The Insurance Industry In Nigeria: An Appraisal

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The insurance industry in Nigeria has indeed come a long way, as it has been in existence 30 years before the country became independent on October 1, 1960.

However, within the 50 years of a sovereign Nigeria, the insurance industry has recorded a mixed grill of ups and downs.

Actuarial science experts believe that the contribution of the insurance industry to the country’s Gross Domestic Product (GDP) has remained abysmally poor.

The experts note that the insurance industry, which ought to be playing a key role in the national economy, only contributes less than 1 per cent to the GDP.

They say that factors inhibiting the growth of the industry include low level of insurance penetration, high public apathy toward insurance policies and high premium cutting, among others.

Some of the experts recall that in the 1960s and 1970s, insurance practitioners appeared more civilised and disciplined in spite of the fact that there were a few insurance laws guiding their operations.

Prof. Joe Irukwu, the Chairman of African Development Insurance Company (ADIC), says that some of the insurance practitioners in the country are not practising the profession the way it should be.

“They cut rates and they do this is in an annoying and stupid manner. That is just like cutting your nose to shape your face,” he says.

Irukwu stresses that Nigeria has yet to develop a positive national insurance culture that would  enable the citizens to know that they could not live without insurance.

“We have not yet achieved the desired level of insurance penetration in Nigeria and we have to do something about it,” he says.

“Nigerians do not get insurance covers even in the areas where insurance is compulsory like motor insurance and this is just a matter of attitude,” he adds.

Mr Dipo Bailey, the former Commissioner for Insurance, National Insurance Commission (NAICOM), says that under normal circumstances, banks ought to be under the control and influence of insurance companies

“That is the practice everywhere in the world. In a well developed economy, insurance companies even own banks but that is not the case in Nigeria,” he says.

Bailey laments that pension administration has been taken away from the insurance industry, stressing that pension funds had served as long-term investible funds for the insurance industry.

However, Mr Adegboyega Adepegba, the Director-General, Chartered Insurance Institute of Nigeria (CIIN), says that the insurance industry has not done badly, considering the environment it has operated in.

“There is no way one can assess the performance of the insurance industry without necessarily assessing it within the context of the country’s performance in the last 50 years.

“These are things our nation should have put behind since; so, not much should be expected from insurance or any other industry,” he says.

Adepegba, however, claims that that the insurance industry has enabled other sectors of the national economy to operate with the confidence that if any unexpected thing happens; they would be aided to recover.

“If this is the only way to assess the insurance industry’s performance during Nigeria’s 50th independence anniversary, I think it has not performed badly,” he says.

For Mr Sunny Adeda, the President of CIIN, the insurance industry has achieved a lot in its human capital development, while insurance penetration is growing deeper everyday.

“Many people are taking insurance covers everyday and with the current level of public awareness about insurance, I believe that insurance will soon become a household name in the country,” he said.

Adeda, however, notes that the older generation of Nigerians is more honest than the citizens of nowadays who are obviously more desperate to make money by hook or by crook.

Observers say that the insurance industry has made some progress within the last 50 years, particularly in the areas of the companies’ ownership and personnel structures.

Mr Femi Okunniyi, the Managing Director of GoldLink Insurance PIc., says that many Nigerians are heading insurance companies today, unlike in the past when foreigners were at the helm of affairs.

He, nonetheless, stresses the need for the strengthening of the industry, adding that such growth will enable insurance companies to grow bigger to the extent that they will even be in a position to own banks.

Mrs Oluseyi Ifaturoti, the Managing Director of Crystallife Assurance Plc., says that five recapitalisation exercises had taken place within the last 50 years, adding that the number of insurance companies in the country was reduced after each exercise.

She says that the insurance industry is bound to experience a remarkable transformation because the regulation of the industry is stricter now.

“The regulator is also stricter in monitoring; so, everybody — policy holders, shareholders and the public — are now more enlightened.”

“It is impossible now for any insurance company not to be on its toes, as every company wants to deliver value and ensure it lives up to the expectations of the insuring public,” she says.

Ifaturoti says that the enforcement of compulsory insurances and NAICOM’s public awareness creation activities will consequently help in deepening the market.

“These efforts will be visible in terms of premium income that will accrue to the industry in the 2011 financial reports,” she says.

The Commissioner for Insurance, Mr Fola Daniel, stresses that the insurance industry has every reason to celebrate Nigeria at 50, saying that the industry’s future is brighter in spite of any seeming constraints.

Daniel says that the industry has recorded appreciable progress since it was streamlined, as the number of companies has been reduced to 49 insurance companies and two re-insurance companies.

He says that since the restructuring exercise and the emergence of big and vibrant companies, there is hardly any news about defaults in the payment of insurance claims.

Daniel is glad to note that Nigeria is fast becoming the hub of insurance in Africa, adding that several Nigerian insurance companies now operate in about nine African countries.

He also says that many citizens are now taking insurance policies, adding that the development has deepened insurance penetration, while many investors are now going for insurance stocks in the capital market.

“We have not got to our destination but we will get there,” Daniel says, adding: “With the Market Development and Restructuring Initiative (MDRI) focus on oil and gas, aviation and compulsory insurance, I know that the industry’s contribution to the GDP will soon be in 2 digits.”

The commissioner says that NAICOM has put in place the Code of Corporate Good Governance and annual guidelines to improve the industry’s operations.

Sharing similar sentiments, Alhaji Bala Zakariya’u, the Chairman of Niger Insurance Plc., says that the industry is becoming much better because of the improvement in the capital base of insurance companies.

“The companies have now been re-capitalized to improve their branch networks and computerise their operations, while their service delivery has considerably improved,” he said.

Besides, Mr Olorundare Thomas, the Director-General of Nigerian Insurers Association (NIA), says that the industry has excelled, considering its antecedents since the promulgation of the first insurance law in 1961.

He says that the industry’s growth could be measured in terms of its contributions to the economy, employment and the general wellbeing of the citizenry.

Thomas notes that the country’s insurance laws of 1962, 1964, 1976, 1997, 1998,2003 and the new law being proposed; have been improving the operations of the insurance industry from time to time.

The accolades, notwithstanding, observers stress the need for further restructuring of the insurance industry to enable it to play more meaningful roles in the lives of the citizens, as Nigeria marks its Golden Jubilee.

Agu writes for NAN

 

Chidinma Agu