Monday, January 13, 2020 /
08.27 AM / By Ekerete Olawoye Gam-Ikon / Header Image Credit: blog.constructaquote.com
As the decade unfolds and we pursue
emerging opportunities either as robots or humans, we need to engage clear and
unambiguous structures coupled with acceptable behaviours that embrace
disruptions.
The insurance sub-sector especially in
Nigeria is one of the least understood businesses (profession, if you like)
largely because of its complex structure and rather traditional behaviour of
its representation.
The Structure (as is)
What can best be called the Insurance
Architecture in Nigeria, historically, comprises:
1. General, Life, Takaful and Microinsurance regulated
and supervised the National Insurance Commission (NAICOM);
2. Health Insurance supervised and regulated by National
Health Insurance Scheme (NHIS);
3. Employees' Benefits supervised and managed by National
Social Insurance Trust Fund (NSITF); and
4. Pensions supervised and regulated by National Pensions
Commission (PENCOM).
However, what most Nigerians know about
insurance is Motor Insurance, probably because it has the oldest law and
longest practice, hence NAICOM and its licensed operators (insurance companies,
brokers, loss adjusters, agents and reinsurers) readily come into the
discussions.
Also, the aspect of the insurance
architecture under the management of NAICOM currently has:
1. Insurance companies (General, Life, Reinsurance) which
operate with NATIONAL non-renewable licences;
2. Insurance intermediaries (Brokers and Agents) that
operate with NATIONAL licences renewable every two years;
3. Takaful operators (General and Family) that have
NATIONAL non-renewable licenses;
4. Microinsurance companies (General, Life or both) that
operate with Unit, State or National non-renewable licenses similar to what
obtains for microfinance banks.
The above expression of the existing
insurance architecture in Nigeria without a common supervisory and regulatory
designation creates the avoidable frictions between and amongst the regulators
as we have seen recently.
This absence of a common coordinating
point for INSURANCE is even more desirable for the insuring public that needs
continuous enlightenment and education on insurance towards improved
experiences.
From the Customer's Perspective
Depending on the awareness level of the
customer, an attempt to search, find, compare and decide on the insurances you
should take can be a herculean task in Nigeria. "Why do I have to go
through this to get personal insurance?" This is a common question
customer's ask daily, and the answer(s) remain elusive, largely because they
see discordant pictures.
In Nigeria, when you need basic personal
and business insurances in respect of life, health, motor and pensions, you are
confronted with multiple unconnected sales points because the operators are
licensed by different regulators.
One customer with a similar need
approached by multilateral providers with different guidelines!
Could we not have a common regulatory and
operational position that eases the process for a wonderful experience for the
customer of insurance?
Whilst this may sound like a great
opportunity for a new business especially in this digital age, the current
regulatory environment would make it very challenging, methink.
For example, it will offer the person
getting motor insurance for his/her vehicle the opportunity to get health or
accident insurance.
Recall that insurance is a BUSINESS of
NUMBERS, so the volume that will come with this approach will definitely
justify lower pricing, discounts and incentives that operators are giving now.
With a better engagement of customers
through a functional window into an improved insurance architectural structure,
the likelihood of deepening our insurance penetration will be higher and the
benefits of insurance will be better appreciated by the public.
This single window approach will likely
eliminate another reason why people do not seek insurance and continue to live
with risks that diminishes our human value.
Does it work elsewhere?
In other climes, where insurance works
better and penetration is higher, there are central authorities that supervise
and regulate all arms of insurance including pensions.
Increasingly, in Asia, where indicators
show that the economies are growing, insurance plays a huge role. Some of the
insurance companies in China have become global financial behemoths!
In the Middle East, there are ongoing
efforts by Dubai International Financial Centre to create presence for Lloyd's
of London in collaboration with the insurance industry there.
However, it would seem we are slower at
adopting some of the improvements from the UK insurance industry where we
derived the knowledge and expertise we have today.
Investors are also asking questions
As the insurance sub-sector, as we know it
today, pursues the recapitalization announced by NAICOM, keen investors
including foreign insurance brands have asked questions like:
1.
Why would we acquire a Life licence but have the
health insurance under a different regulation? My
response: Insurance companies can also offer health insurance but the
eyes of the public rest on NHIS.
2.
If Pensions is
making such huge volumes why shouldn't Life, and what do we need to do to make
Life such a funds generator? My
response: Link the sales of Life policies to points of issuance of
Driver's License and other such public requirements.
3.
Is there any
likelihood that the insurance sub-sector will lose another aspect of its
current structure in the near future or be harmonized with another? My response: If the displeasure of
individual policyholders persist, something will give, may be another aspect
will be taken away except NAICOM gets more decisive about insurers that owe
age-long claims.
My responses are suggestive however these
questions, as strategic as they sound, should be the concern of NAICOM and
insurance companies seeking new investors because the trajectory of growth must
be clear.
In the limit, the path for the
transformation of the insurance industry in Nigeria needs to be structurally
realigned to enable the ease of doing business with customers, investors and
other stakeholders.
Are we ready to resolve this through
digitization?
About The Author
Ekerete Olawoye Gam-Ikon, MNIM,
CPP is a management consultant with specialization in Strategy and
Insurance. He can be reached vide telephone on +234-806-648-1111 and
+234-802-585-0344 or by e-mail vide olagamola@gmail.com
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