Storeis by Chris Ebong
The National Insurance Commission (NAICOM), the insurance industry regulator in Nigeria has highlighted the factors that impeded the success Market Development and Restructuring Initiative (MDRI) initiated by the Commission to open up the insurance market growth through the enforcement of Compulsory Insurances.
MDRI was also targeted at raising the industry gross premium income (GPI) from about N200 billion then to N1trillion by 2012 while raising the sector’s contribution to the national Gross Domestic Product (GDP) to 3.00percent from the current 0.6percent but for global financial meltdown that swept across major economies of the world that led to capital market crash in Nigeria in 2008
The crisis had cause so much damage and companies that invested heavily in Nigeria’s capital market incurred huge losses and some are yet to recover from the shock.
According to the Commissioner for Insurance, Mr. Fola Daniel, the negative impacts were the huge losses suffered by insurance companies as result of the near collapse of the Nigeria Capital Market and decline in the growth of personal lines as a result 2009 changes in the financial services industry, noting that as at the year ending 2013, the gross premium income of the industry grew to N300billion from N101billion in 2007.
The CFI said despite the impediments, 2013 business year achieved gross premium income puts Nigeria as 3rd from 5th position in Africa as he expressed optimism that the industry can do a lot better.
He added that the key challenge to growing the industry has been how to get sufficient number of potential customers to buy insurance which he said the decision is influenced by factors such as the image of the industry, financial literacy, economic constraints and attitude of the consumers, amongst others.
Continuing the NAICOM boss asserted that there is also a mutually reinforcing relationship between growth in insurance industry and the level of National Economic Development, noting that in advanced economies, personal lines insurance for example, has acquired a cultural status and is given priority as a means to mitigate various risks and reduce incidence of poverty which is not the same in Nigeria.
To him the major question to answer therefore will be, what to do in Nigeria to break barriers and release the potential that ought to come with demographic advantage.
Daniel also noted that the FSS2020 Strategy was reviewed in May 2013 in the light of implementation experience and the need to focus efforts on fewer more impactful transformation programmes and installing a measurable implementation framework. The result of this effort was improvements in the key elements of the strategy.
He said the transformation initiatives for the insurance industry were reduced to three main themes as follows: Mass insurance encouragement, Improving Insurance Market Conduct framework, Coordination for Insurance Regulatory Enforcement and that the execution elements of the project were decided and validated after a two (2) days’ workshop that enlisted the participation of 30 industry stakeholders.
“Relevant elements of our market development and regulatory strategies have been adjusted to reflect the outcome of the review and decisions reached. It is important to say that the implementation of these changes have not being without challenges, principal amongst which are the resistance to change, resources constraints, internationally uncompetitive tax regime for the insurance industry and change overload.”
“ It is my sincere expectation that the interaction in this Summit will result in workable programmes that will not just address these challenges but also identify initiatives that will radically transform the industry to enhance its relative contribution to the nation’s economy.
“A critical landmark in the regulatory history of the insurance industry took place in the Year 2007 when the Commission increased the minimum capital base to N2billion, N3billion and N10billion for Life, General and Reinsurance businesses respectively. This led to reduction in the number of insurance companies from 103 to 61 and reduced the unethical competitive that threatened the industry then.”
“The industry was, however, affected by the 2008 financial crisis as many insurance companies lost their investments in the capital market and access to capital was significantly impaired by the economic crisis that follows. It also affected the demand for insurance especially the personal lines that were growing as a result of the growth in financial services industry.”