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Financial literacy cause of low insurance penetration – NAICOM


Commissioner for Insurance, Mr. Fola Daniel has decried the persistence of low level financial literacy in Nigeria and some other African countries which is the cause of the low insurance penetration in such places.

Daniel said, “It is a well-known fact that insurance is not very popular in our sub-region for various reasons amongst which are; low level of financial literacy, lack of adequate awareness of insurance mechanism and poor perception of the industry.”

According to Daniel, insurance practitioners need to come together to tackle the menace.

It will be recalled that Managing Director of Riskguard-Africa Nigeria Limited, Mr. Yemi Soladoye had said that the future and solidity of the Nigerian insurance industry can only come from market expansion.

Soladoye said that the concentration on premium growth, as against market expansion by insurance operators is inimical to growth.

He said operators often focus on how to raise their yearly premium, abandoning the need to create expansion through good services and people tailored products.

He said, “All the operators want is to ensure that their premium for this year is higher than what it was the previous year, and they are ready to spend anything to achieve that. If their market position last year was number six and they move to number five this year, their board would applaud their effort, not minding the cost.

“The companies cost of doing business is indeed very high; the claims ratio is quite low. These are pointers to the fact that insurance companies need something new and better.

“The issue of unhealthy competition will be getting worse until they look for better, cost effective and non-volatile distribution channel. This can be achieved by bankassurance which is insurers having collaboration with banks to grow their retail businesses. It also means engaging in strategic alliances with organisations, like Shoprite, Megaplaza and others,” Soladoye said.

He also urged operators to initiate collaboration with cooperative societies and other relevant bodies to deepen insurance penetration.

Meanwhile, Managing Director of Linkage Assurance Plc, Mr. Gus Wiggle said that the insurance industry is grappling with inadequate infrastructure and unstable weather which exposed insured assets to natural disasters such as floods.

According to him the current performance of the industry has not been sufficient for it to reach the critical mass necessary to make the desired impact on the economy.

Wiggle said that the Nigerian Insurance Association, NIA, was reviving the Nigerian Oil and Energy Insurance Pool to improve the industry’s oil and energy underwriting capacity.

According to Wiggle, the Association had completed and started deploying the first phase of the Nigerian Insurance Industry Database (NIID) Motor Insurance Module adding that delay in claims payment had reduced as its members continued to live up to their obligation of prompt claims payment to policy holders.

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