As Government Challenges Insurers To Grow | Independent Newspapers Limited
Newsletter subscribe

Our View

As Government Challenges Insurers To Grow

Kemi Adeosun
Posted: Jul 18, 2016 at 2:00 am   /   by   /   comments (0)


Again, the need for the insurance industry to optimise its impact and count in the scheme of Nigeria’s economic growth has been brought to the fore. Mrs. Kemi Adeosun, the country’s Finance Minister, recently revealed at the 2016 edition of the National Insurance Conference in Abuja that the Federal Government would enforce the compulsory insurance policies and ensure the cost of insurance is included in its expenditure.

The minister said: “We are committed to growing a strong and resilient insurance sector, which will contribute better to the Gross Domestic Product. Government will impose insurance and I will enforce insurance in the Ministry of Finance and in everything we are doing. We will ensure that insurance cost is included in government expenses because it is compulsory.”

She highlighted the need to urgently attack the issues responsible for the industry’s under-performance. We believe her position is apt given her statistics-led remark that a “0. 33 per cent increase in insurance penetration can engender a 0.5 per cent growth in GDP and create more than 70,000 jobs annually.”
That the industry in Nigeria is under-performing compared to its pension and banking counterparts cannot be disputed, even with its second position behind South Africa among Sub-Saharan African countries.   For instance, the minister    pointed out that out of 57 insurance companies in the country, less than 23 advertise their products. Other factors identified as the root cause of insurance industry’s weak performance include poor distribution channels and unethical practices among operators. Interestingly, the minister says she is already working vigorously with the National Insurance Commission (NAICOM) to ensure that premium discounting, which has also been pinpointed as a major problem area, is eliminated among practitioners. .
We also agree with the Minister’s position that there is need for recapitalisation of most insurance companies. This, we believe, is long overdue considering the fact that “the first top three banks have over N300 billion capital base each, while the top three insurance companies’ capital base is between N14 billion and N25 billion each,” as she stated.

It is our view that the minister’s remarks were tactfully and lucidly made at the 2016 National Insurance Conference (NIC) which had Expanding National Resources and Infrastructure in Challenging Times as theme.

It serves insurers a great purpose that the government is showing strong commitment that the practitioners could latch on to build momentum and dilate the scope and horizon of their business.

Although,the level of awareness has dovetailed into dismal appreciation, and by extension, penetration of insurance services in the country, we are of the strong view that the practitioners need to build trust into their business practices to promptly and adequately pay claims to policy holders when risks insured against occur. This requires that the cardinal principle of trust must at all times be built into their business growth models.

As a matter of fact, paying attention to such areas of compulsory insurance as third party motor insurance, buildings insurance, medical indemnity insurance, group life insurance, among many others, is more than sufficient to keep insurance undertakers busy and dilate the industry’s growth curves.

It is, however, heart-warming that the National Insurance Commission (NAICOM), the industry’s apex regulatory agency had already started raising the bar to enforce the acceptance of compulsory insurance ever before this year’s summit. We are further encouraged that practitioners are taking the challenge and pooling resources together to take the industry to the next level. The recent formation of the Insurers Committee is a clear demonstration of their new wave of commitment in that direction.

On their part, managers of the economy need to understand that as much as insurance is beneficial to businesses, government and households, it is only vibrantly embraced when the economic situation in the country guarantees valuable earnings, savings and investment. While the government therefore craves for higher growth and contributions by the insurance industry, conscious effort also needs to be made to empower critical economic agents to enhance growth opportunities. We therefore urge all hands to be on deck to move the insurance industry in Nigeria forward for the benefit of all.