Opadokun: Insurance is Back Bone of Sustainable Economy


                                                       


Bode Opadokun is the Managing Director of Nigeria Agricultural Insurance Corporation. In this interview with Ebere Nwoji, he spoke on the activities of the corporation in providing insurance cover to farmers to enhance food production. He also shed more light on the corporation’s proposed  weather index insurance initiative: Excerpts:


To many business operators in Nigeria, the first quarter of this year was a very dull moment  business-wise, especially with the political activities that characterised the period  what was your experience like ?

The first quarter of the year was a very dull period for most businesses including insurance.Though there were some policy cover that we were able to do as an industry.Some of them are businesses that are private sector driven whose  accounting year is usually  January to December. Most of those organisations concluded their  renewals as far back as December  because in our operations today,you pay your premium before the effective date so most of the renewals were done in December .So for such companies yes, those are accounts that we call renewable accounts. But  in terms of new business, coming out of  the activities in the course of the first quarter of the year, I will say it was very very dull and the reason is not far fetched.It was because of the political situation we found ourselves in the first quarter of the year. Mainly the general elections for the state , the federal as well as the legislative offices. There were a lot of speculations and many people were not sure of what the situation will  look like in terms of the outcome of the elections so many investors both local and foreign were not really willing to put in any form of investment into the system.Also remember that the budget was only signed few weeks ago so all  of these put together really affected the performance  of not only NAIC, insurance industry but the entire nation.It really had negative impact on businesses in the country.


Retail insurance is the in thing now, how is NAIC playing in this line of business and what is the future of the retail market like?


Fortunately, the way our own market,  I mean agricultural insurance market is,we have more  small scale players than even the big time players in terms of number.That is  to say that the number of policy holders or potential policy holders are far more  in number as small scale farmers. Unlike other classes of business where you can have corporate organisations that have so much  in terms of fire,burglary and what have you .
So  in our own case,we have been quite active in the area of providing cover for small scale farmers.Even when you look at what we have done so far,we believe we can do better and that is why
 we recently came up with a new distribution model which we termed  “plant with peace 
programme”. It was implemented during the last dry season farming where we were able to meet with 42, 000 farmers even though about 500,000 farmers  actually participated in the dry season farming under the  growth enhancement support scheme which is the scheme  that we partner ourselves with in providing insurance  cover to farmers.

What we did was just selling insurance along with  the bag of fertilizer  that is  being bought under the programme with a token premium of N500 and a guarantee sum insured of N20,000. It was made optional for them. Not every one of them bought it but  for us,achieving 42,000 under the pilot scheme, we felt  it was  a good feed back or result for ourselves.The only thing we need to do is to continue to do  sensitisation  of the farmers to let them know the benefit and gains of having insurance in place especially when we cast our minds back to what happened in 2012 where the flood affected many farmers to the extent that government has to  step in to assist some of them by providing compensation which costs federal government billions of Naira at that time .

Looking at the mandate and responsibilities given to NAIC,  ideally, if every farmer has an Insurance coverage, government need not come in to provide a form of financial assistance to any farmer whenever there is  disaster. We would have been able to play our role in that area.That is if the farmers have insurance cover on their farmlands.So our job here is to continue to sensitise them for them to know the benefit of having insurance for their farm land and one good thing we also did is educating them on some of the best strategies that can be adopted towards agricultural farming.

You don’t just collect premium and sit down waiting for when disaster will happen, rather you also provide field services as in risk management.visiting them tutoring them  even organising workshops and tutoring them on modern day method of doing agriculture farming.

So all of these are really reflecting in the output at the end of the day because ours is an insurance  company that is not only collecting premium but are interested in increasing food production for the 
nation.

That means you are well grounded in retail insurance Who and who   then are your corporate  clients?

For retail, retail is mainly  more of individuals these are small scale farmers who have two, three or four plots of land some maximum of five, 10 plots of land. These are rural farmers.But that does not mean that  we don’t  have dealings with the corporate world. For instance,Olam farms is one of our key corporate  customers who  has its base in Nasarawa State.It  used to be importer of rice but now it is full time local producer of rice. It has well over 200 acres of land for farming . Their  method of farming is so advanced that some times they use helicopter  for some of their activities that is to show you how big they are.
There is also Umza farms. It is based in Kano. It has been a long time customer of NAIC These are big time rice farmers .There is also Ebonyi rice, savanah sugar, is also one of our big clients owned by Dangote group.It is based in Adamawa and is involved in rice and maize farming.But that does not mean that all the other big ones are  not in our books .We have so many of them but some are yet to take a decision on taking up cover but we believe of course that insurance is something that has to do with resilience you have to keep advising, keep talking  because insurance is hard sell, people don’t see what they buy.They only buy  based on promise that if the unfortunate happens, they will be compensated.So it  is not easy to get people pay for  what they don’t see. But that not withstanding, we have  practicalised and demonstrated it to those who have experienced losses by settling their  claims promptly and that  is what we also used as reference point to some of them  that are yet to believe in what we are talking about insurance.

