Daily Independent (Lagos)
Sola Alabadan
18 November 2008
Dr. Mike Ikupolati, Director General/ Head Of Mission West African Insurance Institute, Kotu South, Banjul, The Gambia, has suggested ways to make the practice of micro-insurance work in the West African sub-region.
Ikupolati, who presented a paper on "The Practice of Micro-insurance in West Africa -The Journey So Far" at the WAICA Educational Conference in Lagos, said that there are many challenges facing micro insurance in the sub-region.
He said "The challenge of micro insurance in West Africa is many. It is vital to know that our local conditions are unfavorable, Premium income is low, administrative costs are relatively high and infrastructure for insurance support is lacking."
The WAII boss stated that these explain why the commercial insurers in West Africa have not taken more interest in this market, adding that reaching the poor people, many of whom are illiterates and many of whom are living in the informal economy is difficult.
Besides, he lamented that the benefits of insurance are often misinterpreted since most of them do not understand why the premiums are not refunded if no claim is made.
These challenges, according to him, are compounded by the fact that there is no mechanism to systematically reach the informal workers since they are unorganized, there is no employer contribution, the poor may not be able to afford the full cost, insufficient government resources to cover recurring expenses and inadequate infrastructure to provide appropriate services.
Ikupolati therefore charged insurance operators to begin with conscious efforts at reaching the multitude of poor people living in both the urban and rural areas of our nations so that the insurance industry can take its central position in our efforts to eradicate poverty in our society.
In realisation of the fact that ignorance is the worst enemy of mankind; he advised that the poor must become knowledgeable about insurance and its ability to fight poverty effectively, noting that insurers need to begin a massive campaign through education and training.
"We practitioners must begin this great process of educating Africans on the roles insurance can play to help eradicate or at least alleviate poverty in our societies. We should remember that "a bent tree will never grow straight" so also an impoverished population cannot promote rapid growth and development," he stressed.
He further said that "To succeed in our current bid to alleviate poverty, we need good leaders and good followership. "For an army of sheep led by a lion, would defeat an army of lions led by a sheep". There is now an urgent need than ever before, for a great cooperation between the Insurance Industry in our various countries and between the insurance industry in West Africa and others sectors of the West African economy. We need not procrastinate on this. For the future is now!"
There is need to undertake feasibility study on the demand for insurance within a pre-existing group such as a credit union or cooperative, the WAII boss stated, adding that " It is beneficial that savings and credit facilities are already available to cover small losses of client and introduce a saving culture. The scheme should be compulsory or have a sufficient number of policyholders enrolled before it becomes active, it should also cover a wide range of risks and minimize exclusion."
To ensure success, insurers should search for a partner from an established insurance company, preferable a cooperative and negotiate an appropriate agreement for distribution, training products and reinsurance or set up own insurance scheme, separate to existing services, with limited coverage and simple products and confirm with donor agency or organizations like the International Cooperative and Mutual Insurance Federation (ICMIF) for long term technical assistance and training needs.
Besides, the operators must establish clear and concise policy wordings, product coverage, and administration system for dealing with applications, claims and payment, while also ensuring adequate capital reserves.
Considering the level of insurance awareness, favourable consideration should be given to education and marketing of insurance concept to policyholders, training of staff on principles and practices of insurance, implement an accurate and timely accounting and information system.
It is also necessary to train staff on cooperative principles, reinsurance, insurance accounting reserving, actuarial calculation and specialist training on different product lines.
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