Is Insurance a Government-led Private Business in Nigeria?


Tuesday, August 18, 2020 / 05:44 PM  /By Ekerete Ola Gam-Ikon  / Header Image Credit: Economic Times


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Today, it is unlikely that any insurance company in Nigeria will concede that it is owned by the government except a few where the interests of the Federal Government and some States are publicly declared. All insurance companies, irrespective of the ownership, are licensed by the National Insurance Commission (NAICOM), the regulatory body mandated to ensure sound financial management and stability of the insurance industry and protection of policyholders.


Quite interestingly, until the late 90s, some government-owned insurance companies dominated the insurance landscape largely as a result of the monopoly they enjoyed from insuring the assets of governments at the Federal and State levels.


With the privatisation and commercialisation policies of the Federal Government, re/insurance companies like National Insurance Corporation of Nigeria (now NICON) and Nigeria Reinsurance Corporation (Nigeria Re) lost their original statuses and monopolies; at the level of States, the Odua Group owned by Governments of the South West zone relinquished their interests in Great Nigeria Insurance Plc, Enugu State bade goodbye to Universal Insurance Plc and Bauchi/Gombe States decided to hold insignificant stakes in Yankari Insurance Company (now Fin Insurance Company), just to mention a few.


On the other hand, Lagos State retained ownership of Lasaco Assurance Company Limited and Akwa Ibom State kept majority interest in Anchor Insurance Company while much later in 2006/2007, Bayelsa State acquired significant interest in Linkage Assurance Plc. These stakes are still held by these States in the face of the current recapitalization exercise.


Perhaps, it is worth noting that though most of the insurance companies (including the market leaders) are privately owned, they have depended on the insurance of government assets and personnel at Federal and State levels, to survive and thrive, since the monopolies were implicitly removed.


Just imagine the size of insurable interests in the Presidency and  Ministries, Departments and Agencies (MDAs), the National Assembly and Judiciary then consider the opportunities in the multibillion dollar-denominated infrastructural projects of the present and past administrations; does all these not indicate that the private businesses are sustained by the Federal and State Governments?


As you might be saying, the essence of recapitalization and arrival of foreign brands in Nigeria's insurance sector becomes clearer and justified because the capacity and capabilities to handle such size of risks could not be readily available except the Federal Government decided to return as owner. After all, Nigerian Agricultural Insurance Corporation (NAIC) remains a monopoly with respect to all insurance required for government loans to farmers.


Doing More Private Sector Insurance

With so many existing insurance policies and more opportunities available at the Federal and State Governments levels, are we likely to have the current insurers seriously invest in the infrastructure, mostly digital, for serving the individuals' market, commonly referred to as Personal Lines Insurance, though some like to call it Retail Insurance?


It has remained as challenging for the insurance players to diversify their portfolios to personal lines as it had been for Nigeria to shift focus from petroleum as her major source of revenue.


Some of these challenges border on spending for insurance awareness campaign without success in converting more publics into customers; as you might know by now, the problem remains the lack of trust amongst Nigerians that their claims will be paid when due. Unfortunately, some insurers have indicated that the rate of fraudulent claims have increased though reports remain scanty and unpublished. 


So, if insurers are cautious about investing in communicating the benefits of insurance to woo the individuals, then should we expect the dominance of the market by very few insurers?


Another challenge in view is the frequency of claims from individual policyholders unlike the corporates. Currently, most insurers are more prompt when it comes to settling claims of corporate policyholders except policies of Federal and State Governments, where claims are hardly made; another reason why they are preferred over individual policyholders.


Interestingly, a few insurers are recording little successes and are promoting their digital initiatives and applications for individuals to use. However, they might wait longer to enjoy returns on their investments as those individual policyholders owed claims by their colleagues are becoming  more vocal as the months of unsettled claims turn to years.


What If Governments' Position Change?

While the leadership of the insurance industry have continued to call on Federal and State Governments to do more insurance for personnel, properties and projects, often in line with the Insurance Act 2003, the poor financial position of governments at different levels means such calls have not been on the agenda. Indeed, the insurance industry is expected to support the efforts of these governments.


The real challenge therefore is, should the Federal and State Governments make a U-turn, as part of its fiscal measures, to stop paying insurance premiums and rather create Sinking Fund, like some corporates have done, what will happen to the insurance industry in Nigeria? For how long will some of the "highly capitalised" insurers survive thereafter?


Hopefully, the smarter insurers will accept these posers as genuine wake up calls to rather, urgently and deliberately, consider investments in the Nigerian people than seek to continue with "government business as usual", as if the non-renewal of the multibillion Naira Group Life policy of Federal Civil Servants for over two insurance years has not been enough sign.


With only one percent of Nigeria's 200m population having one insurance policy, only investors outside the insurance industry today seem to see the opportunities and push to engage on them.


The time to dive in is really NOW before the tide changes!


About The Author

Ekerete Olawoye Gam-Ikon, MNIM, CPP, is a management consultant with a specialization in Strategy and Insurance. You can contact him via e:mail and mobile +234-806-648-1111

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