By Patience Saghana
M r Pasca Egerue, Managing Director of Afribank insurance Brokers in this interview with Patience Saghana relays the tasking challenges in the industry especially in the broking arm. Egerue     touches on the Nigeria Local Content Act ad how the sector has fared n the last six months. Excerpts

Market share of insurance brokers is declining by the day. What is responsible for it?
Basically, what is responsible for this matter is the fact that most insurance underwriting firms are duplicating the function of the broker through their marketing departments, through their collaboration with international insurance brokers and of course, through their own direct intervention as intermediaries.

You will notice this more in the oil and gas sector where the insurance underwriting firms are the alternate and highly favoured brokers instead of the main stream registered insurance brokers.

The way the market in the oil and gas sector is structured, it does not favour the local broker and you can see this vividly in the various beat adverts of oil majors. In such adverts, you can hardly see where they are looking for brokers to take their business because it is taken for granted that the underwriting firms with the capacities they have will get this business and put them in the international market through the overseas brokers. So, that practically made the local brokers loses relevance in the scheme of things. In other arrears as well, brokers over time depended merely on the brokerage they earn from simple intermediation services. They were more or less blind to other services they can render in terms of product development and consultancy in various arrears of the emerging risks.

So, a large chunk of the emerging market has not been embraced by the brokers as a result of limited interest and limited skill to diversify their income base. In a little time, brokers will understand that they need to shift their focus; otherwise there would be a lot of troubles for them.

What’s your take on the NAICOM’s MDRI initiatives?
First of all, any market development initiative should be applauded. The reason is that, this market is more or less stagnated because persistently in the last ten, fifteen years we have not been able to do more than 15 percent penetration despite the huge opportunities open to the market. So, any market development effort is welcome, and I am particularly happy that the National Insurance Commission (NAICOM) is taking step in that direction.

Agency system is agency system, whether it relates to the broker or the primary agents. If it seems to favour the agents as opposed to brokers, I do not think that is the intension. Perhaps, the thinking is that we need to reach the grassroots and brokers must key into the initiative.

For example, there are so many things the broker can do, you can sell your franchise to these agents and mentor them in some specific mass market and be able to tap into what they are doing. It’s a question of being creative, innovative about these processes rather than fighting wars that are not suppose to be.

Can you give an assessment of operating environment in the last six months?
The business environment globally and locally has been very hectic. Of course, you are aware of the global financial crises that started with mortgage issue in the US which now cascaded to other sectors of the company. In Nigeria, the past six months has been a lot of struggle, trying to get it right in the money market, in the capital market and of course the insurance sector.

The crises in the capital market had its toll because companies especially in the financial services sector were mandated to make full provisioning and that in addition to deterioration of capital logically were consequent on the down turn in the market.

All these culminated in the very declining performance of companies. For the insurance industry, the Nigerian Insurers Association (NIA) has recently released their figures and the result reveal a less that N200 billion income. Looking at the result, the whole market performed below par because at the conclusion of capitalisation, it was obvious that the total industry capitalization was in excess of N200 billion. So, if the gross income of the same market is below N200 billion, then something is certainly wrong. And therefore, it will take a lot of efforts to be able to benefit shareholders. So, these are the circumstance under which companies have operated which has put so much pressure on the managers of these companies. The fear is that shareholders will soon start reacting to this obvious down turn.

What went wrong with Workmen’s Compensation that NSITF is taking way from the sector?
I stand to be proven wrong.

The initial Workmen’s Compensation strictly in real sense cannot be called an insurance Act. What it said is that, there has to be provision for that contingency and it only made good sense for companies to insure that since there is a market to take over that responsibility in the event of workers having to come for compensation for any accident in the work place.

Having said that, insurance industry has over time gained a lot of experience in the management of these issues and it will only make sense if the government should be seen to assist the insurance industry develop more capacity in this area rather than creating institutions, dividing issues and at the end of the day no person is developing, nobody is developing at all.

It is in that sense that I would say that government should accord a lot of recognition to the expertise of the insurance industry in handling these insurance and tilt their laws towards developing the existing Workmen’s Compensation issues. One problem I have found with the existing Workmen’s Compensation is that there is no serious awareness and it seems to be in conflict with products like group personal accident, group life insurance and because of the conflicts, employers would rather not take it and where they take it, they don’t take it serious.

So, it is the responsibility of the insurance industry. Once that is done, there would be no need for the Nigerian Social Insurance Trust Fund to begin to talk about employee compensation law again. The insurance industry is handling things that are fortuitous and so far there is no problem. Nobody has been accused of mismanaging any fund and with the level of realisation in this country it has never been heard that insurance company is indicted for not paying compensation.

What are the opportunities for insurance industry in the Local Content Act?
It means a lot. It’s a right step in the right direction in developing local capacity. Really, it’s about local content weather is insurance, fabrication or any other area, but the good thing for the industry is that insurance will benefit.

Before now, the door was completely shut, but with the local content there would be recourse to local capacity and expertise of the insurance industry. What this means really is that, there would be a lot of business, the oil majors will no longer discriminate against the local market, it also poses a lot of challenge that the local market must have to develop both technical and financial capacity and must develop the linkages to distribute the risks.

The problems we have had in Nigeria are one, capacity shortages, but we know there are defined ways to build this capacity. The market can actually build this capacity with the assistance of government, practitioners and with the assistance of the international market.

What is happening today is that the international market takes the benefit of what is coming out from here and we are shut out globally. So, the local content Bill is apt just like the Cabotage Act, and has created a lot of tremendous opportunities but then they will lie dormant if efforts are not made to tap from it.

How prepared is the industry to play in this sector?
Yes. The industry will now have to show that they are prepared to play in the sector. One would expect a lot of activism; one would expect creation of structures and so on.

I have always advocated that we have to go back to the basis, small-small things the advanced market did to get to where they are, we have to do that.

For example, we need to have oil and gas committee of the Nigerian Insurers Association (NIA), we need to have rating committees, we need to have people who understand the contract terms in the oil and gas sector, we need to have a lot of input into some of this joint venture agreements and we need to re-orientate our companies towards issues of claims payment. It is important that as we grow, we have to grow gradually.

Let people have the business, take as much as they can absorb and grow from there and I believe with that the capacity will come. We need to consciously build this capacity immediately otherwise the capacity will never be built.