I have noticed that each time people attempt to make a case for the development of life insurance in Nigeria, they usually start by going memory lane to talk about how insurance started in the country, following which they proceed to analyze data upon data, most of which are from the World Bank, United Nations or Swiss Re. They then end up exerting so much energy on the decays in the Nigerian insurance industry. If care is not taken, by the time you finish such reports, you may be tempted to conclude that the Nigerian insurance industry is a “no go” area.
This post is different. It is not about those World Bank or United Nations figures on Nigerian economy. It is not about castigating my well respected industry. And it is not about crucifying the Nigerian public for not seeing the needs for life insurance. Instead, the article is about the basic, verifiable facts that qualify Nigeria as a luxuriant country where life insurance can have a place.
The preceding paragraph suggests that life insurance is not occupying an enviable position at the moment. That is true, and I need not dwell too much on it. Everyone knows that the insurance industry as a whole contributes less than 1% (appx. 0.72%) to the country’s GDP, and it ranks as one of the lowest in the world insurance market.
In its efforts to ensure that the Nigerian insurance industry** becomes a better player in the financial sector, the supervisory body, National Insurance Commission (NAICOM) introduced a new project called Market Development Restructuring Initiative (MDRI) in December 2010. This medium term plan of the Commission covers the enforcement of compulsory insurance products in Nigeria, sanitization and modernization of insurance agency system, wiping out of fake insurance institutions, and risk-based supervision. With this project, the insurance industry’s contribution to the country’s GDP is expected to rise from less than 1% to 4% in 2012. This is expected to be realized with a gross premium of N1 trillion in the year (2012). NAICOM also thinks that the Initiative will create additional 250,000 jobs in the market, build consumer trust and confidence, and lower the insurance gap in the country from about 94% to 70%.
** Nigerian Insurance Industry
- Number of specialist life companies 17
- Number of non-life companies 32
- Number of composite companies 10
- Number of reinsurance companies 02
- Number of insurance brokers 706
- Number of Loss Adjusters 60
- Number insurance agents 1,668
Source: National Insurance Commission website
One of the questions that any keen observer would be asking is, “What gives the confidence that the expectations can be met?” To answer this, NAICOM has listed a number of action steps aimed at achieving the set objectives, and necessary implementation has since commenced.
Although, fears have been expressed in certain quarters that it would be difficult to move from the present premium income of less than N200 billion to N1 trillion in 2012, I believe that the potentials to get to that level very much exist in the country. But I equally share the concern expressed on the timeline for the huge jump.
While the MDRI project places a lot of emphasis on the enforcement of existing laws on compulsory insurances, I think there are other factors that should make the industry perform better. For the purpose of this article, I want to take a look at only six factors in relation to life insurance business.
Insurance operates on a law of large number. The elementary insurance course teaches us that insurance is “a pool of fund.” A number of people contribute an amount into a common “pot” and those few among them that suffer a loss are compensated from the “pot.” This therefore means that the larger the number of people making such contributions, the larger would be the available fund in the common “pot of fund.”
Nigeria is the most populous country in Africa with about 160 million people. This, alone, is a key opportunity that insurance practitioners could tap on. “But you are one of them,” you may think. Yes, I agree. We seem not to be doing enough as practitioners in the industry to vigorously take advantage of our large number as a nation.
Let’s do a quick arithmetic like businessmen. If our industry could sell to just about 10% of Nigerians (16 million) with each of them paying N2,000 per month as premium, that gives us about N400 billion in a year!
Of course, the business of life insurance is not as simple as that. But I believe we can make it simple for people. When one does this kind of arithmetic for an average insurance practitioner in the country, tendency is for him to start raising various issues that could make it impossible to achieve the figures. He would most likely bring up issues such as poverty level, lack of awareness, religion etc.
Yes, those issues may be there, but they can be addressed and defeated. How? You may ask. Well, I have some solutions which, understandably, I shouldn’t be expected to disclose here. It is suffice to reemphasis for the purpose of this article that the solutions are there for those who are ready to explore them wholeheartedly.
No doubt, you can have a large population but your product may not serve their needs. In that case, you cannot force anyone to buy from you.
The question, then, is: Does the Nigerian society have a need for life insurance? The answer is a resounding “Yes.” Our country is one in which people meet unexpected deaths every day. If it is not road accident, it would be fire incident. If it’s not fire incident, it would be armed robbery attack. If not armed robbery, it would be Boko Haram bombing or police “accidental discharge.” The list is unending.
I think many people are quite aware of the risks they face on a daily basis, but the onus seems to be for us as practitioners to tell them how life insurance can help out. This, of course, buttresses the point that “Insurance is Sold, and not Bought.”
If the population is there, and the needs for life insurance exist, what, then, are we waiting for as insurance practitioners? Clearly, we can up the life insurance game in Nigeria.
3. Family passion
Family passion? Don’t bother to figure that out. I will explain myself. Nigerians are the most passionate people on earth (seriously!). We care so much about our wives, husbands, children, in-laws, church members, mosque members, colleagues …just name it. But we don’t seem to love our enemies that much because we rain “fire” on them in the churches every day.
