Patience Saghana
5 January 2009
Insurance operators are full of expectations in the New Year, having jointly laid a solid foundation for business growth in the past 12 months.
With more efforts from the regulatory body, the NIA and the NCRIB, practitioners trust that 2009 will be a better year for the sector.
Mallam Abbas Idriss Chief Executive Officer, Valid Insurance Brokers Limited was optimistic that the New Year would be a more rewarding one for the insurance industry but added that operators had to behave themselves to achieve the rewards in 2009.
According to him, "2009 is going to be good only if practitioners will change their attitudes towards the market. I do not want to say anything on the budget until when the economic policies are out then we can say how much it is going to affect the industry. However, one thing remains, if we the practitioners will not value our profession as it is now, then nobody will do that for us.
"As a result of operators' desire to be on an account, you see people rush for business without even carrying their risk analysis. And by the time they get there, it is like the economic theory of demand and supply, when many underwriters are chasing few businesses the insured will now peg a price below the cost of production and it is only underwriter that accept that kind of unprofitable or prices of business.
"The commission should put in more efforts in this New Year in enlightenment and enforcement of laws and order in the industry. If they do not do that, the local content insurance we are all jubilating about, will not yield anything good".
Mr Adeyemo Adejumo, President of the Chartered Insurance Institute of Nigeria (CIIN) confirmed that the insurance industry in Nigeria has huge potentials for growth hence it is not out of place for the sector to face some challenges.
According to him, "Any industry with growth potentials is bound to witness the usual challenges of competition, which if well managed, should lead to overall improvement and resultant gains to the industry in general".
Given Nigeria's present low insurance penetration levels, conscious and deliberate effort must be made by insurance practitioners to positively alter, influence and shape the negative perception of the general public on insurance generally; through public enlightenment programmes, awareness creation and education on accruing benefits derivable from insurance activities.
The CIIN President said that 2009 will be a better year for the insurance industry in all its ramifications only if operators conduct their businesses professionally. "Healthy competition will stimulate improved services through introduction of creative and innovative products and services; promotional campaigns and concession offerings and reduced charges through premium rationing, although adequate measures must be put in place to forestall price war by the operators.
"Introduction of new products and services and other innovative approaches are essential ingredients towards achieving success. In order to be perceived as a dynamic and forward-looking industry that keeps abreast of the dictates of the market, customers should be encouraged to choose from a wide range of specially designed products and services; tailored to meet the peculiar needs of customers," he said.
Today's business, Adejumo stated further, demands that the focus of management is to be shifted to the provision and delivery of qualitative and customer satisfying products and services in order to confront the competition posed by new entrants - notably the commercial banks, who are at the retail end of financial services, with enormous resources and existing branch network. Hence, any forward-looking operator must adopt a change in attitude in terms of prompt and responsive payment of claims.
"A critical determinant of success in any financial institution is the quality of people that provide the services as well as recruitment and retention of skilled and competent employees. Attraction of the right calibre of staff is highly essential. Retention and continued commitment of employees through lucrative and competitive packages and incentive schemes; and the provision of an environment, which encourages growth of fresh ideas and initiatives, are equally critical. It is instructive to mention that a highly skilled, committed and imaginative staff would earn the respect of his competitors and the confidence of his customers".
The NIA chairman, Mr. Wole Oshin, believes that insurance companies should endeavour in 2009 to exploit new and increasing opportunities to widen the scope of insurance business based on a clear recognition that the ability of any financial institution to correctly define its basic business is critical to business growth and success.
Oshin said that there is need for insurance companies to put their strategies to play in order for the sector to take its rightful position in the economy of this nation. "In a nutshell the insurance industry, an integral part of the economy, would have to go back to the drawing board to re-strategize for the future.
"Inflation is bound to be on the rise and therefore the cost of goods and services. It follows that security would be an issue since many jobs would be lost and crime rate would simultaneously rise. This would inevitably lead to high claims thereby impacting negatively on the business of insurance," he said.
