Unprecedented. Challenging. Outstanding. Stable. These are some of the words that have described the state of the insurance industry in Nigeria for 2022 and the reasons are not far-fetched. They are revealed in the numbers, as the industry has recorded higher Gross Written Premium, higher Total Assets and paid out more in Claims, according to recent announcements from the regulator, National Insurance Commission (NAICOM) corroborated by National Bureau of Statistics (NBS).

However, these reports did not mention the number of policyholders, the Total Liabilities and Expense to Income Ratio amongst others to enable industry analysts see the balanced picture, and possibly consider any changes there might be in terms of the level of contribution by the insurance industry to Nigeria's Gross Domestic Product (GDP)!

Indeed, all these have been within the same year that the rate of inflation in Nigeria reached its highest, same as the exchange rate of Naira to the US Dollar.

Equally, the effect on the ranking of insurance companies in Africa, which revealed that, for the first time in some years, no Nigerian insurance company was listed amongst the first 20 could not be ignored.

Insurance is, and remains, a BUSINESS of NUMBERS and any reportage that does not provide the full picture would mislead the public.

Truth is, the insurance industry in Nigeria, still faces huge challenges bordering on financial capacity, organizational capabilities and public confidence; issues that need to be urgently and strategically addressed.

NAICOM, under the current leadership of Sunday Thomas, has shown readiness and determination to recreate the Nigerian insurance market and make room for the broad adoption of technology and collaboration towards achieving real growth but the impact of its actions are seemingly not aligned with the pace of the insurance operators.

Many initiatives are still at the starting block either due to the delay in signing the Insurance Amendments Bill into law or the focus of the insurance operators on premium-ready opportunities rather than areas that require activities towards implementation. For example, the insurance of public buildings, which was aggressively pushed by NAICOM, especially with the much publicized partnership with the Federal Fire Service, but yet to commence. 

It is important to note that as 2022 closed, the key elements of recapitalization and passage of the bill, which would have put the insurance industry in Nigeria on the path of transformation, did not happen and may have become huge setbacks that 2023 will expose.

Is 2023 the Year of Consolidation?

Despite the failures experienced regarding recapitalization and passage of the bill, NAICOM responded vigorously to win 2022 from the insurance operators - insurers, reinsurers, brokers, agents, loss adjusters and consultants, a trend that will likely continue in 2023 as NAICOM has already set the tone with two critical actions lately. First was the announcements requiring insurance companies to comply with the Code of Good Governance on tenure for Managing Directors and Executive Directors, then the new Premium Rates for Motor Insurance released days ago.

Coupled with the commencement of the implementation of the International Financial Reporting System (IFRS) and Risk-based Supervision in 2023, the insurance operators with minimal strategic framework will have no choice than to give 70 percent of their time to regulatory demands.

The concern therefore becomes how much attention would be given to the buyers and users of insurance as well as the potential market that needs to be engaged, enlightened and educated about insurance and, equally so, insurtech that is increasingly becoming the aspect of the insurance industry giving the insuring public some sense of the value and benefits that insurance offers.

This is the first point where consolidation would be necessary in 2023 for the insurance industry in Nigeria! Engagement, enlightenment and education of the existing and potential insurance policyholders (customers), which I also call "The 3Es of Insurance Market Development".

With the effective and influential position NAICOM has put itself as earlier described, the regulator would be best suited to drive the consolidation of efforts by insurance operators to implement the 3Es. Industry analysts have watched how past efforts had been inconclusive because most insurance companies were unwilling to invest in the collective approach in addition to their own budgetary spend on branding and communication. 

Therefore, it is suggested that NAICOM again takes the responsibility to aggressively drive the 3Es as part of its priority actions on market development, this time with the involvement of agents, brokers, loss adjusters, policyholders, reinsurers and independent insurance professionals as well as selected members of the media. Such an all-inclusive standing body will become responsible for developing and implementing the Consolidated Public Communication Programme based on a simple and practical framework that will enable regular interactions with policyholders leveraged on insurtech. With NAICOM's Portal in full gear, a section could be dedicated to the activities of the body and its reports well captured for future references and analyses.

For example, we have seen the sustained efforts of NCRIB, the trade association of the Insurance Brokers, especially in Abuja during its monthly meetings throughout 2022 using Street Walks to engage the public, and the feedback has been quite positive after every outing. While this may seem targeted at the everyday Nigerian, other traditional and new media should be used to interact with others, especially SMEs, in a more sustainable manner led by NAICOM.

Additionally, NAICOM is overdue for a sponsored weekly programme on national television and hopefully, we will see this as proof of the consolidated action for the engagement, enlightenment and education of the insuring public come 2023! All said, a NAICOM-driven Consolidated Public Communication Programme would most likely receive collaborative support from international and local not-for-profit organizations in this regard.

