Long before Nigeria was finally plunged into recession last year, it has been pretty challenging to get Nigerians to appreciate the benefits inherent in insurance products, with the sector contributing a meager 0.6 per cent to the nation’s Gross Domestic Product (GDP).
Due to the high level of apathy, the industry has not grown at par with the other financial services sub-sectors like banking and capital market, and has therefore remained the weakest link among them.
A recent survey by the Chartered Insurance Institute of Nigeria (CIIN), revealed that about 86.6 million Nigerians do not have any form of insurance cover, while 1.3 million adults or 1.5 per cent of the entire adult population maintain some category of formal insurance cover.
As a result, industry stakeholders are concerned over the state of the sector, especially as it has been in existence for close to a century and should have fared much better, compared to its peers in the developed economies.
Efforts by operators to reduce lack of interest and boost patronage have not yielded much fruits, with many proffering various theories for such indifference.
The Group Executive Director, Royal Exchange Plc, Auwalu Muktari, attributed the insurance lethargy to a number of factors, compounded by declining disposable income on account of the economic downturn and high level of inflation.
“The only problem we see in the Nigerian market is that per capita income of the people is very low, and people tend not to take insurance as a priority against other things related to them,” he said.
He, however, added that it was heartwarming to note that the Federal Government has made group life insurance compulsory for all employers of labour with a minimum of five employees, which has brought about a turnaround in the fortunes of this class of insurance.
He also believed that “with improvement in income regulation and other things, many people will take to insurance and gradually we will get an increased participation by the insuring public in the country.”
Furthermore, he expressed optimism that the awareness campaign embarked on by the industry trade group, the Nigerian Insurers Association (NIA) and players like Royal Exchange on the need for individuals to be protected and have life insurance covers will yield positive fruits.
He noted that “With the coming of retail businesses set up by various underwriters and micro-insurance, this awareness will get to the common man at the grassroots and they will embrace insurance as a way of life. Despite the low per capital income, there should be an increase in the rate at which people patronise the insurance industry.”
Part of the low insurance penetration has been traced to the poor adoption and deployment of technology as a marketing tool, a development that is responsible for the poor data and information management system in the industry.
The lack of information technology and standardisation of insurance data (including lack of local expertise in the field of insurance IT solutions) means that manual operations are still prevalent in the industry. This is responsible for the delays in services provided such as claims settlement, and unethical practices among some operators.
These challenges notwithstanding, the Managing Director, Great Nigeria Insurance Plc, Cecilia Osipitan, urged Nigerians to educate themselves on the benefits of an insurance policy, and blamed the poor performance on low awareness.
She defended that operators are doing their best to develop various products designed to protect lives and properties, adding that recent cases of road accidents, building collapses, and fire outbreaks nationwide, resulting in losses worth billions of naira, make insurance an imperative.
According to her, “Nigerians have waited too long in recognising and accepting the reality that without insurance is like one building a house without a foundation and in no time, it will come crashing. And when that happens, you will have to start from the scratch again with more funds than you initially expended.
“Insurance gives you the promise of a safe and comfortable future. The earlier we disabuse our minds of the old notion that insurance does not work, the better it will be for all of us.”