He however noted that all hope is not lost on the down turn of the global market. "We are still optimistic that the potentials in the sector far outweigh the immediate downturn in the economy. The industry is the bedrock of the economy albeit in the background. The face of business vis-à-vis the structure of companies across the financial sector would change over the next three years. I doubt if our companies would remain the way they are presently structured in three years time," he stated.
He added that "Our vision is to have an industry which is appropriately benchmarked against other markets. In other words comparing apples with apples and not otherwise. Pensions business and health insurance are all part of the insurance industry and should be recognized as such. In so doing we would be moving closer to the vision 2020 objective of the Federal Government".
Operators' views of NAICOM
Operators seem to be impressed with the National Insurance Commission (NAICOM) and how it has impacted on the sector in recent times.
Oshin noted that, "The relationship between the industry and its regulator has been the best in recent times and I must commend the Commissioner for Insurance for the progressive approach he has adopted in moving the industry forward".
The Association in partnership with the National Insurance Commission has already commenced the enforcement of the following measures. They include Enforcement of Local content as it affects insurance business; Enforcement of Sections 64 and 65 of Insurance Act 2003 i.e. Insurance of Public buildings & buildings under construction; Eradication of fake Third Party Motor Insurance Certificates and; Implementation of Section 9(3) of Pension Reform Act 2004.
Adejumo said the CIIN and indeed the insurance industry have enjoyed tremendous support and peace from the Commission since Mr. Fola Daniel assumed office. "The insurance industry had never been this peaceful until Fola Daniel came to office and he has maintained peace and sanity in the industry. And with the way the industry is moving and conducting itself, thanks to NAICOM, the sector will enjoy more business boom in 2009," he said.
Valid Insurance Brokers boss has this to say, "NAICOM is doing its best in discharging its routing and supervisory duties especially on inspections. Before now you hardly see any official of NAICOM visiting offices for inspection, but now it is something they do with all sincerity. This will help in checking the activities of quacks and fraudulent people especially Brokers".
Operators' Overview of 2008
The consolidation exercise also brought in its wake increased capital market activities in the insurance sector of the Nigeria Stock Exchange, with many new companies coming on stream to raise funds.
More so, the inflows of funds into the sector has boosted the liquidity position of operators and further place them in good stead to readily meet their obligations and claims from clients - a hitherto worrisome situation in the recent past. Without doubt, this development will also aid and enhance public confidence in the insurance sector thereby influencing general economic growth of the nation.
With improved capitalization, the operators are now better placed with greater potential to handle big-ticket insurance-based transactions and wide and varied financial services with higher risk profile. Besides, operators now have access to much larger credit lines from the banks and other financial institutions as a result of their enhanced capacity and shareholders' funds.
The recapitalization exercise also led to dilution of ownership in most insurance companies, which hitherto was mostly concentrated in the hands of few individuals along with family members. This went a go a long way in taming the monster of insider dealings and abuse of corporate governance.
Oshin believes 2008 was a remarkable year for the insurance industry. According to him "The year was very interesting for the insurance industry being the first full year of operation since the recapitalization exercise. The year started with high hopes on all fronts, set targets by companies were high and expectations to perform from shareholders were even more. All signals pointed to a year with unprecedented growth.
"The stock market was aggressive and bullish and it appeared the year would be an easy ride. Businesses grew in leaps and bounds and there was seeming prosperity everywhere. Unfortunately, this trend was not to continue as the economy began to overheat. The rest is history. By year end we find ourselves in an unpredictable mono-product economy which is dependent on an unpredictable product, oil. The Naira depreciated against the Dollar in just over one week thereby putting Foreign Direct Investments and foreign loans at risk".
Oshin who addressed newsmen on the progress of the association for the year, stated that the NIA in its bid to reconcile all parties in the industry continues to reach out to member companies by carrying them along on vital decisions taken in the industry.
Chief Dede Ijere, President of the Nigerian Council of Registered Insurance Brokers (NCRIB) admitted that insurance had been quite stable in 2008 and more reliable than in the past years. We have an insurance industry that lived up to its name and promises as entrenched in insurance policies given out to clients.
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