Stakeholders in the insurance industry met in Ogun State last week. Omobola Tolu-Kusimo, who was at the forum, reports that despite the challenges, they see a bright future in the industry.
THE industry has recorded a year-on-year turnover of 18.4 per cent and17.4 per cent compounded average growth (CAGR) between 2007 and 2013.
Its total assets have hit N711.4 billion from about N347.1billion in 2007, indicating an increase of 104 per cent.
This notwithstanding, the industry remains largely underpenetrated with insurance density at 0.225 per cent considering industry premium of $1.5 billion in comparison to other African countries, these were some of the highlights of the performnace of the industry.
But industry chiefs said the gap was as a result of low penetration. Group Managing Director, Custodian and Allied Insurance Plc, Wole Oshin, in a presentation at an insurance forum in Ogun State titled: “Opportunities and returns in the Nigerian business environment”, said regulatory changes in the industry, including No premium, No cover, International Financial Reporting Standard (IFRS) adoption, enforcement of Market Development Restructuring Initiative (MDRI), among others, have led to growth in the industry.According to him, information technology is still below par and wide data gathering and document management is poor.
He said this affected proper product pricing and development, adding that the industry is highly fragmented and competitive, thereby affecting the pace of growth in overall market size.
He identified other challenges such as enforcement of compulsory insurances, scarcity of human capital in certain specialised areas like actuaries and rise in fraudulent claims.
Oshin said the life business contributes 25 per cent and growing with a potential to surpass the general business in 10years.
He said: “A shift in focus to retail business would largely unlock hitherto uninsured risks through product channels, such as mobile phones and retail outlets. The bottom of the pyramid and low income mass market hold a huge potential for the industry, albeit in the medium to long term e.g. agricultural insurance.
“A regulatory environment that is favourably disposed to change and growth and a closer collaboration between government and the industry will help the industry.
“The industry performance is impressive. The gross premium income growing from N100 billion in 2007 to N302 billion at the end of 2014, an increase of over 200 per cent. The Insurance sector is dominated by the general insurance sector. This trend is however changing rapidly.”
Oshin said the recent happenings in the industry are pointers to a reinvigorated and competitive industry which includes:
He said favourable economic performance, recent policies and government support through various legislations and the repositioning among industry players to harness the huge market potentials through mergers and acquisitions is vital to further growth in the industry.
He however cautioned, saying that the economy had been slow and might be sliding to a recession which could affect insurance business across board.
The sector is going through a process of change and recovery, however with recent developments in the economy, the companies that will stand tall are those who are savvy enough to navigate through the predicted downturn in the economy.
Group Managing Director, Cornerstone Insurance Plc, Ganiyu Musa, who spoke on critical success factors for market expansion and penetration strategies, said operators should maintain price discipline to deal with rate-cutting issues.
He said there was also greater collaboration between underwriters and brokers, adding that operators should be self-regulated.”There is need for alignment of innovative products with the customers’real needs, increase micro-insurance penetration in new segments, such as agriculture, introduce Takaful insurance to rural parts of the country to further deepen insurance penetration.
“We must fully exploit the opportunities offered by the banking distribution platforms, use of technology to improve products distribution and leverage on the 126 million active lines to boost insurance penetration.
“There must be greater collaboration between operators and regulator to expand the market, enforcement of the six classes of compulsory insurance through collaboration with other relevant stakeholders and improved tax environment for operators and policyholders.”
Musa noted that if all of these are done, N1 trillion is achievable by operators in three years.
He said, according to EFInA (2014), 14.3 million adults would like to have insurance products.
He said market discipline, public awareness on products and claims settlement is very crucial.