By Yinka Kolawole

A robust and vibrant insurance industry is essential for the development of the housing sector in the country which is currently being hampered by paucity of funds.

Managing Director, Union Assurance Company Limited, Mr. Godwin Odah, noted in a statement that no economy can thrive without a vibrant insurance sector. He said that the low level of insurance penetration and awareness in the country is having a negative effect on the growth of the housing sector.

According to him, insurance is a veritable means of mobilising funds, noting that housing remained scarce because there were no funds. “We need long-term funds, which is what life insurance provides,” he said, noting that in other climes, insurance companies own banks and other institutions because they have access to long-term funds.

Odah asserted that the insurance sector could mobilise long-term funds for infrastructure development, with life insurance playing a prominent role because of the long gestation period of life funds. “These funds are made available to the banking system to be able to lend to entrepreneurs at affordable rates and the housing sector can be a huge beneficiary,” Odah said.

Modern farm house with thatched roof.

The insurance chief said Nigerian entrepreneurs presently do not have access to long-term funds, with which to grow the economy because Nigerians have yet to buy into life insurance as a natural way of saving for their long-term needs. “Life insurance comes in the category of five, 10 and 15-year plans and so on. If a sizable number of Nigerians, with the country’s huge population, invests just a small proportion of their income in insurance, the economy will expand because the money will be made available to investors who can then grow their businesses on long-term basis,” he stated.

According to him, funds at the disposal of banks are short-term in nature and have a maximum tenor of 90 days before the owners would come calling, adding that “with this condition, they can only lend short at high interest rates that are largely a disincentive to the entrepreneur in the real estate business. But the situation will be better if banks had insurance life funds.”

He said that without mortgages, it is not possible to achieve sustainable expansion in the housing sector which he explained, would be easier to achieve with a vibrant insurance sector. “The insurance component takes care of the initial deposit required by the mortgage firms. But because insurance companies are backward in terms of patronage of life products, these long-term funds are not available for development.

“Pensions funds, which are another component of insurance, have generated within a short period about N2 trillion. Talks are ongoing to develop a framework for investment of the money for infrastructural development and in other sectors. This is a demonstration of what life insurance funds can do for national development.”