Waiting for NAICOM

If our world is such that is ruled and determined by permutations of the so-called research experts, then the life we live would have been devoid of time-wasting activities while companies and other business concerns wouldn’t have the misfortune of contending with the prospect of losses.

To a large extent, a number of people earn their daily bread by floating one research organisation or the other. This is apart from some research institutes either funded by governments or professional bodies.

It is a yearly routine for multilateral agencies like the International Monetary Fund (IMF), World Bank, United Nations Children’s Fund (UNICEF), World Health Organisation (WHO), Organisation of Petroleum Exporting Nations (OPEC) and a host of other local and international rating agencies.

In Nigeria, the federal and the state governments, corporate leaders in all the sectors of the economy, academic institutions and the media rely heavily on the findings and projections of some of the Nigerian-based research firms like Renaissance Capital, Financial Derivatives Company, Afrinvest, Economic Associates, FBN Capital, among others to shape what they do especially at the beginning of the year like this.

However, experience has shown that more often than not, some of the projections on the various sectors of the economy are usually far from the realities at the end of the day as a result of a number of factors, which cannot be predetermined.

This is exactly the situation with the nation’s insurance industry, where projections have started flying from everywhere.

Going by predictions from notable international rating agencies and experts, Nigeria’s insurance industry is set to grow by utilising expanding ICT deployment, population density and massive use of telecommunication facilities to sell insurance products.

KPMG, an international network of professionals providing auditing and research work, in its recent analysis on “The African Insurance Market at a Glance” observed that many markets in the Sub-Sahara Africa including Nigeria are experiencing a step forward in terms of the sophistication of the insurance market.

When I met a couple of insurance practitioners at a forum in Lagos last week and armed with the KPMG’s findings, I started a discussion on the projection of a common framework for future reform in the insurance industry.

Experts see positive collaboration between regulators to show best practice and agree common framework for future reform.

But is Nigerian insurance industry ready to take its position in view of the current realities? Some of the practitioners that confided in me said there is still a lot to be done by the current leadership of the National Insurance Commission (NAICOM) and other stakeholders in the industry. The point is that there is a huge potential for insurance business in Nigeria in view of the opportunities in the growing population in the country, but the insurance business is still at its infancy stage.

Those behind the positive projections also borrowed the idea of the foremost financial analyst, Bismarck Rewane who also shared similar optimism on the growth of insurance in Nigeria.

However, Rewane seemed to have hit the nail on the head when he stressed the need for practitioners to work towards insurance penetration and awareness in the country.

As far as many serious insurance practitioners are concerned, the greatest challenge is how to increase the depth of insurance in Nigeria. This is because the industry currently contributes barely 0.65 per cent to GDP and less than one per cent in penetration, making it the third largest in Africa with premium size of about N300 billion as at the end of 2014 financial year.

There is no doubt that a young and growing population of approximately 170 million people like Nigeria presents a huge growth opportunity that even at 2.6 per cent annual growth rate, it would have accommodated four million of the population. Stable economic growth projected at 6.2 per cent is favourable for business growth and insurance, as an important arm of the financial services market would benefit.

The question is, what is the current leadership doing to make a difference? Can a breakthrough be achieved if the management of the National Insurance Commission is not coming up with regulatory measures to bring about the desired change?

The nation’s insurance industry could generate an estimated N300 billion annually if 10 per cent of its 170 million population take at least one form of retail insurance product offered in the market.

According to projections, generating 15 million policies from life, health and asset-linked policies of at least N20, 000 per annum or $10 premium per month would deliver an industry premium that would change the fortunes of the sector and increase its contribution to the nation’s GDP.

The sector is currently generating N50 billion annually from retail insurance, which analysts describe as abysmally low, considering the population size and potential to risk exposure.

In view of the immense opportunities presented by the technological advancement of the modern world, it beats my imagination that the insurance stakeholders have not deemed it fit to effectively use mobile phones to sell their products.  Today, mobile telecommunication phone ownership currently stands at 84.9 per cent in urban areas and 55.6 per cent in rural areas.

Recently, Business Monitor International, a renown international business assessor said the Nigerian insurance market remains at an embryonic stage of development with the combined assets of the country’s insurers comprising only a tiny percentage of GDP and total premiums lagging behind more developed markets such as South Africa.

It however noted that the past few years have seen considerable expansion in the sector as rapid economic/population growth and rising prosperity have boosted demand for life and non-life products.

And like Rewane, I believe that the sale of life insurance using mobile phone network to 126million active lines would definitely boost insurance penetration.

Considering the present state of the economy and the continued slide of oil price and the attendant dip in revenue, insurance practitioners need to go beyond the traditional conservative way of marketing their products. New products to meet the emergent dispensation are necessary and one wonders if the current level of supervision can bring about this desired chang