Mr. Yemi Soladoye, Managing Director of RiskGurad Africa, is an insurance expert and consultant. In this interview with ROSEMARY ONUOHA, he states that insurance operators must re-strategise if the business of insurance is to grow.
To what extent has oil and gas risks underwriting impacted on the performance of insurers?
When insurers talk about oil and gas insurance, 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. So I am saying that insurers should expand their business to for instance, bancassurance, which means using banks to sell insurance to the retail banking public, or appoint franchise marketers which mean entering into strategic alliances with organisations like Shoprite to sell insurance. With such, they will be developing the market.
Local content on oil and gas risk will only grow the premium income, but will not expand the market. Retail insurance is the way to go for any insurance company that knows what it is doing.
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 utilising the opportunities available to us and unless we do that, the system cannot grow.
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.
What are the extraordinary things that insurers must do to develop the market?
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 strategise 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.
To what extent will the influx of foreign players into the Nigerian insurance market impact on activities in the sector?
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.
The public all along have shown apathy towards insurance in this country, how can this syndrome be cured?
In fact, the insurance sector is where it is because the public does not have confidence and trust on insurance mechanism in Nigeria. This is historically based on how insurance was presented to them since the promulgation of the Workmen’s Compensation Ordinance of 1942. The first compulsory financial product in the country was from insurance and the second is the motor vehicle third party ordinance of 1945.
When all these came and the local underwriters embraced insurance, it was seen as more or less a side business by motor dealers. There was serious abuse and that was why the Insurance Act of 1941 came into effect. When the foreign companies came in the 50s and 60s, the agents that started marketing, especially life insurance products, were selling all-purpose products.
If you have headache, they will tell you that you are going to get money. They will tell you that if they steal your car, under a life cover, you are going to get money. Theirs was just to sell their products. So between 1964 and 1974, the image of insurance seriously nose-dived and that was when we had the first pragmatic insurance crash in 1976.
So many insurance companies were operating then without being licensed or registered. Because the insurance sector performed woefully, the general public, as typical Nigerians decided to give insurance to God. Instead of appreciating the fact that the message was good and what was probably wrong was the messenger and to come together to say ‘No, we must resist this.’
Nobody did that until very recently, when we have the Insurance Consumers Association of Nigeria put in place. It is still trying to come out and it will definitely come out in big form. On the part of the public, even if your husband or father sells a product and you cannot see the benefit you are going to derive from the product, you are not going to embrace it.
I tell people that insurance is a fear product and that fear emanates from this. If the fear of getting compensation from the insurance company is higher than the fear of the risk materializing, then insurance has failed in that direction, and so people will not embrace it which is what we have been experiencing. People go through such fears like ‘anything can happen to my car, anything can happen to my house’ but the fear of getting compensation from the insurance company if they insure is higher than the fear of the risk.
Therefore what the insurance companies should have done all these years is to embark on massive insurance education to enlighten the public. Do you know that 60 per cent of educated people still believe that third party motor insurance is ‘police let me pass.’ So if that is the feeling, then we have failed in a strategic aspect of our job. And unless we can improve, we are not going to get anywhere.
However, the public should have come together long ago to say ‘this is what we want. You cannot be talking of small prints if we the public don’t want small prints. You cannot be giving us what you feel you want to give us. We should be able to say, this is what we deserve as insurance consumers.’ In some countries, when you insure your house and it gets burnt, they give you alternative accommodation until the house is repaired. When you have a car comprehensively insured and the car is stolen or has an accident, they give you a replacement car until the damaged one is repaired.
What are some of the 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.