Mr. Yemi Soladoye, Managing Director of RiskGurad Africa, is an insurance expert and consultant. In this interview with ROSEMARY ONUOHA, he states that retail insurance is the way to go for insurance operators.
The future of retail insurance
Any society where retail insurance does not take prominence; then insurance in that system has not really developed. Retail insurance enables stable financial account, against volatile wholesale market; cost effective business; as well as direct impact and relationship with your customers.
Retail is not only about direct underwriting alone. There are about 14 avenues of distributing insurance at the same time and all these have to be implemented by insurers. Just like I recommended in the Market Development and Restructuring Initiative, MDRI, in 2009, the issue of agents to brokers is a development which many other countries have embraced.
There is nothing stopping an insurance broker from having about 200/300 agents. Brokers traditionally pursue the wholesale market but, imagine a broker on Opebi street who goes to Abuja to pursue the Nigerian National Petroleum Corporation, NNPC, or Head of Service insurance, whereas the people residing at Opebi have need for insurance, so agents can take care of them. So looking at the 14 avenues of marketing retail insurance, you will know that as an industry, we are not utilizing the opportunities available to us and unless we do that, the system cannot grow.
So when insurers talk about oil and gas, the interest of all of them is to grow their premium. You hear them say ‘our premium last year was N10 billion, this year it is N15 billion.’ But the N15 billion is from the same traditional classes and route that we are all used to.
All I am saying is that if you expand your business to e.g bancassurance, which means using banks to sell insurance to the retail banking public, or you appoint franchise marketers which mean entering into strategic alliances with organisations like Shoprite to sell insurance, then you are developing the market.
The management and board of any insurance company that is not deep into retail business should go and re-strategise because in the next three years any insurance company that is not in retail will find itself far behind.
Some avenues of distributing retail insurance
Some of the avenues are the captive agents which is what is being used now, such as insurance companies using their own trained agents. Another one is independent agents, who on their own sell insurance and collect commission.
There is also agents-to-brokers; as well as collaborating with network providers. Also we have mall marketing; as well as the utilities such as using the Power Holding Company of Nigeria, PHCN, or Water Corporation to market insurance.
In using the utilities, as the bills are being distributed, insurance is already built into it. If ordinarily, my PHCN bill in a month is N10,000 and I have insurance, the electricity company will give me a bill of N15,000 knowing full well that N5,000 goes into my insurance. These are just to mention a few.
Challenge on the part of insurers
The major challenge on the part of insurers is that they are all busy focusing on short term business orientation. Retail insurance requires the board and management sitting down to strategize about the long term.
They should ask such questions like “When oil and gas content must have reached its saturation point; when the regulator will continue to be more and more stringent in its regulation, what are we to do?” It is only companies that are strategic and visionary that can toe this line. Everybody is looking at ‘how can I outsmart the other person on head of service account?, on oil and gas?’ An insurance company that is working to succeed today should also think of tomorrow.
Foreign players coming into the market
Insurance is a universal business; hence there is nothing foreign or local about it. The insurance I am talking about in Lagos is the same they are talking about in Johannesburg, Malawi, and even in USA. The level of success you record in insurance business is a function of the dynamism of the management team, level of customer service you are able to provide, your spread, and then how you are able to use the competing and complementing benefits of insurance to create strategic alliances with numerous segments of the economy.
So if Sanlam or Old Mutual is doing better than any insurance company in Nigeria, it is not because they are foreign companies, it is because we refuse to do the right thing. So if they come with better customer service approach, better products, widespread branch networks, strategic alliances in areas that matter in the system, provide mortgage finance which we are not doing, then they will do better.
That takes me to the fact that we have the largest population in Africa, we are the sixth largest country in the world, still when I analyse the 15 largest insurance companies in Africa, no Nigerian company is there. Of a fact, the premium income of the largest insurance company in Nigeria is 50 per cent of the premium of the no 15 in Africa. With countries like Morocco, Algeria, predominantly Muslim countries doing better than Nigeria, then we are to blame for the low level of insurance development in this country.