How to save Nigeria’s N500 trillion insurance industry [opinion] – Insurance News Network | CarTailz

That’s the real challenge; how to get more people to sign up for insurance. The problems are long-standing and seem insurmountable. In my opinion, it is a problem of politics and process at the same time; a matter of promotion and progress; and a matter of staff and professionalism. And since they only seem insurmountable, they can be overcome, solved, and improved upon. Given that nearly 100 million Nigerians live below the poverty line, it is no surprise that many cannot afford to pay insurance premiums under the current regime.

Most of the population lives hand-to-mouth, leaving little room for other things if you don’t take care of the bare necessities. Only affordable and flexible insurance with a clear emphasis on key benefits will appeal to Nigerians. What would work is something that wouldn’t strain the pocket or mental capacity of the man on the street. People who find money to top up cards, place sports bets, and treat themselves to the occasional weekend getaway can find the money for a bounty if it makes sense to them.

When people speak of ignorance about insurance, it’s more than a lack of knowledge of their existence. It’s a matter of trust. True mass acceptance is necessarily a function of ubiquitous access and trust. Once people understand why, nothing can stop them from investing for the future through insurance. Which brings us right back to education, awareness and access.

Only a radical change in the entire insurance industry is future-proof. Current cosmetic makeup doesn’t cut it. The industry needs a fundamental transformation. Regulators need to address policies that will fundamentally change the way the industry does business, treats its customers and, in fact, who can get involved in the business.

What is required is a really functioning microinsurance system. In the recent past Nigeria had offered cell phone insurance from a telecom company but failed. No! That wasn’t because it wasn’t profitable, but rather because of resistance and regulatory issues. Think how impossible mobile money came in Nigeria and how it thrived spectacularly in other realms (read Kenya). The only real difference was the policy formulation and regulatory framework. Mobile money only now appears to be feasible and realizable. What has changed? Simple guidelines and regulatory requirements. But I digress.

The International Association of Insurance Supervisors, IAIS, defines microinsurance as “the protection of low-income people against specified perils in exchange for periodic premium payments commensurate with the likelihood and cost of the risk involved”. According to the IAIS, the term refers to serving a specific income segment in emerging markets where insurance markets are not well developed.

Nigeria fits this bill perfectly. To be fair, experts argue that microinsurance works similarly to traditional insurance, except that it’s aimed at low-income households, particularly the working poor, who have little or no financial reserves and incomes that fluctuate widely.

The National Insurance Commission, NAICOM, the regulator of the insurance sector, has stated that it is actively pursuing the implementation of various regulatory and market development initiatives aimed at elevating the insurance sector to a global standard. Industry watchers insist the commission is doing fine.

I believe that the Commission must now look again at the microinsurance market. It’s barely scratching the surface right now. To get off the ground and really thrive, it needs favorable policies, legal and regulatory adjustments, and sector-wide institutional capacity building.

Companies offering the service need to understand how it evolved. License fees should be affordable for operators. Of course, operations would be closely monitored to prevent abuse and ensure they stay on track.

While microinsurance can typically be provided through a variety of institutional channels, including licensed insurers, healthcare providers, community-based organizations and non-governmental organizations, in Nigeriathe ubiquitous reach of telecommunications services, the basic expertise of microfinance banks, and the depth of academic institutions make them good candidates to drive such a program.

Eromosele, Corporate Communications Expert and Public Affairs Analyst, lives in Lagos.

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