The Nigerian insurance industry operators are expressing the need to increase participation in the sector through financial inclusion.
Going by data obtained from the National Insurance Commission, the Nigerian adult population, consisting of people from 18 years and above, is 96.4 million, out of which 59.6 million people are living in the rural areas. Among this rural populace, 40.1 million people are excluded from any form of financial services.
According to the National Insurance Commission, the penetration, at 0.5 per cent, can be reversed through different efforts such as financial inclusion.
The commission observed that apart from lack of knowledge on the relevance of insurance, there were myriads of challenges militating against the growth of the sector.
High level of poverty, as a result of low income level and unemployment, is a major factor limiting the ability of individuals to patronise the sector, according to the commission.
Deputy Commissioner, Finance and Administration, National Insurance Commission, George Onekhena, said there were opportunities to grow the sector.
He said that through micro insurance, relevant products and services could be taken to the grassroots.
According to him, there are opportunities to take insurance to the Small and Medium-sized Enterprises, agricultural producers, households and individuals, especially those in the informal sector.
He said that the commission had put strategic intents in place.
“There is strategic intent to establish, develop and maintain a fair, safe, stable and inclusive insurance market for the protection of beneficiaries of insurance contracts, competitive returns to investors and optimal contribution to Nigeria’s economic development,” he said.
According to him, the Nigerian insurance sector aims to be an innovative insurance market in Africa noted for high level of capacity, transparency, efficiency, stability and inclusiveness supporting the economic growth agenda of the country and attaining optimal rate of insurance penetration at all times.
Onekhena said there was the need to create optimal regulatory environment devoid of burden, yet facilitating growth of the industry through deployment of relevant industry infrastructure, standards and facilitation of competitiveness, inclusion, operational efficiency and profitability of insurance institution.
The deputy commissioner also said that there was a need to enhance insurance acceptance and patronage through undiluted compliance with laws and regulations, product and service innovation and prompt claims settlement.
He added that there was a need to ride on the opportunities in increased insurance acceptance, technology enablement and government initiatives to enhance the contribution of insurance to the Nigerian economy.
According to him, the commission plans to establish, develop and maintain a fair, safe, stable and inclusive insurance market for the protection of beneficiaries of insurance contracts, competitive returns to investors and optimal contribution to Nigeria’s economic development.
The Chairman, Zenith General Insurance Limited, Jim Ovia, described financial inclusion as a means of providing access to useful and affordable financial products and services that meet the needs of every individual.
“Within the context of insurance, financial inclusion simply means making insurance services readily accessible to all,” he said.
While giving examples of financial products that could boost inclusion, he said the credit product helps to improve the productivity of micro enterprises.
Savings product, he added, contributes to payment for children’s education, healthcare or meeting other financial obligations.
On insurance as a product, Ovia said this offers protection against the financial impact of unfortunate events such as illnesses, accidents, and burglaries/theft.
He observed that there were various reasons why people may be excluded from accessing insurance products.
Ovia said, “Premiums may be too expensive for many in the low income category. The products design and terms and conditions are too complex, and products are not customised for low income.”
He added that there could be mistrust of insurers, especially given the gap between when an insurance product is bought and when benefits may be enjoyed.
Sometimes, he observed, the person buying the product may not even be the one that enjoys the benefits such as pure life assurance products.
To achieve financial inclusion, he said that there should be payment systems, which facilitate easy movement of funds to complete financial transactions such as sending money from far-away cities or abroad to family members back home.
Quoting the 2016 Enhancing Financial Innovation and Access Survey, he said that the total adult population (i.e. individuals from 18 years and above) of Nigeria is 96.4 million.
Of this adult population, he said 59.6m (62 per cent) are based in rural areas; 56.2m (58 per cent) are under 35 years; 18.4m (19 per cent) get their main source of income from subsistence/commercial farming; 18.9m (20 per cent) get their main source of income from own business (non-farming); 7.9m (four per cent) get their main source of income from the formal sector; and 21.8m (23 per cent) have no formal education.
He noted that financial illiteracy could from lack of adequate engagement with the population as to the purposes and benefits of insurance.
Lack of insurance, he said, posed a lot of disadvantages.
Ovia said, “This exclusion from insurance products often results in people being trapped in a poverty cycle which is exacerbated by poor health. This is especially so because of the risk transfer mechanism of insurance.”
According to him, everyone is exposed to risk either through normal everyday existence or through the enterprises that they may embark on.
He explained that insurance ensured peace of mind, which enabled people to take more risks with higher expected returns, adding that it also acted as a stabiliser against shocks should these risks materialise.
“Health insurance access, for example, reduces the likelihood that a household has to sell some of their productive assets such as cattle in order to take care of the health costs of a family member,” he said.
The Managing Director, SystemSpecs, John Obaro, stressed the need to leverage technology for financial inclusion.
He said, “Digital technologies can play a key role in addressing the issue of poverty eradication within a balanced mix of responsible regulation, relevant skills and accountable institutions.”
There is need for ready availability of appropriate financial services and products including payments, credits, savings and insurance to adults of all income groups, at affordable costs and in a sustainable way for the provider and provided in a responsible manner, he said.
Appropriate financial services can help improve household welfare and spur small enterprise activity, he said.
He observed that economies with deeper financial intermediation tend to grow faster and reduce income inequality.
Obaro said that technology had demonstrated a strong potential to help improve access to and quality of financial services for the un-served and the underserved.
Exciting technology innovation is happening in emerging markets and very much in Nigeria through new products and services launched by start-ups and through partnerships with banks and corporates,” he said.
On making technology work for financial inclusion, he said technology should be local, based on the financial system at the grassroots, easy to use and available in languages, have improved customer relations and accessible even on dull devices.
The Chairman, Planning Committee, National Insurance Conference, Femi Hassan, observed that that access to financial services was concentrated in urban areas, adding that this had limited the people from the rural areas from contributing maximally to the growth and development of the Nigeria’s economy.
He said that financial inclusion should be geared towards making insurance services accessible at affordable costs to all individuals and businesses, irrespective of net worth and size.
According to him, financial inclusion strives to address and proffer solutions to the constraints that exclude people from participating in the financial sector.
Hassan stated that in 2018, the national insurance conference focused on insurance industry and financial inclusion in view of the policy direction of the government towards including all segments of the society within the financial safety net.