By Rosemary Onuoha
Managing Director of Leadway Assurance Plc, Mr. Oye Hassan-Odukale said that sundry challenges in the insurance sector are not enough reasons for insurers to shy away from retail insurance. He spoke on this and other issues.
How can insurance penetration grow in Nigeria?
Insurance is a business that is done with a large number of people. One of the things we have been accused of in Nigeria is not reaching large number of Nigerians. You grow penetration by selling insurance products to a larger number of people. Nigeria has a population of over 175 million people and where local insurers look at it that the Nigerian market is tough, foreign investors see opportunity in Nigeria because they look at the large population.
They believe that if they can sell products to this huge population, then they have penetrated the market. However, the local players have decided to look inward. There are people we need to reach here.
Although, we in the insurance industry have been a bit lazy by not trying to reach enough people to get insurance products to them, overall premium income of the insurance industry is not all that bad but most of them come through commercial insurance because you can sell one policy to an organisation for a couple of millions but you need to sell probably 1000 policies to individuals to make that same level of premium in retail.
Previously insurers had challenges with banks payments system because we want to sell in a way that we can efficiently collect premium. Now it is getting better but we are still struggling. There are lots of things that have not worked in our favour. Sometimes, when you use agents, some agents can be very funny and that also can affect your brand. Some will collect premium and will not remit it to the company thereby causing the insured to be unhappy with you.
Yes, we have a lot of challenges but they are still not enough reasons for us not to try and take advantage of the opportunities that are just lying at our door steps. But I think we are all waking up to it.
How soon can we begin to see growth in retail insurance?
Retail insurance could be expensive but it is the only way to grow penetration and if insurers don’t face it now, they have to face it some other time. It takes a while to reach a critical mass in retail insurance and it is also expensive in terms of investment. Our believe in Leadway Assurance is that we have to do it now because if we don’t, one day we must have to do it. Corporate insurance could reduce with time because there are a lot of mechanisms for managing risks that are available to companies.
However, it is not so for the individual. The man that has one car must insure that one car because it is the only car he has. But a corporate organisation that has 50 cars, to insure one may be hard because there are other cars. So the person that needs insurance more is the individual. I am not saying that corporate organisations don’t need insurance; they need insurance that is more sophisticated. But the basic insurance such as motor, fire, house, children’s education is needed more by individuals. However, reaching them has been expensive and challenging.
Are foreign companies a threat to local players?
But I am not saying because it is expensive we will not face it. We will face it. The foreign companies that have entered Nigeria insurance sector are being attracted by retail insurance. They are not coming to insure the Nigerian National Petroleum Corporation, NNPC. They are coming to insure people like you. They know that it is going to be expensive initially but when you overcome it you will just be cruising but to reach that critical mass could be challenging.
So local players must also strive to reach that critical mass. People must feel our impact as an industry. Corporate organisations feel our impact because we pay their claims, but many individuals do say that insurance companies don’t pay claims because we are not reaching them and they are not feeling our impact enough. So, if people start buying insurance policies and their claims are promptly settled, they will help to spread the good news to their friends saying, ‘Ah!
These people are paying o!’ For instance, if you buy the Leadway Family Benefit Plan Plus which is a funeral cover and something happens to any beneficiary of the cover, you will get paid instantly and you will have a smooth burial for the dead. Thereafter, you will tell your friends that ‘Ah! This thing worked for me.’ So that is the best advertisement we need.
To what extent has insurers embraced retail insurance?
There is still work in progress because we are not yet there, but we are ready to face it squarely. To amass premium in retail insurance could take time. For instance, in corporate insurance, you can do a premium of N1 billion, but to do N1 million in retail will take a longer time because it is a lot of policy count. But overall retail can be more profitable when you get the right number. If you insured one big factory now, if there is a claim, you know how much you will pay, but in retail, how much claims can you have?
Also in retail insurance, insurers retain more premium. For instance, Leadway can insure a car worth N5 million and retain it. But if Leadway insures a plane for $5 million, Leadway cannot retain a premium of $5million as part of it will go to the reinsurer. If you are a commercial insurer, and you are doing a premium of N1billion, probably you may retain N300million, but a retail underwriter that does N1billion could retain N900million.