Cynthia Ezekwe
Ekerete Gam-Ikon, a management consultant in the insurance sector, urged the Nigerian Insurance Commission (NAICOM) and the Central Bank of Nigeria (CBN) to create an environment that would encourage the growth of bancassurance. He stated that bancassurance, which refers to the sale of insurance products through banks, could help increase access to insurance and address the low level of insurance penetration in Nigeria.
In a recent interview with Business a.m, Gam-Ikon emphasised the potential of bancassurance to increase insurance penetration and make insurance more accessible to the average Nigerian. He noted that the traditional way of selling insurance products, through agents and brokers, has its limitations, and that bancassurance could be a more effective way to reach a larger number of people. He also highlighted the need for banks to be well-trained in insurance products and services in order to effectively sell them to their customers.
In a bancassurance arrangement, a bank and an insurance company partner to offer insurance products and services to the bank’s customers. The insurance company benefits from this partnership by gaining access to a larger pool of potential customers, while the bank can generate additional revenue by providing insurance services to its customers. This arrangement is advantageous for both parties, as it allows the insurance company to expand its reach without having to build a large sales force, and the bank to offer its customers a comprehensive range of financial products and services.
With less than five per cent of Nigerians currently having insurance coverage, bancassurance could make a significant impact on the economy. By making it easier for people to access insurance products, it could encourage more people to get insurance, which could in turn lead to an increase in the country’s insurance penetration rate.
Speaking on how bancassurance has impacted the growth of the financial sector in Nigeria, Gam-Ikon said, “Not in any significant way because very few relationships run with the well-known Bancassurance models.
“Yes, we have insurance companies and banks maintaining relationships that give each other value but when the outcomes aren’t reported as bancassurance in their financial statements. We ae unable to attribute anything to Bancassurance.’’
According to Gam-Ikon, the regulator, NAICOM needs to recognise bancassurance either as a distribution channel like Agency, Brokerage and E-channel or an Insurance Product, stressing the need for information and data to ascertain how Bancassurance is performing.
He pointed out that the major factor driving the growth of bancassurance is the interest of the banks in ensuring that their customers get packaged financial services within their environment, whether physical or virtual.
“The attraction for the insurance companies, that is, premium generation, has been limited by most of the banks that have relationships with insurers keeping it as their exclusive rights,’’ he said
Speaking on the role of the government in promoting bancassurance in Nigeria, he said, “Government’s role, in my view, has only been seen through the Guidelines on Bancassurance released by NAICOM five years ago.’’
According to Gam-Ikon, the insurance industry is overdue for a bancassurance conference that can help to reset and improve the sector. He pointed to similar conferences that have been held in other countries, which have led to improved working patterns and better outcomes for customers. He stated that Nigeria should adopt a similar approach, to ensure that the sector is able to reach its full potential.
“Also, both banking and insurance are under the same group. When the National Bureau of Statistics is reporting on the performance of the economy and contribution to Nigeria’s GDP. Why do we wait when we can win more percentile points with bancassurance?’’ he questioned.
Several insurance experts have highlighted the benefits of bancassurance over traditional insurance channels, which can include:
– Access to a larger customer base: Banks have a large customer base, which means insurance companies can reach a larger number of potential customers through bancassurance.
– Ease of payment: Customers can pay for insurance premiums through their existing bank accounts, making it more convenient and reducing the risk of non-payment.
– Trusted brand name: Customers may have more trust in insurance products offered through their bank, as it is a brand they are already familiar with and have a relationship with.
They also noted that in addition to addressing the challenge of awareness, bancassurance also makes it easier for customers to pay for insurance, which is another barrier to uptake. Many people in Nigeria do not have easy access to financial services, or may not have the financial means to pay for insurance. Bancassurance makes it possible to pay for insurance through bank accounts, which many people already have. This removes a significant barrier to accessing insurance, and helps to make it more accessible to a wider range of people.
Experts have also pointed out that bancassurance is having a positive impact on risk management in Nigeria. This is because it offers products that cover a wide range of risks, such as fire, theft, and natural disasters. This is helping to protect people from the financial consequences of these events, which can be devastating for individuals and businesses. By promoting risk management, bancassurance is helping to reduce financial instability and promote more sustainable economic growth. This is because it can reduce the amount of money lost due to these risks, and help to rebuild assets and livelihoods in the event of a disaster.
Despite the potential benefits of bancassurance, there are a number of challenges that need to be addressed in order for it to reach its full potential. One of the main challenges is the lack of awareness about insurance products among the general population in Nigeria. This means that many people are not aware of the protection that insurance can provide, and therefore do not purchase policies. This also leads to a lack of trust in insurance, as people may not be aware of the benefits or may have had negative experiences with insurance in the past.
The high cost of insurance is another challenge that needs to be addressed. Bancassurance products are often more expensive than traditional insurance products, making them unaffordable for many people. This is particularly true for low-income earners, who may not be able to afford the premiums. This means that they are left without any protection in the event of an illness or accident, which can have devastating consequences. Another challenge is the lack of regulation and oversight in the microfinance sector. This can lead to fraudulent practices, such as the sale of fake insurance policies.
Industry experts agree that greater financial literacy is key to the success of bancassurance in Nigeria. People need to understand the benefits of insurance and how it can protect them from financial hardship. They also stressed that increased regulation and oversight of the microfinance sector are needed to ensure the growth of bancassurance and to guarantee that all parties are acting in good faith.