Since life insurance is a business of love, Nigerians are the best prospects any insurance practitioner can have. It is a man who cares for his family that can think of effecting life insurance on his own life for their benefits. It is a man who loves his children that can do without food for the sake of paying his children’s school fees. And it is a man with passion that can think about using life insurance to take care of his need.
So, my point is that Nigeria as a country has the population; its people have a great need for life insurance; and they can quickly understand what an insurance practitioner is telling them because they have passion for the welfare of their family – even after death.
Again, why are we not capitalizing on this as insurance practitioners? Hmm, maybe I will table it at my industry’s next Professionals’ Forum.
4. Disposable Income
I’m sure some of you must have been waiting for me to get to this point. You must have been saying to yourself that, “How many people can afford to pay the insurance premium? How much are people earning in a month for life insurance premium to make their expenditure list? Many people in the country are too poor to be able to afford life insurance premiums, please!” Well, I disagree, and I will try to prove it to you that most Nigerians who earn some form of income can, indeed, afford to pay life insurance premium.
Let’s do a quick exercise. Take a walk around town. It doesn’t matter if you are in the village or in Lagos; there is a classical pattern you will see out there. In almost every street, you will find a number of beer parlors and pepper soup joints. In fact, the rate at which the joints are springing up these days is alarming! As it is in the villages, so it is in the cities. Beer joints are now competing neck to neck with churches! I even know of some houses here in Lagos where the churches and beer parlors are on the same building!
What am I driving at? If a man can afford to drink some bottles of beer and eat fish pepper soup, he can definitely afford to buy life insurance. A great majority of people fall within this beer drinking and pepper soup gulping group, so the market is there for the insurance practitioners.
The churches will also not be springing up in every nook and cranny if the attendees are not “blessing” the gospel!
Okay, you may not want to agree with the beer and pepper soup example because many people are now “born again.” How about the eateries: The Sweet Sensation, Mr. Bigg’s, and Tantalizers of this world? That’s few of the known names. There are also thousands that don’t have the name but command huge patronage. Don’t forget the cinemas, the shopping plazas, and, of course, the numerous street markets around. What do people spend in all those places? Money, of course! Why, then, is insurance not able to access their pockets?
If an average Nigerian man can see the value to be derived from buying life insurance, he would most likely forgo one or two bottles of beer and use the money to pay his premium. The question we should be asking as insurance professionals should therefore be, “How do we achieve this?” We should stop using poverty as an excuse for the low performance of our industry. That man or woman out there can afford to pay, but he/she is not seeing what should be paid for!
Nigerians generally are reasonable people. With due respect to our other West African brothers and sisters, I think Nigerians are much more sharp witted. A friend from one of the other West African countries once described the difference between Nigerians and his countrymen to me. He said that if you keep a Nigerian in a room and you say to him, “Please wait for me here, I will soon be back.” The man will surely wait for you, but if you don’t return to the room after about an hour or so, he would start to ask himself many questions, and you may not find him in the room by the time you return.
He then compared this situation with his kinsmen. According to him (honestly na him talk am o), his countryman would wait patiently for you without any question. You may decide to return to the room after three days, the man would be there…waiting! Spot the difference on your own. I have spoken in parables.
Now, considering their sharp wittedness, Nigerians can easily dribble you and that’s why many people associate them with 419s.
However, there is a positive side to this, most especially for the life insurance practitioners. When you have an intelligent client, you don’t have to waste too much time in explaining your products to him. He can reason well, and can quickly understand whatever value you are proposing to him.
Think about it this way: How come the telecom industry made very quick inroads into the hearts of millions of Nigerians? How come both the literates and illiterates are now carrying mobile phones about? It’s simple. They can see the value. They are intelligent.
6. The law
There are quite a number of laws supporting the growth of insurance in Nigeria. Those are actually the ones that NAICOM is using to drive the MDRI project as can be seen here.
However, let me briefly touch on the one that concerns the growth of life insurance – that is, the Pension Reform Act 2004 (PRA 2004). This law makes it compulsory for employers who have five or more employees to effect life insurance cover for them. The required benefit level is a minimum of three times the employee’s total emolument. No doubt, this is a solid legal backing for life insurance.
The law further opens a door of opportunities for life insurance practitioners by duly recognizing annuity as a veritable means of providing for employees’ retirement!
How well have we used this “legal key” as life insurance practitioners? I do agree that the level of compliance with PRA 2004 has not yet reached the expected point. However, when one compares the compliance level of the pension aspect of the law with that of the life insurance requirement, one would immediately see a marked gap.
Why is this so? How come the employers, most especially the small/medium sized ones, appear not to be giving the life insurance aspect of the law the same level of seriousness? What are we doing about the compliance level as insurance practitioners? If we can give this law the required attention and action, we will surely get the desired result. The law is there, it’s for us to act on it.
A careful reader of this post must have observed that I am canvassing for microinsurance for the generality of Nigerians – save for the bit I said about PRA 2004. That observation is right. If we had concentrated on “elitist products” for this long without achieving remarkable results, I think it is high time we returned to the drawing table.
In order to take advantage of our large population, we need the type of products that can appeal to the generality of people and, at the same time, be as affordable as possible for them. This is the route to go, and it is the route to prosperity for the industry.