In this interview with EDIDIONG IKPOTO, the Group Chairman of Mutual Benefits Assurance Plc, Akin Ogunbiyi, speaks on a number of the challenges hindering the expansion of the insurance industry in Nigeria
HOW would you assess the insurance industry, contemplating its low belief index in comparison with different sub-sectors of the monetary sector?
Even although insurance is over 100 years in Nigeria, it’s nonetheless at an infancy stage. If I’m not mistaken, insurance penetration in Nigeria at present remains to be underneath 0.25, and that quantity has been quoted within the final 10 years. In truth, I’ve had them quote it within the final 20 years. To be frank, once I got here into the industry, they had been nonetheless quoting 0.25, and that state of affairs may be very unlucky.
Insurance has centered majorly on the company finish. There hasn’t been any try in any way to penetrate the casual sector. This is as a result of if insurance is to develop, it’s the casual sector the place each transaction that occurs in Nigeria at present is on a ratio of 1:9. That means it’s one per cent for the formal sector and 9 per cent for the casual sector. The casual sector gamers will not be captured in statistics in any means. If you get to Idumota, trillions of naira transactions go on there. If you get to main markets throughout the nation, it’s the identical expertise.
So, I’d say insurance shouldn’t be developed. We focus majorly on company insurance. If you have a look at the big-time gamers, the place do you discover them? You discover them within the cities. There are corporations whose technique is to work on a regional foundation. The top-flight insurance corporations shouldn’t have branches all over the place. They have in Lagos, they’ve in Kaduna, they’ve in Abuja and so they have in Port Harcourt. All the big-time insurance corporations which have ever operated have carried on their business this fashion. Nobody has actually taken time to develop the casual sector.
The National Insurance Commission (NAICOM) not too long ago suspended the licences of some massive gamers within the industry. Should we count on to see extra of this?
I actually want we had very highly effective, affordable regulations. We have had corporations which were on the brink, however the boldness to sanitise the industry was not there. If you have a look at the businesses distorting the market at present, it’s nonetheless these massive gamers. They dictate for NAICOM. When you may have the regulated dictating for the regulator, it’s a main problem. We have all the time had these challenges. All the insurance corporations that went underneath died pure deaths, not as a result of NAICOM was concerned, not as a result of NAICOM did what they had been speculated to do. If NAICOM did what they had been speculated to do, they might have taken their licences. They allowed them to die pure deaths as a result of there was no boldness on the a part of NAICOM to do the proper factor. People say we’re over-regulated, however it is just on a capital base that they’re all the time mentioning. We will not be over-regulated wherever. NAICOM doesn’t have the capability to successfully supervise this industry. They don’t have the capability to do what the Central Bank of Nigeria was doing to banks. We would have executed higher within the insurance industry if there had been strong regulations. People say there’s over-regulation, however I’m telling you, now we have extraordinarily weak regulations.
How would you fee the capability of insurance corporations as pension managers?
Before the Pension Reform Act, which fashioned PENCOM, got here up, the insurance industry had the good thing about underwriting pensions. However, as a result of there was no supervision, the identical expertise that persons are having now was the expertise at the moment. You do your funding financial savings scheme and when the time lapses so that you can acquire your cash, insurance begins telling you tales, and it wasn’t a lot that the individuals didn’t get direct advantages. Not all of the insurance corporations had been doing that, but when there had been efficient supervision, they might have sanitised the industry at the moment. But have a look at since they got here up with pension contributions, the Pension Act that took that pension straight from the insurance industry to the federal government companies, what number of trillions do now we have?
The Market Development and Restructuring initiative (MDRI) was to take as much as N1 trillion in 2012. By 2022, we had been nonetheless at 400,000. The good factor that the legislation did was the low premium, low cowl that made positive everyone paid for insurance premium. Now, now we have a pension. The authorities made it obligatory and that is the position that I maintain saying that NAICOM can play. If NAICOM had come to the rescue of the industry after we had that pension, we’d have been speaking of a number of trillions of naira as revenue now.
