With guidelines for the practice of Takaful and micro insurance now in place, getting Nigerians at the grassroots and in the informal sector to embrace the products, in the views of analysts, may be a new challenge for insurers and regulators alike to contend with in the years ahead, MESHACK IDEHEN writes.
The country’s insurance industry regulator, the National Insurance Commission (NAICOM), said last week it had given out licences to several organisations for the commencement of the business of micro and Takaful insurance.
According to some analysts, the commission had earlier announced it outlined channels to be utilised to reach potential micro-insurance consumers, following the release of the guidelines for micro-insurance operations in the country
NAICOM listed these channels to include, cooperative societies, micro finance institutions (MFIs),micro finance banks, (MFBs), Non-Governmental Organisations, postal agents, mobile payment system, telecommunications, brokers, agents, trade organisations, health service providers, esusu, adashi group, age grade, faith based organisations, and self employed market women.
Besides, the insurance industry regulators said micro-insurance scheme shall have the features of simplicity, the policies conditions; procedures and marketing be made simple, the risk pooling method, procedures and coverage must be unambiguous and easily understood, and the microproducts be accessible to the target market in terms of purchase, premium payments and claims.
Notwithstanding the potential benefits of the innovative products to the insurance industry and more particularly the nation’s economy, some experts have identified the real challenge of their implementation as getting people in the grassroots, the primary targets of the products, to participate and access the potential micro insurance products.
An insurance expert, Mr. Obasi Ngwuta, noted while all the policies and guidelines that had been released by the commission were in order, those guidelines will only become useful and productive if it is keyed into by its targeted market Ngwuta said as things presently stands, that vast majority of micro and Takaful insurance target market are yet to become aware or yet to key into the scheme, adding what is required is a massive sensitisation campaign by the regulators and operators.
According to him, it is only when such massive sensitisation and awareness campaign is embarked upon; that Nigerians in the informal sector can get to know and understand the benefits of keying into the scheme, saying just releasing the guidelines alone was not enough to achieve desired results.
Similarly, another industry expert and former Executive Director of Hallmark Insurance Brokers Limited, Mr. Patrick Enyi, said that while the onus now fell on insurance operators to develop micro and Takaful insurance market,that the Commission needed to re-assure stakeholders, particularly the operators, on the profitability of this scheme. Enyi explained though NAICOM has proved that micro and Takaful insurance is profitable in the country, that most operators will not spend fund to deepen or develop the sector, except they get constant assurances from the regulators.
“Let’s not forget the insurance industry is still grappling with inherent challenges, despite the growth signs being seen and projected. To remove all and any challenge Takaful and micro insurance practice will experience, NAICOM must keep assuring the operators of its support”, he said. However, the Commissioner for Insurance, Mr Fola Daniel, explained in response to Enyi,s observation, that the commission can confidently assert that micro-insurance and Takaful presents stakeholders and the country at large a vehicle for geometric growth.
According to the commissioner, “the regulatory body is determined to facilitate deeper market penetration with a view to ensuring that the insurance industry contributes equitably to the country’s Gross Domestic Product (GDP). Daniel said the efforts of the commission in this regard have started yielding positive results and that the commission did recognise the desirability of incorporating micro-insurance and Takaful as important vehicles for achieving greater insurance penetration.
Highlighting the fact that microinsurance and Takaful products or services shall be designed to meet the needs of clients; be beneficial, fair in price and coverage, and the delivery and distribution channels must be efficient to both the insurer and the policyholders, Former Financial Planner with Royal Exchange Assurance Plc, Mr. Nosa Igbinoba, told National Mirror NAICOM needs drum up that part of the guideline into operators ears.
Igbinoba said getting operators to comply with that part of the guidelines is sure to present critical challenge, adding the reason being that most operators are yet to understand how to deal with Nigerians on the lower cadre as far as selling insurance products were concerned.
According to him, one other major challenge micro insurance practitioners will have to contend with, and which the regulators have to also look into, is the guideline that said potential micro-insurance operators shall comply with the prudential standards.
He explained what the commission means by prudential standards is that any micro-insurer intending to commence a specialised micro-insurance business shall have a minimum paid up share capital of N150 million for life, N200 million for general business, and that a specialised micro-insurer shall maintain with the Central Bank of Nigeria (CBGN) a statutory deposit of 10 per cent of the minimum capital requirement.
Lamenting that guideline was way to huge for micro insurers to comply with, he pointed out such huge monetary requirements to guarantee licence to practice and operate the scheme will lead to a situation where the operators will eventually pass the burden to those buying into the scheme. “The financial requirements are way too much. It is a micro scheme and must be treated as such.
NAICOM making such huge demand for guarantee will only scare of those it intend to bring into insurance and into financial inclusion”, he observed. The regulators, it would be recalled, has also decided that micro insurers shall maintain adequate and valid reinsurance arrangements a copy of which shall be submitted to the commission on or before December 31st of the preceding year.
The micro-insurer carrying on general insurance business, the commission has also said, may offer general and life micro-insurance products and vice versa, provided there is an arrangement between the general microinsurer and life micro-insurer, whereby the life portion of the business is transferred to the life micro-insurer as the case may be.
The commission ruled also that shall be the responsibility of the general micro-insurer, to settle the claims and subsequently recover the portion of the claims due from the life microinsurer. Despite these potential challenges, other experts believe the performance of the Takaful Insurance policy has been above average since, and has aided in boosting insurance penetration.
Vice-Chairman of the Chartered Insurance Institute of Nigeria (CIIN) Oyo State Chapter, Mr. Babatunde Omosola, said that like Takaful, micro insurance will soon attain more than 70 per cent penetration in the country and drive the industry forward, when the potential are fully harnessed.