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African insurers ignore N 3.75 tn premium from micro-insurance

By Patience Saghana
A whooping N 3.75 trillion premium is currently beckoning on insurance companies in Africa to be tapped in the micro-insurance market which the continent’s insurance market especially Nigeria, has ignored for too long.  Micro-insurance is insurance products that meet the needs of the poor.

In spite of the fact that insurance is a hard sell product, it could be thorny to persuade the poor to part with their precious cash to pay for a product like insurance that they assumed they may not need. African insurance companies have disregarded micro-insurance forgetting the fact that a little drop of water makes a mighty ocean.

The African insurance industry has for so long presumed that they know what their customers wanted rather than taking the pains to find out from them what they actually needed.

With the exception of Uganda, micro-insurance in Africa has not been developed, and this is worsened by the intoxicating premiums in government accounts, oil and gas and other fast income generating classes of insurance business.

Just about 14 million Africans use micro-insurance in spite of the fact that the number of African policyholders has increased by 80 per cent in the last five years, according to International Labour Organisation. The figure is still a fraction of the potential market in micro-insurance. Though Nigeria’s insurance industry is gradually waking up to the vast market in micro-insurance, the magnet from huge premium-generating classes of insurance will not allow them see the potentials in the micro-insurance market.

Mr Fola Daniel, Nigerian Insurance Commissioner said that African governments have helped to restore considerable confidence in the sector through financial services sector in the various African countries. Government reforms in the African financial service sector through recapitalisation, he believes, are aimed at restoring confidence of the public in the market thus enhancing capacity and international competitiveness of local operators.

He further said that, “With the increasing awareness and alignment of insurance with international standards, it is foreseeable that the era of statutory capital requirement will soon become a thing of the past rather, risk-based capital requirement will become attractive as it allows companies to grow at their own pace and size.”

The Prime Minister of Tanzania, Jakaya Mrisho Kikwete at the 36th African Insurance Organisation (AIO) General  Assembly/Conference held at Ubungo Plaza, Dar Es Salaam, Tanzania, pointed out that insurance business all over the world rely solely on the proficiency of insurance companies in a given continent to be able to sufficiently command the interest of customers to buy their products.

According to him, “Insurance business globally has always depended on the skills of the distributor. Besides, the insurance product is of an intangible nature and the insurance concept itself is less understood by the general masses in Africa “.

“In this regard”, he further stated, “it has to be appreciated that unless the distributor is a wholesome professional rather than a mere insurance person, the African insurance industry will take a long time to move up to the next level where the common public can access their insurance services and plan their insurance portfolio themselves.”

He believes that success of insurance market in Africa depends to a greater extent on the efficacy of the distributor. Insurance distributors in Africa, Kikwete said, have a key role to play in enhancing product visibility through awareness creation and sensitisation of the market.

According to him; “For a number of years, insurance has been of interest to only a fraction of the population in Africa. The theme is therefore very relevant and also a wake up call for all stakeholders to figure out what I would call ‘wide outreach’.

“Our business is unique and leaves no sphere untouched, with every fresh discovery and every new invention come a new challenge for our business, adding that the African insurance industry over the decades has surmounted many challenges and meeting the changing need of today’s insurance industry customers would not be an exception”. Mr Johnnie Wilcox, Managing Director of United African Insurance Brokers (UAIB) said that African insurance industry has for too long assumed that they knew what their customers wanted rather than taking the pain to find out from the customers themselves what they actually want.
He admitted that African insurance industry had for too long taken the needs of their clients for granted. “A lot of things have not been done in the past in the insurance industry. We only assumed we knew what the insurance industry customers want but we have not really asked them what they wanted,” he said. Another issue that is critical to the sector, Wilcox noted, was making insurance relevant to the grassroots people. “We really need to have some product for them which they can afford so that the rural population can have one form of insurance or another to buy,” he stated.

A lot of insurance companies in Africa, the UAIB boss confessed, had ignored micro-insurance thus running after corporate and institutional business. Insurance brokers, he said, though had little or nothing to do with micro-insurance but he was of the view that insurance agents would be more relevant to micro-insurance than brokers.

Nevertheless, Wilcox said that if only insurance brokers could look closely at micro-insurance, they would find a role to play in generating the needed awareness and create a vehicle to reach out to the grassroots.

Mr. Femi Okunniyi, Managing Director of Goldlink Insurance Plc, said insurance industry in Africa must be able to create product that best meets the needs of the sector’s clients. He said there is a distinctive difference between marketing insurance and selling insurance.

Okuniyi said, “The moment a company begins to look at profit as a major factor of establishing the company, it will miss the track of insurance businesses. A company must first of all render good service and also satisfy the needs of its customers after which it will make profit”.

Mr. Solomon Samba, Managing Director of Aureol Insurance Company, Sierra Leone blamed the African insurance industry for the low awareness of insurance which is the result of low penetration of insurance. He believes that inadequacy of insurance awareness in the continent was as a result of the fact that insurance operators have not lived up to their responsibilities in that regard.
His words: “We will take the blame because insurance industry in the African continent has not done enough in creating the desired awareness”.

He, however, stated that all was not as bad as it looked concerning creating the needed awareness. “Insurance companies are becoming responsive to their responsibilities to the public as relates to insurance and its services,” he said.

Prof Joe Irukwu, Insurance Law Review Committee Chairman said that over regulation of the industry in some jurisdictions has constituted barriers to micro insurance.

Irukwu, ardent believer in micro-insurance stated, “Overlapping regulations can create problems for micro insurance design and delivery. For example, different supervisors or regulators exercise some modicum of control over the same organisation”
“If we really desire to promote a viable micro-insurance industry, we must remove those existing regulatory barriers to the effective distribution of micro-insurance”

According to him’ “Other regulatory barriers that should be addressed include such matters as agency commission. The limitations on the commission offered to an agent may hinder the development of micro-insurance, especially in the areas of life insurance and the need for the protection of the life funds from getting depleted, due to expensive distribution structures”.

He advised that “a positive and flexible regulatory environment is necessary for the development of micro-insurance. It would be reasonable to state that the basic legal framework exists that should allow for micro-insurance to thrive in the country.”

He however implored insurance operators to key into the numerous potentials that micro-insurance has to offer the sector and make good use of it.


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