Insurance penetration in Nigeria is low, despite the country’s gross domestic product (GDP) of $506 billion, the biggest in Africa.
However, the President of the Nigerian Council of Registered Insurance Brokers (NCRIB), Ayodapo Shoderu, says there is a strong relationship between growth in the insurance industry and economic growth.
Shoderu, the 17th President of the NCRIB, warns in this interview with Assistant Business Editor, KELECHI MGBOJI, that the economy may remain stagnant until insurance and risk management are handled by professionals.
He also provides insight into the topics for discussion at the NCRIB national conference holding this week.
Economic growth tied to insurance growth
First, the economy is not growing because insurance is not growing. Insurance is the last hope of any human kind. If a loss occurs and insurance has been purchased, it puts the individual in better stead as if no loss was occurred.
But where no insurance has been purchased, it causes a reduction in wealth by the amount of value of those insurable assets.
A good economy will always have a thriving insurance industry, all over the world. However, in this country, there is no recognition for insurance. We have all sorts of people who feel that it is easy money to practice insurance. They set up all sorts of bodies to capture the businesses that should go to insurance professionals.
They set up companies as insurance broking and underwriting firms. Of course they are not. This has hampered the growth of the industry. And the government is not helping matters here. They are taking business away from the insurance industry by setting up another body to take up the management of that risk.
Workmen compensation insurance, for instance, which used to be one of the largest revenue generating sectors for the industry, has been taken away and given to another body which is not managing it properly. When people get injured they make a claim but get nothing.
The pension scheme was also taken away from the industry and another body was created to manage it. And now what is happening in the industry? Fraud. These are some of the reasons why the economy is not growing.
Don’t let us deceive ourselves, the economy is not growing because the insurance sector is hamstrung. Let them leave insurance to the professionals and face politics, and you will notice how buoyant the economy will turn out to be.
Relationship between brokers and underwriters
The relationship has not been very cordial. Insurance companies detest the intermediary role of brokers because we make sure they do not overcharge clients. We ensure that they charge rates that are commensurate with the risks, and that claims are properly processed and paid promptly.
Underwriters don’t like it. They perceive us as pushing charges to the bottom; but of course we have to work with competitive rates. These are some of the age old grievances of insurance companies against brokers.
However, after I came on board, about three months ago, I visited the newly elected chairman of the National Insurance Association (NIA), who is a much younger person than me, to extend NCRIB’s warmth of friendship to him.
I proposed that both bodies, the NIA and NCRIB, should come to a roundtable and discuss how we could resolve all sorts of differences that have existed for so many years between both bodies.
But they have not responded till now. We have written letters, made telephone calls, yet no response from them. It may be that they don’t want to engage us in any discussion.
In the face of all these, they go about trying to get another rate for motor insurance agreed with the regulators (the National Insurance Commission, NAICOM) without involving brokers. We are the professional arm of the industry. You cannot go and agree on any rate without involving brokers.
Look at the time they agreed on 10 per cent for comprehensive motor insurance, it never worked because they did not seek the co-operation of the broking community.
So there are a lot of things we need to sit down together and trash out. We are in the same industry and should work together, and harmoniously too. It is only by working together we can resolve our differences, and join hands together to grow the industry.
Focus of the coming conference
This conference will address disaster management which is risk management as well. Disaster management is one of the things we are promoting. It is going to be a big conference. You will see a different outlook in our presentation compared with what it used to be.
Knowledgeable people, resourceful professionals, and stakeholders drawn from all sectors of the economy, and particularly disaster management institutions, will engage topical issues in risk management to educate, not only those in insurance, but also people in business. It will help them in managing risks.
The government should see the need to involve insurance practitioners in formulating policies and establishing institutions to manage disasters and mitigate losses to victims of disaster.
The conference will also provide a robust platform for discussing current trends with regard to insurance regulation. It will provide a platform for the NCRIB to generate a robust discourse on issues that affect the operation of insurance professionals in Nigeria.
RAHIS policy not known to NCRIB
The Road Accident Health Insurance Scheme (RAHIS) policy protection has not come to the attention of the NCRIB. We do not know which broker is covering it or which insurance company is covering it. But now that you have mentioned it, we will make research into it.
Presently, if something is being done which is not to the knowledge of the NCRIB secretariat, it is bound not to run properly because any such insurance policy needs to be a general knowledge of insurance industry brokers, especially one that has to do with the traveling public.
It may be something done in secret by some brokers with an underwriting firm. This secretariat knows nothing about it. People should be careful about patronising this kind of policy so that they don’t throw money away.