Next will be the consolidation of efforts to have more capacity to retain businesses and premiums ferried abroad. What will it take for the domestic market to increase its capacity? Is there a deliberate action driven, again, by the regulator to change our story? In 2020, NAICOM took a bold step to invest in the sponsored training of persons that will qualify as Actuaries with a view to deepening the reliance of actuarial assessments and valuations in the insurance industry in Nigeria. Today, more Actuaries operate in Nigeria and more companies have them to deploy their expertise regularly, like other professionals.

So, regarding the need of the market for increased technical capacity for underwriting special risks, NAICOM is better positioned to find the right collaboration to work on towards achieving this. It could begin with deliberate capacity building programmes in-country or abroad for the Executive Directors in charge of Technical across all insurance companies, with consequent options to employ relevant experts into designated companies considered ready to accommodate them. The hundreds of billions of Naira remitted as share of premium on certain risks can be strategically reduced in future with the suggested intentional approach to addressing the poor level of capacity we have.

Another area of consolidation, which we are more familiar with, is the financial aspect to address the concerns of retaining certain risks locally and more importantly, being in the position to settle and pay claims promptly. What to do with insurance companies that are financially weak and unable to meet their obligations continues to be nightmarish for NAICOM, in my view. It is to be considered that in the season of harsh economic dispensation as we are experiencing now, it is better to have a Special Consolidation Program (SCP) for repositioning these financially weak companies than to cancel their Certificates of Registration as we saw in the recent past.

With hindsight, it does seem, especially in the interests of policyholders and investors, better to manage these companies under SCP. Presently, most of the affected insurance companies were renowned market leaders that suffered from mismanagement and unprofessional conducts of their authorized signatories as well as the indecisiveness at regulatory level; therefore they still have the names, which when brought together could become near viable and ready to compete again.

While the challenges may look protracted and peculiar to each entity, it is clear that mismanagement was the cause of the problem and professionally sound managers in different respects would be required to turnaround their collective fortunes under the SCP. This option should be necessarily considered as it would restore the confidence of their policyholders and claimants, rather than expose them to the vagaries of dealing with the fallout of withdrawal of licences as we have seen with the last decision.

Customer Education and Insurers Apathy

Deep market analysis of the insurance industry in Nigeria has revealed that there is a serious level of apathy amongst insurance companies, except very few, to engage customers or the insuring public from where they get premiums or expect to get premiums. This is because there is an unspoken contest between the one school of thought that is afraid of sharing knowledge of the insurance business with customers thereby receiving more claims requests and another school of thought, which posits that the more people understand the workings of insurance, the more they are likely to see value and buy rather than wait to be compelled by law to buy.

May be it is simpler to say that some professionals and practitioners, at leadership level in the insurance industry in Nigeria, see insurance as a professional service that the public will come looking for, while others see and understand insurance to be a business that should be driven using all known principles of business to achieve outstanding results, especially when the capital required by the regulatory entity are provided by investors!

It is the latter that invests comparatively more than the former in the engagement, enlightenment and education of the insuring public. Further study revealed that ninety percent of their customers speak positively about them and would readily recommend them to others.

Yet, the level of customer education required to cover the gap calls for the concerted efforts of all insurance companies, indeed operators as mentioned earlier, if we desire to see more individuals in the insurance net in Nigeria. Some analysts have described it as a mindset challenge that might become more obvious in 2023.

Take the announcement of the new Premium Rates for Motor Insurance by NAICOM for example. There has not been such an overwhelming response as would be expected from the insurance operators with respect to the education of policyholders, especially given the short notice by NAICOM, which in the first instance was expected to be managed by the insurance companies. Announcements, either made or anticipated, should provide a basis for engagement, enlightenment and education.

While in "the other sector", you would by the day after the announcement be receiving short messages and emails and seeing online banners explaining the benefits to you, that thing I have chosen to call "Insurers' Apathy" has hindered the insurance companies from making any public follow-up releases till date, with the view to educating their customers. Interestingly, any of the insurers licensed to transact Motor Insurance will readily follow the call that a customer is ready to pay the new premium based on the directive of the regulator.

In 2023, how insurance companies engage their existing and potential customers will determine the condition of the market in terms of customer behaviour, premium growth, product offerings, customer service, profitability and performance.

Overall, insurance industry leaders at both regulatory and operational levels will have to work together more towards creating a conducive and friendly environment for Nigerians who have embraced insurance and those who are yet to do so beyond the compulsory classes of insurance.

The evidence of promise keepers are seen in the promises that have been fulfilled!

Welcome to 2023.

About The Author 

Ekerete Olawoye Gam-Ikon, MNIM, CPP, is a management consultant with a specialization in Strategy and Insurance. You can contact him via e:mail [email protected] and mobile +234-806-648-1111