For the insurance industry to contribute meaningfully to the development of the national economy; there is the need to make it more attractive so that the insuring public can voluntarily buy into it.
To achieve this objective, experts have canvassed more insurance awareness and innovative products that can meet the needs of the insuring public.
To address the problem of low contribution to the economy, the National Insurance Commission has encouraged all insurers and reinsurers to establish Research and Business Development departments for their operations.
Through the recent operational guidelines issued to the operators to encourage new product development, the commission waived the payment of processing fee for new products.
By this, it hoped that the operators would be more encouraged to come up with products that would be attractive to members of the public.
The Chief Business Analyst, North Waterloo Farmers Mutual Insurance Company, Canada, Mr. Kehinde Borisade, said factors responsible for low insurance awareness in the country included low awareness of insurance benefits as a factor for economic empowerment and peace of mind.
He also identified low level of employment and disposable income, as well as a shrinking middle class as other factors affecting insurance awareness in Nigeria.
According to him, the economy is largely driven by the informal sector, which does not believe in insurance protection, and there is the lack of confidence in insurance companies in the event of claims settlement with the fear that they may renege on settlement.
“Ineffective enforcement of regulations such as the mandatory Motor Vehicle Third Party Insurance, Occupiers Liability Insurance and Builders Liability Insurance is also affecting the sector,” Borisade said.
He observed that religious and superstitious beliefs were also hindering insurance development in the country.
On the supply side, he said inadequate technological infrastructure to deliver insurance products to end users in the country, compared to the western world where technology played a pivotal role in driving insurance process, distribution and contracts, was another hindrance.
On the part of the operators, Borisade said, “Price wars, indiscipline, unethical practices and rivalry among insurance companies, resulting in inappropriate pricing of insurance products and the lack of innovation in product design and packaging to prospective customer hinder the sector’s growth.”
The Group Managing Director, Mutual Benefits Assurance Plc, Mr. Akin Ogunbiyi, said insurance was significant and should actually contribute more to the national economy but was not currently doing so.
He noted that insurance should be the backbone of any national economy.
“Insurance is a medium through which you can put funds together and make them available for long-term investment in other sectors. But unfortunately, the way we are doing insurance in Nigeria today is a non-starter,” Ogunbiyi said.
Available statistics, he said, revealed that the level of insurance penetration in Nigeria was low compared to the potential.
“Today, there is no reason why insurance should not be the mother of the national economy if you are able to mobilize up to 25 per cent of insurance potential in Nigeria ,” Ogunbiyi said.
To increase local participation, he emphasized the need for operators to pay more attention to retail insurance as much as they had done with corporate business.
The Group Managing Director, Lasaco Assurance Plc, Mr. Olusola Ladipo-Ajayi, said that operators were ensuring that they did business in the right way as part of efforts to increase the visibility of insurance in the country.
He said, “The way to increase our visibility is doing our business right and educating the people. Any society where insurance is not doing well is an underdeveloped economy.
“Insurance is the backbone of commerce and industry anywhere in the world because without the confidence and security that insurance brings, enterprises face huge risks.”
According to him, there is no way anybody can do serious business without having insurance backup.
Ladipo-Ajayi also identified the undeveloped credit system in the country as another impediment to insurance development.
He said, “If the credit system is well developed, the surplus sector of the economy can sponsor the deficit sector of the economy.
“By deficit, it doesn’t mean that they don’t have money, they have things to do, which cost more money than they can afford, and the surplus sector has more money than what they want to do instead of the money been idle, the financial system will transfer the idle fund into the active deficit sector.”
Ladipo-Ajayi said such a system could not work unless it had insurance as its bedrock.
He also said that if insurance was not doing well in Nigeria, it was because the country was not doing well in commerce and industry.
The Lasaco boss said, “Insurance needs to move at a faster rate in order to contribute better to the Gross Domestic Product and bear more risks in the country.
“There is low insurance awareness, people don’t understand insurance, and this has reduced their participation and eroded most of our responsibilities to the insuring public.”