How has the Agric  Transformation Programme of the immediate past administration affected NAIC?

In a very positive way the agenda really helped the growth and rebranding that the corporation is undergoing today.That is what informed somebody like me as the Managing Director of the company to be brought in from the private sector to come and  see how we can develop level of activity and also penetration level  that is required of us. I look at it that opportunities that exist in Agricultural Insurance is very big in terms of level of penetration.I will say we are far below where we suppose to be.If you want to rate it,I will say less than 15 percent penetration  is what has been achieved  so far in Nigeria and the reason this is so is this, you cannot take away the economic situation in the country, secondly, the information available to people is not enough in terms of  existence of agricultural insurance  organstions and the role  they can play for farmers out there. So these are some of the things we have identified and which informed the reason why we are spending so much in  the area of advertisement ,  workshops, sensitisation not only in newspapers and radio but also bringing together of farmers’groups and educating them.
In fact, this plant with peace  programme we did afforded us the opportunity to go round the six geopolitical zones of  the country  last year where we gathered farmers’ groups  that are participating in the scheme  and educated some of them on the importance and benefits of insurance and that also informed why we were Able to get 42,000 people in nine states. Within the pilot scheme.So we believe that in doing this, we will be able to grow the market, we will be able to increase the level of penetration and increase the level of income available for the insurance industry.


You have undoubtedly achieved a lot within this short period you took up the mantle of leadership of  the corporation,  what are the challenges  you have met on your way in your new office?


If there is any challenge we have as an institution it is what I can call change management.Change management as in reorienting   our staff to see us as an enterprise who has the responsibility to meet an identified need in the area of agricultural development.We are service providers and not administrative agency.We are to render service to the customer out there who through their sweat  have brought in premium into the corporation. And we believe that the Naira worth of today is different from the Naira worth of tomorrow .So the issue of efficiency and improved turn around time is what we see as one of the key areas that we need  to  really really improve upon and which I can confirm to you has been improved in recent time. But that does not mean that we have gotten to where we are going we still believe that we can do much more than  what we are doing and that is also what informed the ongoing computerisation programme in our system. We want to see a situation whereby farmers get value for their money within 24 hours  whenever they have claims to make,that is our target.

NAICOM few years back, liberalised  Agric insurance to pave way for other underwriters to come into the business that is competition for you. Do you feel threatened?

I will say clearly no.I said no because first of all by my own understanding, until recently when the transformation agenda of government started, when the insurance sector operators started looking at the agricultural sector,  people were ignorant of opportunities in agric insurance . Before then, not many people knew that there are a lot of opportunities in this particular market and having seen the opportunity as it is today, we also have one advantage  and that is the technical competence and experience. We have it and it cannot be taken away.
Secondly, when you look at our share holders’ funds  it is also  of great advantage because today we have share holders’ fund in excess of  N5 billion which is well above the minimum requirement of the regulator. Then,we also  look at the opportunity that exist in the market. Just as I said before, that in terms of level of  penetration , we have not even done up to 15 percent of the market.So coming  into agricultural insurance business by other insurance underwriters is not a threat  we see it as an opportunity for us to improve on the level of penetration because those farmers out there really need us  and we are coming with a lot of benefits for them to continue in business.like it is always said, insurance is the backbone of every economy. For a sustainable economy, you have to put insurance in place because when the ships are down, that is the only financial institution that will come to your rescue to bring you back to the former  financial position that you occupied. So for the farmers who do not have insurance in place, either because  they have not been able to learn about it or some of them are quite ignorant of the benefit of insurance in their business, by the time other insurers come in, we will be able to  cover more in terms of level of penetration. So for us, we look at it as a combination of efforts  that is required on the part of  NAIC and other insurance  companies to be able to reach out and increase the level of penetration. We also believe that by the time they come in,  they are also going to enhance  the premium growth that we all aspire for the industry  because when you look at our contribution to the GDP today, it s nothing to write home about compared to other sectors. So if this is where we can all  come together again and see how we can improve the premium size, then of course we would have been able to increase our GDP contribution to the economy  and to us we believe this is achievable through the coming together of NAIC and other insurance companies.


