Experts propose new ideas for insurance transformation

According to PUNCHNG Stakeholders have outlined fresh ideas to develop the insurance industry and speed up the transformation of the sector. NIKE POPOOLA writes

Insurance industry regulators have had to work with concerned major players to work on strategies to improve the sector.

Some initiatives have been introduced to bring about the desired reforms in the sector. These programmes are expected to serve as catalysts to hasten the industry’s growth. But the results have not been as apt as envisaged.

One of such schemes is the Financial Systems Strategy (code-named FSS 2020), which was developed in 2007 to position the financial services sector to drive the vision of making Nigeria one of the most 20 developed economies of the world by the year 2020, and the financial centre of choice in Africa.

Following the aspects of the strategy that related to the insurance sector, the National Insurance Commission developed and introduced its Market Development and Restructuring Initiative whose objectives are to ensure capacity building for NAICOM employees and stakeholders in the industry; to ensure the development of the insurance agency system; to build confidence and integrity in the industry; to ensure awareness creation and securing the support of government and relevant agencies; and ensuring public compliance with various compulsory insurance requirements of the law.

A significant element of the MDRI was a target of N1tn gross premium b y 2012.

However, the implementation challenges and the impact of the 2008 financial crisis on the insurance sector impeded the attainment of the initiative.

Notable among the negative impact are the huge losses suffered by insurance companies as a result of the near collapse of the Nigeria Capital Market and the decline in the growth of personal lines as a result of the 2009 changes in the financial services industry.

In 2013, the gross premium of the industry grew to N300bn from N101bn in 2007 which made Nigeria to rank as third in Africa.

The Commissioner for Insurance, Mr. Fola Daniel, said a key challenge to growing the industry was how to get sufficient number of potential customers to buy insurance.

He noted that this decision was influenced by factors such as the image of the industry, financial literacy, economic constraints and attitude of the consumers, among others.

He said there was also a mutually reinforcing relationship between growth in insurance industry and the level of national economic development.

Daniel observed that in advanced economies, personal lines insurance, for example, had acquired cultural status and was given priority as a means to mitigate various risks and reduce incidence of poverty, which was not the same in Nigeria.

The major question to answer, he said, was what to do in Nigeria to break barriers and release the potential that ought to come with demographic advantage.

Daniel said the FSS 2020 strategy was reviewed in May 2013 due to implementation experience and the need to focus efforts on fewer and more impactful transformation programmes and installing a measurable implementation framework.

He said the transformation initiatives for the insurance industry were reduced to three main themes which were mass insurance encouragement; improving insurance market conduct framework; and coordination for insurance regulatory enforcement.

Daniel said the commission introduced a wide range of regulatory guidelines which in addition to other market development initiatives were targeted at strengthening insurance institutions, building confidence in the insurance market and significantly improving the attractiveness of the insurance industry to both local and foreign investors.

“The growing interest of international investors in our industry as evidenced by the entry of major insurance companies and groups such as Metropolitan Life, Sanlam, NSIA, Old Mutual, and quite recently, AXA is a testimony of the success of our past efforts,” he said.

Daniel gave other initiatives in the regulatory agenda as a review and consolidation of insurance laws; licensing of micro insurance and takaful insurance operators; development of regulatory capacity in risk-based supervision; enhancement of the solvency management framework which include consideration of solvency II equivalence and introduction of internationally benchmarked early warning systems.

He also listed the adoption of uniform financial reporting template for insurance; ring-fencing of assets covering policyholders’ fund; review of investment guidelines to facilitate allocation of insurance and shareholders’ funds to infrastructural development and mortgages.

The commissioner said there was also the issuance of market conducts guidelines to extract appropriate accountability from all parties in the insurance value chain; and consolidation of guidelines issued by the commission.

The Managing Director, Consolidated Hallmark Insurance Plc, Mr. Eddie Efekoha, while speaking on the new trend and strategies in the insurance sector, said there was a need for the sector to focus on people, process, product, and prices of insurance policies.

According to him, there is a need for ongoing training to keep insurance employees up-to-date and to be proactive in problem solving.

He said the industry should develop customer service standards and ensure simplified renewal process for returning customers.

The managing director said that consistent communication should be put in place for the insuring public and the industry to take full advantage of technology and social media in growing participation.

He said the sector should create accessibility through telephones, emails, websites and massive public enlightenment.

The Director-General, Chartered Insurance Institute of Nigeria, Mr. Kola Ahmed, recalled the industry took a number of resolutions during its recent forum which included bringing the human resources managers of insurance institutions together and how critical human capital development should achieve financial inclusion of the industry.

“The arms of the industry should set up a committee with the role of developing a more dynamic strategy in deepening insurance contribution to the nation’s gross domestic product in line with the rebasing of the economy as the current contribution of insurance to the economy is too low to be meaningful,” he said.

Ahmed said the functions of the Nigerian Insurance Industry Consultative Council should be extended to include that of serving as a lobby group for the industry as well as a platform for the pooling together of resources for the development of the Nigerian insurance market.

He added that the council should study the concept of shared services in the industry and take steps towards their implementation.

The industry, he added, should key into the government’s policy of promoting financial literacy through aggressively promoting micro insurance and takaful insurance products.

Ahmed said financial inclusion would be achieved when adults had easy access to a broad range of financial products designed according to their needs and provided at affordable cost.

“The Nigerian insurance industry operators should work towards developing programmes that will facilitate insurance literacy among the public,” he said.