- Allege most assets, personnel not insured
Industry watchers and operators in the Nigerian insurance sector have blamed the poor performances of insurance companies and the sector on the neglect of the industry by the Federal Government.
Top sources within the sector reliably informed The Point in separate interviews, that the FG had lost focus on how to revive the sector. According to them, the planned recapitalisation exercise by the government through the Finance minister, Mrs. Kemi Adeosun, would not restore confidence of investors and Nigerians in the industry but further scare them.
Top executives in leading insurance firms disclosed that most of the operators were over capitalised and did not require more capital.
Rather, they said that the sector needed FG’s patronage and policies that would boost subscription to several insurance products. This, they said, would change the perception and enable the sector compete with its counterparts in other developing countries.
“When an insurance company has a capital base of N5 billion as a composite company and the worth of the business is about N2 billion, it means the company has excess capital of N3 billion that it is not utilising. About 70 per cent of insurance firms fall in this category and that means most of us are financially strong but require more patronage to penetrate to the grassroots. The government is supposed to be the biggest insurance consumer in the country but the reverse is the case,” a top source, who pleaded anonymity, said.
Most FG and states’assets are not insured – Operators
Managing Directors of Insurance firms and brokers have warned both federal and state governments to either patronise insurance firms or lose the sector in few years.
They alleged that the industry’s underperformance could be attributed to the failure of the government to insure their assets while the same g o v e r n m e n t mandated the private sector to comply.
The Chief Executive Officer, AIICO Insurance, Mr. Edwin Igbiti, disclosed that most of the assets of both FG and states were not insured, meaning that the executive arm of the government was responsible for the lull witnessed in the sector.
“The government is supposed to be the biggest insurance consumer in the country but it has failed to patronise us unlike what it is doing with our banking counterparts. Few of them that insure their assets, do not pay premium and that has contributed to the d w i n d l i n g f o r – tunes of the sector and the industry would never grow with such attitude.
“The best way to revive the industry rests largely on the shoulders of government because it has to invest, enforce compliance and join hands with operators to create awareness in the industry. If the policies are implemented, it will create awareness for the people and society to embrace insurance. Government should take the insurance industry serious if they really want it to grow. Governments should also insure their properties and staff because we realise that in the past, they have not been insuring their properties adequately,” he told The Point.
He also urged operators to engage in aggressive advertisement and marketing strategies in order to change the perception of the public concerning the industry.
“With about N170 million population, we believe that the market can grow if the government support and operators offer products and services that would be all inclusive with financial inclusion, which will include the masses in the equation,” he said.
Like Igbiti, the Managing Director, Law Union and Rock Insurance, Mr Akinjide Orimolade argued that governments’ patronage and support for the industry cannot be over emphasised. He noted that the contribution of the indust r y to the nation’s Gross Domestic Product was less than one per cent, saying that it was critically low compared to its counterparts in other parts of the world.
“There is urgent need to revamp the sector and that can be done with the support and partnership of government. If the government is a stakeholder and companies introduce affordable and simple policies, an average Nigerian would be attracted to the sector. The delay of claims by operators, which is also a bane of the industry, should be addressed by the regulators. The foreign exchange that is being sent out of the country can be accommodated within the industry,” he said.
We would address all challenges – FG
Meanwhile, FG have promised to give the stakeholders in the sector the necessary support required to ensure the industry contribute immensely to the GDP. The Minister of Finance assured operators that government would address the low performance of the sector.
Adeosun said, “The commonly used index for measuring the development of insurance in an economy is market penetration, which is the ratio of total insurance premiums to the GDP. As a government, we are committed to identifying the challenges and taking steps to address the current poor performance of insurance in the country.”
According to her, there was a strong link between insurance market development and economic development. “We are optimistic that the work on the Consolidated Insurance Bill Review Committee and its eventual passage into law will positively change the face of insurance regulation and practice in our country because it conforms to the ideals of contemporary insurance practice. We also believe that it will facilitate public awareness and consumer protection,” she added.
Contrary to the arguments of the operators against the recapitalisation exercise, the finance minister insisted that the sector was due for another round of the exercise in order to reposition it. “The first top three banks in the country have over N30 billion capital base each while the top three insurance companies’ capital base is between N20 million and N25 million each,” she observed.
It would be recalled that Insurance companies in Nigeria in 2007 increased their capital base of life, non-life and composite firms from the initial base of N150m, N200m and N350m to N2billion, N3billion, and N5billion, respectively. Four reinsurance firms were asked to recapitalise from N350million to N10billion during the exercise.
The Commissioner for Insurance, Mr. Mohammed Kari said insurance played an important role in the development of economies in terms of services and infrastructural development.
According to him, insurance provides financial and social stability, enhances trade and commerce, and offers opportunities for savings, which in turn enhances the well-being of the citizenry and the nation in general.
“Notwithstanding these challenges, I see enough potential for positive growth of the insurance sectors in the West African states, given the collaborative efforts of the players, regulators and governments in the region,” he said.