Do you think other insurance firms  have what it takes to play in agric Insurance?


Unfortunately am not in the other side, I can only speak for my company but be that as it may like I did mentioned before, if there is any thing that is good for NAIC, it is technical competence.  One of the things we have been doing and which we will continue to do is to see how we can support and develop the market in the area of technical capacity. We have been giving lectures  at workshops organised by  Both Chartered Insurance Institute of Nigeria and the west African Insrance  institute at our own cost.
Another of such  workshop is coming up in July and we are sending our personnel there.We see it as our own contribution towards the growth of Agricultural insurance not only in Nigeria but in West Africa.


You decided to set up this kind of  edifice in Lagos, I mean your   head office annex,  which you commissioned recently.Famers commonly are known to reside and work in rural areas what informed your choice of Lagos or do you have more farmers in Lagos than other parts of the country?


When we talk about  agric, agric does not only mean crop farming.It  involves livestock, for somebody that is doing  poultry, it is agric, cattle rearing, it is agric, piggery is agric so is not only crop.When people hear about agric,they always think of green leaf but it is not only that. But agric cuts across grass cutter farming snail farming, fish farming these are all  parts of agricultural sector and when  you look at the level of fish consumption where we even encourage people to consume more fish, you discover that we don’t even have enough fish farmers in the country to meet the need of people in Lagos.
There are a lot of fish  farmers around Lagos suburb .If you go to Ikorodu,there is a big fish centre for fish farming ,if you go to Agege area, there are a lot of piggery farmers, what we do is that we partner  with the state ministry of agriculture there are a lot of cooperatives, their groups and associations that partner with the ministry who of course come together with a view to access facilities because when they come together, it is a lot easier for them to access loan towards their  agricultural production and each of them whenever they access loan of that nature , there is need for them to have insurance in place.  So that is why you see us partnering with state governments and also banks that have agric desk. There are a lot of banks that are focused on agric, they have agric desk so we partner with them.There are even a few institutions that have been established specifically for agric sector for example the bank of agriculture. We walk in conjunction with most of them.Also remember the cooperatives. The cooperative association is an agency created under the Federal  Ministry of Agriculture today.What most of them do is to come together and see how they can access loan or establish different programme.We see them coming together to establish different schemes. There is one in Kwara sate termed off takers’ scheme.Off takers means that as you farm, you are guaranteed the purchase of your products. Because what we also experience among farmers is that they farm but don’t have access to market and that is  why some  of their crops are seasonal. They lack storage, some don’t have access to road and transportation.Even some got rotten and damage on farmland. So these are the areas we have been able to collaborate with them and the Lagos  State Government is also of good help in this regard.
However, our license has provided us the opportunity not only to concentrate on agric but to do general business, we looked at it from that angle that yes we are doing agric but the colour of the Naira in terms of, premium when collected under agric is the same colour of Naira to collect under general business. So it is a growth strategy for us that there is the need for us to combine the two.We also discover that many people assume that going by our name, we can only underwrite agric and not general business.For instance,we have seen instance where a farmer decides to insure the birds  in his poultry with us and decides to insure his other property elsewhere thinking we cannot insure it. So that is why we need to come out to sensitise the general public on our ability to do general business with a good reinsurance treaty in place.So the market size in Lagos is not something we can close our eyes  on so we believe that having our head office  annex in Lagos will help  to position us to capture this market, increase our income and improve on  our turn around time because what people want out there is service,We are a service industry and we believe that our service is what can sell us. Is only a satisfied  customer that can make a  repeat purchase.
A satisfied customer will assess us from the point of how fast we were able to deliver on our documentation  when it comes to underwriting and how fast we are able to deliver in  the area of claims processes.once a customer is able to give us a pass mark in that  area, we believe that that customer is going to make a repeat purchase and act as marketer for us.


Your plant with peace programme sells insurance cover to farmers on line.How do you cope with rural farmers who may not have access to Internet?


