Dangote's Group Chief Risk Officer, Dr. Adenike Fajemirokun, spoke with Jonathan Eze on the challenges of managing a conglomerate, the implications of delays in payment of insurance claims, and the role of technology in the insurance industry, among other issues. Excerpts:
May I meet you?
My name is Adenike Fajemirokun, I guess people refer to me as Dr. Adenike Fajemirokun. I am a mother of two, I work for Dangote Industries at the Group level, I am the Group Chief Risk officer, Insurance Officer and Procurement Officer as well. I am an engineer by qualification; I have a bachelor degree in civil and structure engineering. I moved on to do a sponsored PHD in quantitative risk management and from there, I went on to investment banking where I started with Goldman Sachs and from there moved to Deutsche Bank in London where I started as what you call an assistant vice president over there.
Because I came in with a PHD and moved up to be a director and you know when you are an African in another country there is really not much you can do and at that point, I decided to come back to Nigeria to become the operational risk officer at First Bank and from there I went on to start my consulting firm. I consulted for CBN, First Bank Capital, AIICO which I am also on the board of directors at that time, but I moved to join Dangote ever since for the last four to five years mainly as a Chief Risk Officer and open to other roles which is where you find me now.
How has it been managing Dangote in terms of risk?
It is a very exciting portfolio. It is like working for seven or eight companies at once especially when you are doing it on a group level. For me, it is very hard to meet the challenge or excitement that you find being a risk officer on this portfolio; but beyond that it is a very dynamic organisation. You have to be very quick on your feet and you have to be very quick particularly around the risk management space, but I think it has been good for me in Dangote, it is an organisation that really lead by regulation, it is not a financial institution, there is no regulation that says you must have a chief risk officer or must have risk management done in a certain way.
I think it is intriguing to find out that the organisation itself saw a need for it; maybe for their internal practice and it was very successful before risk management became a structured manner and you know it is an organisation that has been here for a very long time. It has been a very exciting portfolio and I have all the support I need. One of the challenges of risk management is its buying. Risk is something that is intangible, a lot of the time, it is a probability of something happening but has not happened and you have to protect against it. This is very difficult to sell and you know human nature is show me and I will put my money into it, but when you are not showing me and you are asking me to put my money against it or put my backing against it, it is very difficult, but for an organisation like this, it is inherent, they have bought into it and it has made my job a lot easier.
It is exciting because it is constantly changing. There is no day I come that you find things the same and for the insurance portfolio side as well, it is again if you think of Dangote as an institution, it can also be an insurance company if you look at the capital investment he puts into insurance, again that is a very dynamic portfolio, because most companies you are working you are insuring policies, but here, there are so many types of policies because you are dealing with cement plants, sugar plants, refineries, fertilizers, different products and so you can feel like you are part of the industry even though you are a consumer, so it is a good portfolio.
There was a report recently that Dangote paid almost N5billion as premium in 2016, yet some companies are yet to settle over N400 million owed it. How true is this claim?
Dangote has paid, but the figures tend to change. I do not know where different journalists get their figures from, but it is approximately about N5billion; so that is correct. The interesting thing about the portfolio is that we have a few insurance companies that have not paid and the context of that was that you pay premiums to insurance companies but it only becomes of value to consumers and at a time when you make a claim, but before it is just a cost. For example, your car insurance, the only time you know you have it is when you need it. Insurance is not something you think of until the time you are calling on it, so for me, when you become of value to me is when I have a claim. If you have put this money down to protect your assets and you have a claim, I expect that these companies must turnaround and pay and when they don't, it is not good for the industry, consumers service perspective.
So that was where that came from, which is to say that for me to have insurance companies, meant to pay almost N500 million and it's not paying, it can collapse an institution. You do not know what not paying that has caused us as an institution. Normally, with insurance, you can have 10 underwriters and maybe eight have paid and two have not paid and the view might be that eight of you have paid but the two that have not paid might be what will collapse my company because I have to look for N500 million to cover that cost, so that was where that came from.
