of boosting confidence in the sector, efforts would be made to ensure improvement in payment of claims which currently stood at only 25 per cent against 90 per cent in the United Kingdom.
She added that going forward “very fundamental changes” would occur in the insurance sector.
In an interview with journalists, the minister also foreclosed speculations that the federal government could order a reduction or increase in the pump price of petrol to reflect the recent slide in the global crude oil price.
Rather, she said government would leave the prices to take their course, noting that the PPPRA had already started documenting the landing costs of fuel which had been on the drop.
Meanwhile, the minister added that though the federal government was currently pursuing policies that would stabilise the economy without hurting Nigerians as a result of the current oil slide, government would in the short term sustain payment of salaries to workers while looking forward to a more efficient approach that could mean streamlining ministries, departments and agencies of government (MDAs) with duplicated functions.
However, she noted that wherever a cut was necessary, efforts would be made to protect the investments concerned stressing that education as well as the health sector would enjoy protection from the proposed measures.
Quoting a late US President, she said:”The only thing we have to fear is fear itself.”
According to her, “Many of us, private companies and households are concerned about how the current economic challenges will affect them. That is natural and legitimate. But we should avoid the kind of fear that will paralyse us or make us do the wrong things out of fear and alarm.
“Government is open to constructive criticism and ideas because we need to work together as a country to tackle these present challenges. But we should not let the merchants of fear, those who want to politicise and make political capital by distorting facts about the economy in order to sow hopelessness and fear succeed.
“We have challenges but we also have strengths – a diversifying economy, increasing non-oil revenues from tax, a growing private sector and a mix of the right policies to help the economy grow sustainably. We also have a growing number of goods and products produced in this country so we are not 100 per cent import dependent. These are strengths that we can fall back on to help us in this challenging times.”
She said before the current oil slide, government had embarked on diversification of the economy, reducing its import bill by N168 billion.
She also said government would not give in to suggestion to print more money at the moment in order not to encourage inflation.
She said government would not resort to borrowing in order to address the current challenge but would nevertheless borrow judiciously while considering its chances of paying back.
The minister said: “Moreover, for Nigeria, when you look at assets in our overall financial system, insurance also accounts for only 3 per cent of total assets, compared to 12 per cent from pension assets and 79 per cent from banking assets.
“This is different from other emerging markets such as Brazil and Mexico, where insurance assets account for about 6 per cent of total financial assets; and for India where insurance contributes about 14 per cent of total financial assets.”
She said: “If we are to harness the potential of this industry, then we need to collectively address several challenges. We all know the challenges faced in the industry, such as the lack of consumer trust, a fragmented industry with some weak and insolvent players, low enforcement of compulsory insurance policies, lack of professionalism by some agents and brokers in the industry, and a general shortage of skilled professionals in the entire industry.”
She continued: “To develop the potential of the industry, we will need to work together to address several challenges. Clearly, the federal government has an important role to play in this sector. We need to get better at enforcing compliance for some compulsory classes of insurance such as for motor vehicle insurance and group life insurance.
“We also need to clarify various regulations, for example on bancassurance and the use of corporate agents. And we need to work on strengthening the supervisory powers of NAICOM. But we cannot develop this sector alone. All of us stakeholders will all need to work together to realize the potential of this industry.”
Also speaking at the occasion, Commissioner for Insurance/Chief Executive, NAICOM, Mr. Fola Daniel, identified lack of awareness as a major limitation to the growth of the insurance sector in the country.
He said going forward, there would be an intensive grassroots awareness campaign to educate the masses of the benefits of insurance as well as disabuse general misconceptions.
He also said henceforth, efforts would be made to simplify most of the insurance “jargons” in order to explain what an insurance cover does or does not.
Daniel also said policies would ensure that people can return a policy if it does not suit them and get premiums back.
He said the summit marked a high point of the expression by government in its recognition of the value of insurance to the people.
According to him, the insurance mechanisms reduce the capital needed by firms to operate, increase investments, foster entrepreneurship by reducing uncertainty and expand available risk management options.
“It also offers social protection alongside the state and reduce pressure on public sector finance,” he added.
He also said complains bordering on the over regulation or under regulation of the industry were untrue as the regulatory body had often thrived to entrench a sound and safe insurance companies and an insurance industry that addresses major national challenges such as financial protection, unemployment and relatively low level of foreign investment among others.
– This Day