The way  it is done is this, under the growth enhancement programme which I told you earlier we arranged, the distribution of fertilizer is usually done per season.now farmers have been registered under the scheme.There is an IT company  that work in conjunction with federal ministry of agriculture in the distribution of this fertilizer on the basis of buy one take one free. That is you are entitled to maximum of two and you pay  50 percent of the cost while the federal and state governments pay the balance. Now what we have done is to partner with the same ICT company, to sell insurance along with the bag of fertilizer that the farmers buy.
Each of the farmers has already been registered so we have their data base.you know their addresses through the database,their location, the type of crop they are into whether it is maize,sorghum,millet. All of these are already in the data.So as you buy a bag of fertilizer, through the POS machine, you see the summary of the insurance cover we have provided. And the sum insured that you are entitled to per acre of land which is N20,000 so if you buy two,you are entitled to a compensation of N40,000 in case any form of disaster happen to your farmland. Part of the way we addressed this is that there is a GES director for each state.The same thing with the local council Development Authority.we have extension workers so all of them will partner  under this programme that is for the purpose of selling crop insurance.But we are also taking a step further to see how we can use the weather index rather than to use crop insurance.because the crop insurance we are using now is what we call indemnity basis of compensation.the weather index is going to be a lot easier for us to manage but we are still working with the reinsurers as well as the  federal ministry of agric together with the metrological agency MET.So that is the process  of selling  that we are  using in the distribution of insurance and like the 42,000 I told you we did ,we could have a data base of each and every participant which is what  we are going to se in case there is any loss in any location that is what we will use to determine those that actually insured because we made it optional it was not compulsory and we have seen instances where one farmers farm and is insured but the  person next to him is not insured so definitely when there is a loss, it is not going to be a case of everybody come .no it is going to be for only those that insured.

Talking about the weather index insurance how does it work, have you got any donor agency am aware you were looking for one.?

The reason  we are considering  donor agency to partner  with is because of the cost implication.For us, the product when it is  ready,the cost will be higher than what we are doing presently.  Under our crop insurance, we charge as low as   two  Percent of cost of the farm while the federal and state governments pay the balance.Then by the time we start the weather index insurance, the international market based on actuarial valuation, the premium rate ranges from as high as 
seven to ten percent of the value. But we look at it as one of  the best means of underwriting agric insurance because the issue of basis of providing compensation is going to  be very clear to everybody because we are going to determine what you are entitled to based on the metrological report of that particulate location. We can only determine metrological report based on the weather station report that is available within that location that is what will determine the level of rainfall and shortfall. So that where you projected that if rain falls to this level, this is what you will harvest,  once there is a shortfall,it is going to affect your prductivity so that shortfall between what you projected and what is actual is what we are to pay as insurance industry under the weather index and that is based on the weather report we are going to use and that is why the metrological agency have to be part of what we are doing  because we are not going to create the data. It is the weather agency that will come up with the outcome of the report and that is what the metro logical agency  is going to use to analyse. Past data that is weather report of a particular area can  also be used as a guide to determine what the future will look Iike.


It is a very technical  system, do you think you have the right personnel for that ?


What we have been doing is working on the logistics required first of  all we need to get our data right through the support of the metrological agency.then we need to work in conjunction with the reinsurers who are experts, the knowledgeable on what appended in  other countries because for anything you want to do as insurance, you have to get your reinsurance backing.


We often  hear this adage  ‘as unpredictable as weather’ and that is to say that  in this weather index insurance,sometimes the weather report may fail, under that circumstance, what do you do as an insurer.?


Under the weather index insurance if the  weather prediction fails, you are still responsible as insurer. What the weather report does  is to guide you in  taking decision in the area of pricing ad risk  management.Like you rightly said, it is God that has the power to do all these but what they are doing is to provide us with information relating to past experience in past years and that is what we analyse. We analyse a particular area based  on the experience  in the past years to enable us determine what the future will look like. That is why we always call on actuaries to do an analysis using the past record to determine what the future will look like.


You planned to increase your  premium  this year by 40 percent what have you done so far to achieve that?


We have put the right strategies in place in the area of marketing, services, upgrading of our tools, training of our personnel  and that has started reflecting on our result. For instance,the total premium we have realised in our Lagos office alone the whole of  last year, compared to what we have achieved in the first four months of  this year, we have dne 80 percent of the entire100 percent of last year. So the target isachievable.


What are your suggestions on how more Nigerians can buy insurance?


What we are doing which we will continue to do  is to sensitise the general public to educate them on the need to have insurance cover.

We need to be prudent and plan ahead especially for the unexpected. It is said that if you  fail to plan you have planned to fail.So we continue to sensitise Nigerians . On our part, service is the key thing we continue to improve on our service so that people will have little or nothing to cry about when there is disaster.
We are the industry that stand as lender of last resort when there is peril we should play this role in such a way that investors will be willing to put in their money knowing that the risk element in the business will be covered by insurance industry.
As a result of existence of NAIC,  investors have been encouraged to put in their money  that is to invest in agric sector and this has resulted in  improved food production in the country  so our existence is not  just to generate premium income but our primary responsibility is to increase food production in the country and we have been able to achieve this by providing insurance cover to most of the investors in the agricultural sector and by so doing we have over the years stood as back bone of the agric sector.