Friday, March 22, 2019 / 09:12AM / By Ekerete Ola Gam-Ikon* MNIM, CPP / Header Image Credit: Nigerian Pilot News
Insurance cares about numbers; indeed it is a business of numbers. President Muhammadu Buhari, going by the results of the Presidential Election has the numbers the insurance industry needs and cares about, however, is there a connection between the President and the insurance industry in Nigeria?
Yes, the President is aware of insurance and understands the value of insurance, so should his administration. It is known to those who knew President Buhari's positive disposition towards insurance since the 70s that he remains a staunch believer in insurance. Especially so, he also understands the impact of good insurance on the lives of the people including the active poor whose votes accounted for his re-election. Can he deliver those 15m plus voters to the insurance industry in Nigeria? If PMB can do this, he will launch the emergence of what I call Buharinsurance!
Insurance and PMB's first 4 years
In some of his speeches within his first four years, the President had mentioned "insurance" "insured" and "cover", some familiar words in an insurance glossary, and given hope that his administration would be more committed to insurance than previous ones.
Unfortunately, a lot that would have been achieved in the insurance industry suffered unprecedented setbacks at the National Insurance Commission, the point of connection between the administration and insurance, to the extent that they wobbled into this year without a clear indication of the redemptive measures to get back on track.
Faced with the challenges of curtailing the indiscipline amongst operators and, at the same time, supervising the implementation of multiple regulations and guidelines (risk-based supervision, tier-based minimum capital, IFRS 9), the administration seems overwhelmed and lacking in capacity to effectively address the issues. Recognizing that there were inherited challenges like amendments of the Insurance Act 2003 and NAICOM Act 1997, eradication of fake insurance operators, enforcement of compliance with compulsory insurance laws and strengthening operations of insurance to deepen penetration and boost the contribution of insurance to our Gross Domestic Product, the administration had its job cut for it as per insurance.
With experiences, exposures and endeavours at the leadership level at NAICOM, one would say the administration had what was needed to develop, pursue and deliver a transformational effect on the insurance industry in Nigeria.
However, saddled with multiple unrests led by union leaders, heightened customers' complaints on claims and avoidable takeover of the management of defaulting and weak insurers to address operational misconducts, the administration has been more focused on repairing the damages in the market than developing it.
As operators followed news of the huge infrastructure projects the administration was embarking upon in roads, railway, security, health and power, there seemed not to be any connection between the administration and the insurance industry in Nigeria. Even foreign direct investments that the administration touted did not crystallize to significant businesses to improve the overall results of the insurance sub-sector.
The celebrated Social Investment Programme of the administration also went without much insurance content despite the fact that the sustainability of such laudable programme could only be secured by insurance.
Worse still, the reports of the performance of quoted insurance companies at the stock exchange during this period have been dismal and appalling. Little wonder, shareholders kicked when the administration attempted to embark on further recapitalization.
Can Buharinsurance happen this 2nd Term?
IF President Buhari is allowed, based on his personal positive disposition to insurance, to pronounce the value that insurance holds for his followers and Nigerians in general, we will have an outstanding score in insurance inclusion, a critical aspect of the larger financial inclusion strategy.
Specifically, the administration should adopt a twin challenge of restructuring the insurance industry in Nigeria starting from NAICOM, and pursuing to achieve the N1trn Gross Written Premium target by 2025 (Not 2020 please) by considering the following:
1. Restructuring NAICOM to be more stakeholder-friendly and be seen to connect with the vision and philosophy of the administration.
Awareness, enlightenment and education of the insuring public entities cannot be done by operators that have lost the trust and confidence of policyholders (customers) rather NAICOM stands yet in a stronger position to take the messages across the country.
At fora and discussions, participants insist that the administration (NAICOM) should take full responsibility and lead the engagement of the 99% of Nigerians without insurance!
To do this effectively, President Muhammadu Buhari's administration needs to flip out the Market Development and Restructuring Initiative (MDRI) from NAICOM to run as a time-sensitive program. MDRI will have the responsibility to drive insurance advocacy, enlightenment and education, market development and policyholders' experience management.
MDRI will work with the voice of President Muhammadu Buhari and the face of Vice President Yemi Osinbajo. For example, when the administration is responding to the news of collapsed buildings, vandalization of our national assets and attacks on our citizens, insurance should have a prime mention so that citizens can be engaged towards living safer and the society will have less stress even as the insurance industry will perform better.
2. Democratize Insurance in Nigeria
Making insurance accessible, available, affordable and accountable to the larger population of Nigerians can be a mission to accomplish for this administration and a legacy Nigerians will live with happily hereafter.