What are the implications of a poorly handled claim, especially with the dynamics of social media?
I think it is damaging for the reputation of the company. I know the regulators are starting to be strict, but from that seminar, there were some few comments around which will make them a lot stricter that people are not handling things the way it should be. Words travel very fast and the minute someone knows that an insurance company is not paying a claim it is very rare for that person to go to that company for any insurance because you will think they are still taking their funds from a pool whether it is Dangote or any other company.
The person would ask If you do not pay these people why will you pay me, so the main thing is that you are damaging the reputation of the company and you cannot put a price on that and a country of 180 million that travels fast for the company and for the consumer where the claim is not paid as I said, it has financial impacts because you cannot basically replace all that you lost from the incident with insurance because you have not gotten your claims paid for the consumer. It is also a reputational problem, it is also stressful because we all know how it is to chase money and when you are chasing your money and somebody is not answering you, that is a very stressing and frustrating situation and for someone managing a portfolio it is your responsibility to get their money and it can have a career impact on the individual.
Please, can you throw more light on the generic risk situation models?
They are when you come around and you are in my organisation and you give me a risk solution that is generic, it basically means I can use it, Airtel, MTN can use it, Nestle, Lafarge can use it, so you have not looked particularly at my risk portfolio to see what I need based on the structure of my organisation to say these are the risks I am exposed to and this is how you can mitigate it, but you have not tailor made it to my organisation. Generic risk solutions are necessary, like your motor insurance, it is a generic solution. It is the same kind of policy either its third party, it is comprehensive whereas credit risk insurance can be spoken to me because it may not be generic to me and I might need it because I have a lot of distributors, so you need to create something that works for me.
To what extents are assets you are managing being run or guided by local content?
To the local content law, it is 100 per cent, because we have to fulfill all the capacity locally before we can go outside from the local content perspective; we must meet the requirement before we go outside, it is not actually a choice, there is what is called approved and the principle law, it is a regulatory requirement that you must have met the local requirement that you have reached capacity except where you have insurance that do not qualify, but that is not the only criteria. For insurance companies whose accounts have not been approved by NAICOM, you cannot qualify for local content and if I am looking for my insurance at that time to renew, you are disqualified, so you do not fit into the 100 per cent, but I will still have to share my 100 per cent with other Nigerian companies.
Perception of regulators in the industry, any progress made?
I think they are very open compared to other regulators we have had in the past. This regime is very open; last year I did the same presentation, but with operators, but this year, Dangote went as a consumer which shows that the regulator is actually giving you a voice which was not normally the case, because we are the end user at the bottom of the chain, but what has happened is that the regulators are saying that they want to hear from the consumers to know the impacts of the decisions they are making so I think they are doing a good job basically around completeness than just enclosing everybody into one space and understanding the implications of the decisions they make, I do believe they are very progressive, I do think that there is a question around whether or not the speed at which they implement policies can affect a consumer and that is one of my biggest issues.
You create a policy in December and you send it to the industry in January and expect that we implement in January, that is the problem for me because I have done my budget in December and when you have compulsory rates coming out in January and you are telling me that an employee's insurance has to go up to a certain level, it can affect me as an organisation because I can decide to start firing people because I cannot afford it. I can also decide to not to hire even though I had budgeted to hire, so the implication for me are beyond what you as a regulator has got and you have not given me time to factor that in.
The lead time which we process regulation is very important, I want to go into that area raised the other day when you said I need to raise my rate to a certain amount, I even want to know what statistics you used to do that, but I am not a regulator, you tell me what you want and I do it and we all know that there is a data issue in Nigeria so when you are increasing life insurance for employees, you will have to ask yourself if you have looked at the mortality rate of people between 25 and 50 and 50 to 75 and you come and tell me how many employees do I have on this band and that is how you charge me. I have employees of different ages but I have to pay their rates and that is the problem for me as a consumer, so from the regulatory perspective, the speed and consultation around some of the policies, the regulators have the right to give whatever requirements but there should be a level of consultation and engagement with consumers, other parties, lenders.
