Why industry loses N20 billion mobile insurance to ICT's sector

By Bankole Orimisan

The nation's insurance industry seems to have losing estimated of N20 billion expected premium to be generated from mobile insurance with network operators  on yearly basis to sell insurance products and also to receive claims through mobile phone across the country.

   This, The Guardian, learnt that is as a result of non concrete agreement between the Nigerian Communication Commission(NCC) and the National Insurance Commission(NAICOM) to reach a compromise on licencing of players from the telecoms operators and insurance sectors respectively, is scuttling the use of mobile phones to deploy insurance products and services to the public to generate more income for both agencies in the country

   This, according to findings, is limiting the capacity of insurance companies to effectively deploy micro insurance products through mobile technologies, thereby, leading to low insurance penetration.     

    The two regulators had last year met to reinstate the sales of insurance through platforms of telecommunications firms, but the inability to put finishing touches to the agreement is now having a toll on the profitability of the insurance industry. While NAICOM intends to licence any telecommunications operator intending to operate in insurance space, NCC wants to do the same to insurance companies willing to use telecommunication platforms to sell their products.    According to the Head Corporate Affair, Nigerian Communication Commission(NCC) Tony Ojobo, who spoke to the The Guardian on the development over the weekend said that there is non problem between NCC and NAICOM, because for Nigeria to buy insurance products through mobile phone, this is as good as someone open an account with any bank via mobile and also make hotel reservation all these are called value added service. NCC is not insurance regulator, if NAICOM has a particular about that should register their complain with the NCC, he said.

   According to stakeholders in the sector, until there is a concrete agreement between the two regulators, insurers cannot go ahead to sell micro insurance products through mobile phones, although, few underwriting firms have now resorted to using USSD to sell their products and services. 

   Experts, however, said, the industry will continue to lose about N20 billion yearly, until the issues between the two regulators are amicably resolved. If finally, the embargo placed on mobile insurance in 2016 by NAICOM is finally lifted, this will enable NAICOM licenced telecommunications operators and ensure effective distribution channel for sale of insurance products.

    The commission had to place such embargo after observing that insurers were surcharged in the earlier agreement. The regulator demanded to licence any telecommunications outfit intending to sell insurance on its platform. NCC, on the other hand, is demanding same from insurers willing to use telcos as a platform to sell insurance products. Hence, there was the need to come up with a joint guideline to regulate mobile insurance business in the country. 

   Before the embargo was placed in 2016, at least 150,000 people subscribed to mobile insurance on a monthly basis then, and several millions of naira of premiums generated monthly, even though, only few underwriters were into it then. The likes of FBNInsurance, Cornerstone Insurance, among others were performing well, until the embargo, which meant they had to forfeit the revenue window. Group managing director, Cornerstone Insurance Plc, Mr. Ganiyu Musa said the first phase of its mobile insurance product tagged Airtel Insurance operated for 18 months, saying, throughout this period, about 4.7 million people tried to register for the product with 2.7 million subscribers succeeded, while about 1.8 million covers were purchased in the process. 

   “During that period, we paid about 329 claims on hospitalization, and I think we paid about three claims on death,” he pointed out. Through mobile insurance, he believes millions of people would be persuaded to buy insurance products, thereby generating billions of premium. 

   To this end, chairman, Zenith Bank Plc,Jim Ovia, has advised NAICOM to collaborate with NCC to increase insurance penetration through mobile phone technology. For insurers to break the circle, he said, they have to intensify efforts in deploying micro-insurance products through mobile phones. Noting that insurers could contribute up to 12.5 per cent to the nation’s Gross Domestic Product (GDP) by 2025, with the deployment of micro-insurance through digital technology,  he urged operators to migrate from traditional ways of offering insurance, to embracing new methods of insurance. Citing the innovative example of Prudential Life Insurance Ghana, which achieved 1.5 million policies in 12 months using mobile phone technology.

   Ovia, who is also the chairman, Zenith General Insurance Limited, disclosed that Prudential Zenith Nigeria, together with other insurance companies are now ready to deploy micro insurance products through the use of mobile phone technology as soon as both the NCC and NAICOM could collaborate and approve to do so. 

   The Commissioner for insurance, Alhaji Mohammed Kari, also added that mobile insurance will not only deepen penetration to the mass of uninsured populace in Nigeria; it will reduce operational cost of insurance companies and make them more profitable.

Insurers engage Nigerians on need to imbibe insurance culture

By Bankole Orimisan

Against the backdrop of the natural and man-made disasters lurking around the country, insurance chief executives in the country have admonished Nigerians against overlooking the importance of insurance including insuring their lives.

  The Vice Chairman, Sub-Committee on Publicity and Communications, Insurers Committee, Mrs. Ebelechukwu Nwachukwu, who spoke to The Guardian over the weekend, said this narrative necessitated the rebranding of the nation’s insurance industry.

  She stated that the Insurer’s Committee, comprising of Chief  Executive Officer of all insurance companies in the country engaged Alder Consulting, Nigeria’s creative intelligence firm last year 2018 to jointly  rebrand the industry and make it better understood by Nigerians.

