Making Insurance Work in Nigeria: Structural Realignment Required

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Monday, January 13, 2020 / 08.27 AM / By Ekerete Olawoye Gam-Ikon /  Header Image Credit:



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



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