Nearly seven decades after independence, many sectors of the Nigerian economy have responded differently, some positively, some lukewarmly, to developments that have shaped the various outcomes of businesses, operators and activities, yet some have lagged, unable to meet up with the weight of expectations placed on them.
For instance, in the financial services sector, while the banking industry, with all its shortcomings, is seen to have largely made progress in its development, the insurance industry, which for so long has been expected to be the shining light of the finance sector, has been unable to live up to these huge expectations as the industry grapples with a low insurance premium to GDP ratio.
The National Insurance Commission (NAICOM), which regulates the industry in the country, recently disclosed that the total insurance premium reached N520 billion with the number of insurance policyholders reaching 1.9 million in 2020. Of this figure, individuals with insurance policies reached 1.03 million, while corporate organisations holding policies totaled 891,128. While the result represents insurance penetration rate (IPR) of 0.72 percent and insurance density of less than three percent, it also indicates just a paltry six percent growth compared to the 2019’s record, which shows that the volume of business written by insurers grew by 15.55 percent to N490 billion in terms of premiums.
A cursory analysis of the data shows slow growth in the performance of the industry despite the African giant’s over 200 million market size, coupled with the immense GDP performance. Regarding the movement as snail-like, industry analysts have lamented on the failure of the industry to reach its own expectation contained in a Market Development and Restructuring Initiative (MDRI), which is hinged on transforming the industry to improve industry income significantly, in addition to creating jobs through the insurance agency system, fight against fake insurance institutions and enforce compulsory insurance; and further extend its reach in 2016 and 2020 to 24 million and 42 million, respectively, with a focus on achieving N1 trillion gross premium written.
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Analysing the wide room for growth, which is underutilized by the industry regulator and practitioners, people that are familiar with development in the industry told business a.m. that the best kept secret of the financial services industry in Nigeria is insurance.
“It is even better than the banking sector for the citizens,” one analyst intoned, while describing the wide array of opportunities for the industry to grow.
Aigboje Aig-Imoukhuede, during a media briefing ahead of the launch of his book titled, ‘Leaving the Tarmac, Buying a Bank in Africa’, noted that insurance is not yet where it ought to be.
In his words, “The largest financial companies are not banks but insurance companies and asset management. That is where companies are lacking and if we don’t fix that we will continue to lag behind.”
Nigerian banking sector has continued to be at the forefront of banking globally, serving as a major driver for financial inclusion and taking the lead in areas of mobile and digital banking. According to a 2018 survey conducted by EFInA, both insurance and credit account for just two percent, while pension accounts for eight percent of the list of the products of financial inclusion in Nigeria, while payment and savings account for 40 percent and 24 percent respectively.
In the face of COVID-19, the banking industry continued to show resilience and improved performance. In a report by McKinsey titled, “Nigeria’s Banking Sector: Thriving in the face of COVID-19,” the global advisory firm outlined the industry policy measures in order to stabilize the financial system and increase lending to stimulate the production of goods and services.
On the flip side, the Nigerian insurance industry has recorded slow growth since independence. Today, a major achievement of the industry is that it is characterized by the domination of the Nigerian insurance landscape by indigenous firms. While this development is lauded by industry watchers, many have decried the slow movement of growth in the industry.
Commending the milestone in the industry, Joe Irukwu, a foremost risk management expert, a professor of insurance and educationist, who has contributed to the development of insurance in Nigeria and Africa, in a monitored interview, said that significant achievement has been recorded in the industry, in terms of the available number of professionals, product offerings, regulations as well as objectives.
He said, “We have made a lot of progress and suffered in some areas. When we commenced insurance shortly after independence, insurance in Nigeria was not as sophisticated as it is today. The only dominant insurance businesses in those days were accident, fire, motor, life and traditional type of insurance. “Our aviation insurance was virtually non-existence because it was done abroad, marine insurance in the business was very limited, but right now, the industry has grown. When it comes to professional expertise, we have made a lot of progress. As at the early sixties, the market was dominated by lots of foreign expertise of the British and America – they were about 90 percent with foreigners, – but with time, we have succeeded in bringing more of our people into the space,” Irukwu said.
On the regulatory aspect, the insurance expert said, “Regulation is better today. In the past, we didn’t have rules and regulations, everybody just did what they liked. Some crooks came into the industry to make money. But today, the development is laudable. From low regulation, we now have high regulation. “Looking at the whole issue, insurance hasn’t done badly. We have done very well, but there is still room for improvement,” he concluded.
Yet, the Nigerian insurance industry has struggled to grow amid cultural barriers, ignorance, increasing unemployment, low income and general issues tied to the economy. In the midst of these lingering problems, insurance practitioners and stakeholders have continued to preach the gospel for individuals, households, organisations to seek the best cover through insuring lives and general businesses/properties as insurance helps to best prepare for unthinkable situations.
In seeking to encourage the spread of insurance, the famous quote of Winston Churchill, a former prime minister of the United Kingdom, is often deployed. He had said, “If I had my way, I would write the word insure over the door of every cottage and upon the blotting book of every public man, because I am convinced that for sacrifices that are inconceivably small, families can be secured against catastrophes that otherwise would smash them up forever”.