   Nwachukwu, stressed that the initiative was born out of the need to redefine the narrative about insurance and to educate Nigerians on its importance.

  She said: “The campaign was also designed to change the perception of the sector and increase the market penetration on insurance in Nigeria. Considering that less than one per cent of the Nigerian adult population was insured. 

 "About 80 per cent of those insured are 35 and above. Millennials below 35 years who form over 70 per cent of Nigeria’s population, or about 138.6 million, form a large part of the uninsured.”          

 “In line with the foregoing, the project was designed to showcase the advancements made in the insurance sector and to encourage more Nigerians to take up insurance. It would also highlight real customer testimonials of insurance. At the end of the day, insurance would be positioned as desirable and not just a regulatory necessity.”

   The Managing Partner, Alder Consulting, Leke Alder, on his part explained that the campaign will span an initial period of three years, in three months respectively.

 He added that instead of pushing a message of fear and tragedy, the campaign focuses on the fulfillment of hopes and dreams, when insurance serves as a safety net in life. Hence, the phrase “Live with Freedom” was adopted as the theme for the campaign.

  “Insurance users can live life to the fullest because they are confident that no matter what happens, they are insured. To ensure that the campaign was continuous and sustainable, a dedicated website (www.insuranceandyou.ng) was developed. Social media pages - @insuranceandyou (Facebook, Instagram, and Twitter) - were also set-up to ensure that the campaign drilled down to the retail market space.

  “According to a poll of 1,500 individuals in Lagos, Abuja, Enugu, Port Harcourt, Kaduna, Asaba and Ibadan conducted by Brand Sampling International, “since the beginning of the project, 66% of those who have heard the campaign are changing their perception of insurance”, he said.

  He further said that during the first phase, key milestones included using a new narrative to begin repositioning insurance; educating Nigerians on the importance of insurance; communicating innovative advancements in the insurance industry; showcasing testimonials from satisfied customers; and highlighting compulsory insurance categories required by the Federal Government.

  “Materials were deployed across print, radio and social media. A brand activation event also held at the Ikeja City Mall in Lagos. 1,415 radio jingles were aired and 28 radio interviews were conducted. 121 videos, graphics and blog posts were posted across digital media platforms reaching a combined 8.8 million people”, he noted.

How Nigeria, others generated $67b insurance premium

 Experts link sector's low penetration to operator inefficiency 

 By Bankole Orimisan

Nigeria and other African countries were able to generate $676.7 billion insurance premium income, going by the records of the 46^th Africa Insurance Barometer, a research report that covers African insurance market.

  The report, launched at the just concluded 46th Conference and General Assembly of the African Insurance Organisation (AIO) in Johannesburg, South Africa, said premiums grew by 12 per cent in dollar terms in 2017, financial year, from $59.4 billion in 2016, reversing the trend of previous years when African growth rates were negative due to depreciation of African currencies.

  On an inflation adjusted-basis, the report showed overall insurance premiums increasing by just 0.5 per cent in 2017, which was ahead of the growth in advanced markets (-0.6 per cent), but below the 10.3 per cent volume growth for the world’s emerging markets.

 In Africa’s largest insurance markets, total real premium growth was positive in Egypt (+9.8 per cent), Namibia (+7.8 per cent) and Morocco (+3.0 per cent), stagnant in South Africa (+0.1 per cent) and negative in Nigeria (-10.5 per cent), Algeria (-2.8 per cent) and Kenya (-2.0 per cent).

 The continent’s insurance markets, according to the research report, have returned to a more stable environment following the deep and sudden economic downturn in 2015/16.

 The yearly survey conducted among the chief executive officers of Africa’s primary insurers, stated that the industry continues to benefit from its underlying growth story, the resilience that it demonstrated during the downturn and a strengthening regulatory framework.

 Reacting on the report, Secretary-General of the African Insurance Organisation, Prisca Soares, said the mood among Africa’s insurance executives polled for this year’s Africa barometer is slightly more cautious than last year.

 “Following the deep recession of 2015/16, insurers is less bullish. The crisis exposed Africa’s continued vulnerability to external shocks. In addition, the prospects for the global economy and for global trade have reduced for the near-term future.

 “However, with the availability of technology and an expanding middle class, awareness and the understanding for the benefits of insurance are improving among policymakers, regulators and consumers. This will generate additional impulses for the industry," she said.

  Outgoing President, African Insurers Association (AIO), Mrs. Aretha Duku-Gia, said, low insurance penetration in Africa still presents an opportunity for growth, urging insurance operators to use the huge population of the continent to their advantage.

 Highlighting the barrier to low Insurance Penetration, she said, micro economic, cultural and religious sentiments as well as low education are challenges that must be addressed for African insurance industry to compete favourably in the international market.

  While calling for insurance to be introduced in secondary schools across Africa for increased insurance education, she urged companies to adopt multi-channels to sell insurance products and services. Operators, according to her, must do all they can, to make insurance accessible to all, especially, those in the informal sector.