Local Content Act and the insurance industry
The Local Content Act deals with the oil sector, by and large. Prior to the advent of the Act, companies or organisations like the NNPC (Nigerian National Petroleum Corporation) used to go abroad for most of their insurance policies. But now brokers are being involved.
It is in the local content law that insurances must pass through brokers. So we are able to now get involved with the insurance policies of organisations like the NNPC and arrange and obtain for them rates that are much more competitive than what they used to get.
And I am sure that it is the same thing with other companies that are dealing in oil and gas. They know that businesses have to pass through insurance brokerage firms now as opposed to those days when they used to railroad everything over to Lloyds in London or America.
Exploring opportunities in e-commerce
The NCRIB is doing something for brokers to tap into the opportunities in the fast growing e-commerce business in the country.
I cannot disclose that now but what I know about e-commerce with the NIA is that they are working with the co-operation of the FIRS (Federal Inland Revenue Service) so that they can easily check if a motorist presents a motor insurance certificate, they can easily cross check with an equipment in hand whether that certificate is genuine or not.
Once a certificate is issued by an insurance company it is supposed to go to the database of the NIA and circulated to law enforcement agencies. That so far is what is happening with e-commerce.
Not only that, some GSM companies are now also selling insurance policy. Whether they are holding themselves out as underwriters is what we don’t know, or they are getting the business and passing them on to insurance companies or brokers is what we don’t know yet.
But by and large e-commerce is catching up. At the NCRIB here, what we are doing is creating public awareness, waking up people to the realisation of the importance of insurance.
Dugbe market went up in flames recently (on Monday, September 13) and you can be sure that most of the traders there don’t have insurance. We are waking up the general public to the importance of insurance.
The NCRIB is doing that, not only on the pages of newspapers, but also going to the radio which we feel is the easiest way to communicate to the grassroots to make sure that people are getting insured. It is going to help, not only the ordinary people, but also our members.
Instead of chasing the big elephant, there is a lot going around. Plenty of people in the rural areas, even in Lagos here, ordinary people that are not even insured are millions.
Tell me most of these costly communication gadgets like telephone, computers, et cetera, which people spend so much money to buy are they insured? Of course none. When they are stolen or damaged they spend another money to buy a new one. These are things that ought to be covered by insurance to mitigate loss or damage.
So, we are trying to educate people on the importance of insurance and letting them know about the need to insure some of the things in their possession.
Above all, we are also helping the government to realise the need to transfer most of the disaster emergencies they grapple with from time to time over to insurance. Let the government transfer the management of disaster to the insurance sector.
Every time, the government has to dole out money to victims of disasters like fire outbreak, flood, et cetera. Let them transfer all these risks to the insurance industry and you will find that the polity will be better for it.
For instance, we led a delegation to the Iya Oloja (market leader) general of Lagos State immediately I assumed office to urge them to educate market women about the need for insurance. Our members go to the markets, for instance, to educate the women about insurance.
The government also has to, one way or the other, place responsibility on the shoulder of the market women through negotiation with brokers to make them realise that the government has spent so much money on the market stalls that need to be covered by insurance.
So that as the shop owners are renewing rentage for the stalls, they should be made to renew policy payment to provide another cover for the stalls. That is one of the ways government can help.
Local governments, for instance, when they are sending out their tenement rates, should include policy payment in all their bills because there is compulsory insurance now for public buildings and any building in the open is public building, not necessarily the ones that have offices or high rise buildings.
The government has to make sure that people insure their risk. We repeatedly have many cases of fire outbreak in Lagos and other parts of the country. And this could be too bad to manage when there is no insurance cover. That is why we insist that insurance should be left in the hands of professionals to manage and let the moneybags concentrate on politics.
What I would like to be remembered for
Professionalism is my key word. We have a situation whereby people that are not really in our business are infringing on it. For instance, a lawyer that is not qualified will not go to court to argue a case before a judge. An accountant that is not properly qualified cannot sign an accounts audit.
We want it to be like that with insurance brokerage. People that are professionally qualified, people that are lettered, should be the ones to practice insurance brokerage.
Again, I would like to sanitise the industry, make it impossible for moneybags to infiltrate the industry again. Moneybags would employ an insurance broker who hasn’t got the financial ability to set up his own business and use him to set up insurance brokerage services.
I am hoping to get rid of this infringement in the profession by charlatans. This is a big responsibility, but we must be able to practise in our name and not just deploy any name from anywhere. I reckon, if we are able to do that, the issue of moneybags coming into our industry will be reduced a great deal.