When you determine local content, a lender coming from the United States and you are in Nigeria, you need money, we are looking for money and we say we do not have money for investment, but we need to get this from overseas and we are trying to get these investments and the investors want most of the insurance to be abroad, but you are telling me I have to boost local content, but the foreign investors do not have confidence in our local content, so you have to engage with these lenders to get the money in and as a country, you are the one looking for money so they have to compromise. There is need for increased engagement with all stakeholders, consumers, lenders and different parties.
What are the impacts of globalisation and technology on the insurance industry?
For insurance, yes definitely. Nigeria's penetration rate is very low at 10 per cent and that is being optimistic, with technology it is very different. The woman in the market or the informal sector as they call it, we could not reach them and they are not interested and they also have what they call community insurance where they put their money into and when somebody dies, they say it is your turn to bring etcetera, but now because of what we call the USSD where a lot of companies are using technology these set of people can buy insurance online and you are executing this service on a larger platform. The informal sector is the least penetrated sector in the industry. Technology is definitely playing a key part. Now I can buy my insurance online as oppose to having to talk to an agent and it is an interesting trend.
Insurance was sold by agents coming to your door and it has created lots of problems, they can come and take cash and sometimes you do not know what they have done with it, but also people have changed and technology has helped in throwing more lights about the insurance industry. So it is a vicious circle and that circle is kind of slowing down the work of the agent which means, if you do not provide the technology, you cannot sell the insurance so that is where the technology comes in; where you can buy your insurance online. And for us at Dangote, if I want to reach all the employees, we have an online scheme we are starting which you can access online with your staff ID to buy insurance at the rate as a company have because of my economies of scale, so I can reach a lot more people, but you could not do that before, but with a Dangote ID, you can buy insurance, so technology has helped and it should help to increase the participation of insurance in Nigeria.
What is the best way to provide excellent services to consumers?
Well, first of all, do not start if you do not understand your demography. You need to understand your demography, so different companies need to know who they are trying to sell to and what products they are trying to sell and you also need to know what channels to reach them, what do they use. I will give you an example, there was a discussion I was having with somebody a year ago, and they were asking why women do not buy insurance and I said to them. It is because you do not sell to us insurance for hair, you have to speak the language that I am understanding, in fact the one I remembered is that people do not sell aso ebi insurance and this is one of the biggest money makers.
Have aso ebi insurance, speak a language people can relate to and do not go to them and say you want to sell life insurance and of course, because we are also a very religious society where no one wants to think about death, but if you call it a succession insurance where their children can benefit after they are gone, they will be thinking of it in a different way. You have to understand your audience and communicate to them in that manner and another thing is to have the infrastructure to deliver it.
I remember when they said cashless economy by CBN, but the ATMs and POS were not working. CBN can do that but you as a company if you do that you will die, because the minute they find out your internet is not working they go somewhere else and you cannot get them back. So you have to make sure your infrastructure is ready to deliver that service and ultimately you have to pay claims; so claims decide if this is a good company or if it is a bad one whether you pay my claim quickly and in terms of the amount that you actually give me is accurate as well.
What is the future of insurance industry considering the fact that a lot of people are apathetic to it?
I think it has a long way to go and I really believe it is the next thing in the financial industry. Insurance opens up doors to so many things, so I think from investment income to different things that insurance can do in a society. The perception is low and there is so much to do around insurance and you are also protecting people, assets at the end of the day, so it is to the benefit of a country that the insurance industry is working and I think it can do it, but everything has to come together, the regulators must work in tandem with the insurance companies, with the insurance brokers, consumers and lenders. Everybody has to work together to attain common goals. For the regulators to make this industry grow, all the engines have to be put in place to make it work.