If we considered to say "Insurance of the people for the people by the people" as the cry towards engaging our wider population to have that sense of wealth protection, we will take certain actions to realize it.
First, the risk managers in Nigeria will be introduced into the mainstream of policy making and implementation across governance structure.
Governments have had to deal with and are increasingly dealing with risks of diverse nature in Nigeria without risk managers because we have simply divided our risks into only security and financial, unmindful of the impact of weak enforcement on our overall system. The role of risk managers have been taken for granted for too long and any effort to democratize insurance should involve professional risk managers not just insurance professionals.
Secondly, as we have recognized, this administration needs to strengthen its capacity to effectively manage the insurance needs of our citizens and maintain standards that match best practice in the way insurance companies operate globally. NAICOM needs to take a brutal self-appraisal and admit that capital base of N2b for Life and N3b for General insurance companies in Nigeria never existed, which explains why insurance companies are struggling and NAICOM is pushing for increase in capital base.
The capital base for insurance companies in Nigeria is the highest in Africa as recently reported by The Nation newspaper. So, if all Nigerian insurance companies had the minimum required and applied them in the critical areas of technical expertise, technology and market development, the insurance industry in Nigeria would be higher in insurance penetration than other countries currently ahead of us.
Engaging the services of highly experienced "retired but not tired" insurance professionals and risk managers as Consultants by NAICOM is a sure way to address the challenge of capacity especially when system automation is yet to happen. Implementation of Risk-Based Supervision (RBS) can only be effective when the IT infrastructure of NAICOM is in place and reasonable number of actuaries and re-insurers are working in key positions at NAICOM. This will no doubt allow C-level officers in insurance companies who shuttle between Lagos and Abuja to answer NAICOM's queries rather use their time analysing market development strategies and making customers happy.
3. Making Insurance Work (MIW) for the Development of More Nigerian Entrepreneurs
As commendable as the determination of the Buhari administration is to promote the non-oil sector in Nigeria into the future, poor management of the risks we live with would not allow us achieve success of any sustainable nature.
Let us say we are all now in agreement with the fact that we are challenged by the way these risks are managed, a fundamental problem is that risks are no longer assessed, rated and priced "by the book"! This much NAICOM has admitted but still trying to address; and now, it would seem the industry's overall result for 2018 might not be better than that of 2017. This is because some transactions were either not renewed or the rates reduced to enable premium payment, and government accounts have been found in these classifications.
President Buhari must therefore compel NAICOM to produce and publish Underwriting Guidelines submitted by insurers especially the Mortality Table which is needed to appropriately rate Group Life businesses that are made compulsory by the Pension Reforms (Amendment) Act for all companies with at least three (3) employees.
Enterprises run by young Nigerians mostly fall into this category and require properly rated Group Life policies, not only to fulfill the requirements for participation in government contracts but also, possibly as collateral to earn access to credit, finance and markets.
This administration may be well advised to give more thoughts to how it can work with the insurance industry to provide entrepreneurs with the collateral that would be acceptable to banks rather than seek to establish that bank for entrepreneurs, which will still be licensed by our collateral-oriented Central Bank of Nigeria.
I have made this suggestion mindful of the past experience when banks accepted individual life policies as collateral for loans until insurance companies started failing to honour their claims. If it is only the policies of the five leading insurance companies in Nigeria that are acceptable to banks as collateral for our entrepreneurs, Buharinsurance would have taken position towards the democratisation of insurance in Nigeria. It can work. We can make it work.
It is just unthinkable to make insurance work without underwriting guidelines of licensed companies. Just having it should not be enough. When an experienced underwriter has applied his or her experience and the rate changes, such should be recorded to ensure an improved document is produced by year end. In some other sectors, that document is the Standard Operating Procedure.
Quite a number of people especially in government (whether in previous administrations or this current one), perceive insurance and risk management as something meant for a certain class of people - elites, professionals and consultants.
It amazes me that it is only when insurance is presented as an opportunity to make extra income, that you are welcomed to discuss it!
Unfortunately, we are living in a world that has become increasingly risky and we can no longer ignore the solution insurance provides, notwithstanding how bad it is currently served, and the few claims left unpaid.
If President Buhari would see his second term as the opportunity to leave legacies for the unborn generation of Nigerians, insurance may be the way that opens up to deliver them.
With the numbers secured by insurance, our wealth as a nation of 198m people can be sustained.
What we take for granted reveals our inner strength.
With insurance provided for our infrastructure in the event of damage in future, we are assured that our investment will not be in vain; without insurance, we remain in this cycle that comes around after every 20 years leaving us economically drained.
Buharinsurance is the change the insurance industry in Nigeria needs!
About The Author
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 firstname.lastname@example.org
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