Underwriters lose 90% risks to foreign investors as local content policy flops

By Bankole Orimisan
The nation's insurance sector may be far from meeting the local content agenda of the Federal Government, as indications emerged that it is currently loosing about 90 per cent of the big risks in the economy to foreign underwriters.
  Consequently, there is not only a huge capital flight from the economy, but also lower risk retention capacity and inability to take up the big risks.   
  The Guardian reliably gathered that the situation has made the nation’s insurance industry the weakest link in the financial services sector, contrary to what happens in other climes, where insurance amasses strong asset base for major projects, especially infrastructure.
  Investigations also revealed that lack of full implementation of the Local Content Act in insuring oil and gas risks has made the sector to lag behind, compared to its peers globally.
  The law stipulates that states that 70 per cent of all businesses coming out of the oil and gas sector shall be insured in Nigeria, including engineering, building of infrastructure and other insurance needs, however due to factors beyond immediate control of the industry, it is currently far from the target.
  These factors include deep actuarial study and understanding of Nigeria’s oil and gas industry, financial capacity, availability of reinsurance market at optimal cost benefit to Nigeria and non-enabling environment.
  Industry facts showed that if the Local Content Act is fully implemented, it would boost the insurance sector’s contribution to the Gross Domestic Product (GDP) from less than one per cent, as it is currently, to a significant figure.
Beside the local content law, it was also discovered that the bigger issue is low capitalisation, which limits the capacity of local operators to play in the big underwriting league of the oil and gas, aviation and maritime sectors.
  The industry stakeholder who spoke to The Guardian said that despite the local content policy that has been in place, insurance companies are yet to fully take advantage of the Act to wrestle a major chunk of the underwriting business from the grips of foreign counterparts.
  The Managing Director of Continental Reinsurance Plc, Dr. Femi Oyetunji, affirmed that Nigerian insurers presently insure only about 10 per cent of such risks, while the rest is insured abroad.
  Oyetunji, maintained that Nigerian insurers’ tendency for relatively low retention levels in respect of energy risks is also largely responsible, admitting that while the industry needs the local content policy, however, “the policy is not yet in full session”.
  According to him, owing to their relatively modest size and capitalisation, compared with acceptable international standards, the Local Content Act will have little or no effect, since bearing and underwriting risk in the oil and gas sector requires huge capital investments outlay.
  "The big risks in the sector are all owned by multinationals with head offices in US, China and Europe. So they will be more comfortable dealing with companies from their own base.
  “If the local content policy were not in place, I can assure you that most of us will not be in business now because the size of the balance sheet of some of the big global insurers would have placed them in vantage position to write everything that is there.
  “Insurance business is a global thing. These overseas companies are international ‘A’ rated players so everything seems to work against African companies. Nigeria is doing well in terms of making sure that local capacities are exhausted before any risk is externalised.
  “Africa is going through tough times and most African economies depend on commodities. Commodities' prices, be it copper, gold, or crude oil, have gone down, so the economies have been affected and when economies are affected, you have a downturn and the first causality has always been insurance. So, we have seen a lot of reduction in interest in insurance.
“We have seen asset values going down; we have also seen a new risked coming to the fore front which is risk of currency fluctuation. Nigeria has been negatively impacted,” he said.
  The Chairman, Nigerian Insurer Association (NIA), Tope Smart, told The Guardian that implementation of local content act in insurance industry has reduced premium flight and improved the financial position of operators and industry as a whole.
   But he stressed the need for full implementation of the Act, to drive the insurance industry to the desired level, noting that expectation "is one thing and reality is another" and urged insurers to only accept what their financial position- balance sheet) and reinsurances can accommodate.
   Speaking in the same vein, the industry's analyst  who also spoke to The Guardian, on anonymity, described the Local Content Act 2010 as a novel initiative of the then administration that has impacted in the insurance sector, but yet to fill the huge gap in big risk underwriting.
  He said that prior to the implementation of the Act, the industry has very little retained or underwriting premium in oil and gas.
“As a matter of fact, we have little of no knowledge in underwriting oil and gas. We barely have a handful of semi experts in NICON Insurance trained only to document session to London and America market. The advent of the law has seen a geometric increase in underwriting knowledge and practical sessions in oil and gas Insurance.
  “Today practically insurance companies participate in oil and gas insurance. The significant increase in our gross premium income in the last five years came majorly from oil and gas.
"That the expectation of the law is that we should write 70 per cent of the premium in Nigeria, however due to factors beyond immediate control of the industry, we are far from the target”, he said.
  With the sector contributing 0.6 per cent to Nigeria's GDP, it contributes about 15 per cent in South Africa. Meanwhile, Ghana’s insurance market is projected to hit $600 million next year from $400 million in 2014, based on Oxford Business Group’s (OBG’s) projected annual growth rate of 8.5 per cent and Nigeria’s total premium is currently about N300 billion (equivalent to $108 billion).
  However, another analyst who also preferred anonymity, affirmed that the expectations of stakeholders from insurance remain mirage, as insurance operators, using excuses ranging from ordinary to the absurd, have been unable to deepen insurance penetration, with many others remaining incapable of getting share of insurance businesses from foreign controlled companies.