Monday,September 09, 2019 /   07.30AM   / Ottoabasi Abasiekong forProshare WebTV / Header Image Credit: WebTV 

The rollout of Micro-Insurance and Adoption of Technology will go a longway in deepening the Nigerian Insurance sector. 

This was part of the submission of the report on, "Nigerian InsuranceIndustry: From the Lagoon to the Ocean" published by Coronation Merchant Bank'sResearch Team. 

In the wake of the new recapitalization drive of the National InsuranceCommission, NAICOM by June 2020, the Head of Research for Coronation MerchantBank  Mr. Guy Czartoryski in a briefing with financial correspondents, gaveinsight into how the insurance landscape will be transformed beyond 2020. 

He acknowledged the fact that at the moment the Nigerian InsuranceIndustry is under-developed with a current total capitalization of N300bn forall the insurance companies. 

Czartoryski noted that in real terms the insurance industry has notgrown in the last 10 years, as insurance penetration at 0.31% compared poorlyto India's penetration of 3.69%. 

He said that without growth and scale, the average return on equity forinsurance companies will remain low. 

Speaking further on the planned recapitalization circular published byNAICOM in May, 2019, Czartoryski said Coronation Merchant Bank Research estimatesthat 22% of insurance companies complied with the new capital requirements. 

The Merchant Bank's report projects that the NAICOM recapitalizationrequirement will reduce insurance companies from 59 to 25. 

Also, the report noted that 36% of insurers met less than 50% of thecapital requirement, 21% met 50% of the capital requirement, and 21% met 75% ofthe capital requirement. 

According to him the NAICOM circular has led to a new round of capitalraising from companies like AIICO, LASACO, NEM (purchased by AFIG); SovereignTrust; Royal Exchange General (bought by InsuResilience); amongst others. 

Emphasizing the need for driving micro-insurance, Czartoryski cited India as an example of a country that has achieved 3.69% penetration,because of driving a robust micro-insurance policy supported by the state. 

He stressed that Micro-insurance has a role in educating the market andbuilding trust in the industry, which has contributed to the steady rise in thepenetration and density of the Indian Insurance sector. 

Coronation Merchant Bank's head of research also identified Ghana as theAfrican example that has successfully implemented micro-insurance, whichtranslated to a Compound Annual Growth Rate, CAGR, of 6.9% between 2013 to2017. 

On the role of technology in deepening insurance penetration, hehighlighted the following opportunities;

• 38.5m Bank Verification Numbers, BVNs - Opportunity for bancassurance
• 172.9m SIM Cards - Opportunity forDistributing Insurance with Telcos
• Technology that transformed bankingindustry can be applied to the insurance industry, which can lead to asignificant lead in customer base from thousands to millions.

He also believed that enhanced dialogue with regulators like the CentralBank of Nigeria, CBN and the Nigerian Communications Commission, NCC can unlockthe opportunity for the insurance industry in the country to witnesssignificant growth and scale. 

Czartoryski also acknowledged the banking sector reforms andrecapitalization of 2004, that reduced the number of banks from 89 to 25, andstated that between 2004-2019, the banks achieved a CAGR of 27.9%. 

He believed that with effective recapitalization of the insuranceindustry in 2020, the sector would witness remarkable growth over the nextdecade. 

Key areas he identified as potential  drivers of transformation ofthe insurance industry include;

• Utilization of Data
• Ensuring proper identity checks
• Engaging Tech and Telcos

On the recapitalization he said "The key element which has been lackingover the past ten years is growth. Only with significant future growth can the recapitalisation of the insurance industry be justified".

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