OBG talks to Fola Daniel, Commissioner for Insurance, National Insurance Commission (NAICOM)

Interview: Fola Daniel

To what extent is there room for consolidation in the global insurance market?

FOLA DANIEL: Companies will have to merge if they want to become larger and serve customers better. With a population of 1.3bn, China has 52 insurance companies, while India, with a population of 1.1bn, has 32 insurance firms. Meanwhile, South Africa has a total of 15. At present, Nigeria has 59 insurance groups, but NAICOM is developing the industry to have fewer, but stronger and more viable firms. We would like to have about 15 firms that could pay claims promptly and develop innovative products to the market. NAICOM would like to see firms focus on market expansion rather than mere premium growth. At present, limited distribution outlets are preventing market players from expanding, as they are limited to insurance brokers, which results in unhealthy competition. We would ultimately like to see more collaboration among banks and other organisations to cross-sell insurance and other products.

What new distribution channels have the potential to increase penetration?

DANIEL: Despite the Central Bank of Nigeria’s divestment guidelines for banks, insurance companies are still able to have bancassurance agreements and alliances with banks to sell insurance. Also, microfinance banks are selling micro-insurance credit life products via partnerships with insurance companies. In addition, many insurers are adopting a direct sales method and are relying more on their own agents and representatives, while brokers are still used for specialised products and segments of the market. There is also the increasing use of online insurance purchase.

How can the insurance industry develop and aggregate personal data on the Nigerian population?

DANIEL: Surveys reveal that out of 168m people only 4m have insurance. This reinforces the need for adequate data on consumers so that insurers can design products suitable for them. Insurance companies have been partnering with organisations such as the Federal Road Safety Corps and vehicle licensing agencies, with data being built into the proposed new electronic vehicle licence to ensure that insurance is obtained before an eligible individual can drive. These measures will boost insurance patronage. Further, the Nigeria Insurers Association has launched the Insurance Industry Database project, whereby details of vehicles’ insurance policies uploaded onto a database can be accessed by law enforcement agencies. There is also partnership at the level of the fire service and state government.

What scope exists for take-up of insurance products among unbanked Nigerians?

DANIEL: Although only 4% of Nigerians have insurance compared to 35% of the adult population with bank accounts, there is plenty of room for expansion. Hampering growth, however, is a resistance often due to religious or cultural beliefs. With the introduction of takaful (Islamic insurance) we will see a rise in the number of insurance products available to the unbanked.

Low disposable income and standard of living has also adversely affected insurance uptake. Low-cost microinsurance products could expand the sector’s reach and there are currently many informal cooperative societies using insurance models to save and provide for the future. Microinsurance will formalise the various societies and cooperatives in existence.

In what way can insurers be supported in a profitable roll-out of new lower-end products?

DANIEL: There is a need for greater adequacy of data on Nigerian consumers, including data on the number of vehicles and households. To understand the market, insurers may also need to involve the target market in designing the products. On the demand side, NAICOM has been embarking on consumer education and financial literacy campaigns for people to be aware of the benefits of insurance. The roll-out of agricultural policies is effective as they are tied to loans from the banks.