Fola Adeola interviewed me and I gave him the thought. I didn’t know he was going to do it for the federal government. But the purpose is, the way in which the pension is run, what are we utilizing it for? How is it simple for individuals to get their advantages? The identical problem that we had been having with the insurance industry remains to be there. In truth, it’s now larger as a result of what’s at stake is way bigger and greater than what was at stake at the moment. If you test the pension account now, how will you borrow some individuals’s cash? The Federal Government was borrowing from the pension fund, and so they have taken all the things. So, individuals retire at present, what occurs to them? People who retired yesterday, what occurs to them? This is the disaster. It is unlucky. So, the individuals operating the pension workplace haven’t any cash to settle anyone. Yes, you may put pension belongings in infrastructural improvement that may generate money circulation over a time period. When the federal government borrows it, go and ask the place the trillions are. It is in personal pockets.
There is nothing incorrect with taking cash. America is essentially the most leveraged on this planet now and but is the wealthiest. You can borrow cash, you might be leveraged however once you take cash, what are we going to make use of it for?
What are your ideas on capitalisation and native content material emphasis within the industry?
I’ll inform you right away. It nonetheless boils all the way down to NAICOM. We have the capability to tackle any threat on this market. We don’t even have to get to N10 billion or N8 billion, however we’re there now. Look on the industry, they stated we don’t have capability, let’s increase capability for you. They went to courtroom to cease that legislation on capitalisation. But even earlier than then, I’d say we don’t even have to do past N2 billion and N3 billion. What is the essence of reinsurance? The re-insurance that now we have offers us multiples of capability, however now we have not used it.
Now, now we have bought to N18 billion. How a lot do you want to begin a financial institution? You want N25 billion, and there’s nothing this authorities will do this the cash is not going to cross by way of the financial institution. So, the financial institution will make free cash. I say it’s in insurance that you’ve the creativity and ingenuity of selling, however banks simply take free cash. As you’re seated now, for those who ship cash to somebody, they’ll take your cash.
How would you fee the compliance of industry gamers with moral requirements of the industry?
Unethical follow is the bane of this industry. I’ve stated it, it’s nonetheless taking place. I delivered a paper at CIN on improvement and I stated the individuals killing this industry had been two teams: the large brokers and the large underwriters. I stated it brazenly. The massive brokers compete on the idea of worth and never on the idea of service. So, if one thing is N1 billion, for them to get their reduce, it is going to be mainly on pricing. They will worth themselves as little as attainable. Sometimes, you may name N1 billion premium. They can do it for N50 million. They will compete amongst themselves and they’re going to carry it all the way down to N50m. Who loses? Well, the industry loses. The massive brokers and the large underwriters are those.
I as soon as had a private expertise with a dealer. He stated, “Look, I am a broker. I want this business. Whether I quote it one naira or not, as long as I have my commission, when anything happens, it is his (insurance company) problem.”
That was what he advised me. When you speak of unethical practices, NAICOM has a giant position to play. If the lending fee within the nation is 22 per cent, meaning the financial savings curiosity might be about eight or 9 per cent and a financial institution says, “I’ll give you 60 per cent return on your money,” will the Central Bank of Nigeria permit that financial institution to run? So, what are you regulating when the regulator is saying that the industry has given so many reductions? Who are the businesses concerned? What have you ever executed to them? NAICOM must be up and doing. We have a greater means of doing it now. There is know-how, and so they can regulate us higher.
There remains to be untapped potential within the insurance industry. What are you able to say to younger individuals who need a profession on this sector?
I nonetheless say that the insurance sector has large potential. As it’s at present, I don’t suppose the statistics have modified, however I believe if we’re nonetheless at 0.25 penetration, meaning there’s alternative for improvement for the sector. For the younger ones, get professionally certified, learn loads. In these youthful days, I learn loads to get concepts. The globalisation of the world at present has made it simpler for anyone who desires to do something. So, there’s nothing new you wish to do within the industry. Rather, you may copy and see the way it can work.
You must be forthright and have an urge for food for risk-taking. It could not have to take a lot threat as I’ve executed. For the younger ones, there are loads of alternatives within the insurance industry. I wish to encourage them to start out. Try and see how one can problem the established order, and issues will fall in line.
