Reasons why Insurance Industry is plagued by low penetration

Lack of trust between the subscribing public and insurance companies and absence of awareness campaign to inform the subscribing public on the benefits of taking policies are reasons insurance has failed in Nigeria, an expert, Prof Matthew Atobe has said.

Atobe who is an authority in consumer protection matters, made this known in a paper titled: “Insurance Consumers in Developed Economies, an  Insurance Consumer’s Experience in the United States of America and Lessons for Nigeria” presented at an insurance conference in Lagos.

According to him, this is unlike the United States (U.S.) where insurance companies contribute more to the growth of the economy.

He identified other problems as absence of professionally  trained insurance experts, religious culture, traditional culture or norms, ignorance, illiteracy, absence of infrastructure, lack of insurance companies to cover huge damages or losses, poor technology and the deliberate behaviour of the insurer and the insured not to disclose full material fact to process, pay and receive claim.

For a rebirth to occur in the industry, the expert said there is need for equity, increase in operating capital to underwrite huge and multiple policies and also to write-off and cover huge multiple losses and or damages.

He said: “There is also need to strengthen insurance capacity building centres providing technical and continuous professional development, peer review mechanism, uniform language and innovation in the area of marketing, full funding of insurance investigators, target rural emerging/promising communities, among others.

“There is no other industry that may have contributed more to the growth of the economy of United States than insurance companies. You may not be able to confirm this experience unless you have filed a claim against an insurance company as a result of loss or damage caused by events that you, an insured party cannot control. The role of insurance is to reduce risks.

“Insurance companies are risk takers. Yes it is true, you invest so much on insurance premiums, but the risk you suffer you transfer to insurance company when a loss or damage occurs. Insurance companies operating in U.S. provide great deal of benefit to the U.S. economy. “

Another insurance expert, the Group Head, Energy and Special Risk, International Energy Insurance (IEI), Jude Modilim while delivering his paper titled: “The Economic Importance of Insurance in National Development” added that the development of the industry is related to economic growth.

He stressed that the industry must take definite steps to improve contribution to GDP and make it more attractive to new entrants.

Speaking on the economic importance of insurance in national development, he said it generates financial resources for investment in bonds, treasury bills, stocks and real estate particularly through the instrumentality of life insurance.

He further stated that life insurance enables systematic savings while insurance turn accumulated capital into productive investments. It is an important source of capital formation and a key source of long term capital, encouraging the growth of capital markets.

He noted that the funds are used in individual development to promote economic growth. It also encourages loss of mitigation, financial stability, and promotes trade and commercial activities.

“The industry is a powerful engine for job creation. According to Dr. Ngozi Okonjo-Iweala the industry has the ability to create jobs for 100,000 people in the next three years and more than 300,000 people in the next decade. There is need to unleash the latent energies of the industry to create more jobs and boost economic development

“Insurance enhances peace of mind. The security wish is the prime motivating factor to work more. Tension leads to unpleasant reaction causing reduction in work. By means of insurance a number of the uncertainty that centers on the wish for security and its attainment may be eliminated or significantly reduced.

“It protects mortgaged property. In the event of death of the owner of the mortgaged property, it gives the lender comfort. It also eliminates dependency on the death of a husband or father. In the event of destruction of property by fire or other means. Economic independence of the family is reduced, if not lost totally. It provides wished amount as against deposited amount in the bank and contributes to Internally Generated Revenue (IGR) through payment of taxes.”

 

Source: The Nation