Nigeria insurance faces costs, FX, inflation threats amid opportunities
PHILLIP ISAKPA IN LONDON, UK
A specially coordinated introspective analysis of the Nigerian insurance industry conducted over dedicated social media platforms and monitored by Business a.m. over a four week time-span, has uncovered high cost of insurance and cost of doing business, prevalence of financially weak operators, unhealthy and unprofessional competition, among a raft of weaknesses plaguing the sector in the country.
The introspection, coordinated by the insurance activist and promoter, and The Nigerian Council of Registered Insurance Brokers (NCRIB) NAC award winner, Ekerete Ola Gam-Ikon, also found increasing cost of living due to high inflation, unstable exchange rate of the local currency, the naira, rising cost of healthcare, uncertain statutory policies and regulations among the potential threats hanging on the climate of operation for insurers in the Nigerian economy.
Designed as a SWOT analysis of the industry, the examination received contributions from stakeholders, including operators, practitioners, policyholders (users of insurance in the country) and industry analysts, and set out to unfold what stakeholders thought were the strengths, weaknesses, opportunities and threats of the insurance industry in Nigeria in a “sitting in front of the mirror” to “tell you about yourself” exercise.
“We are delighted to unveil the complete results of the exercises we did,” Gam-Ikon said in a note.
The exercise uncovered the strengths of the insurance industry in the country to include its ability to provide peace of mind that results from payment of claims in the aftermath of eventualities; its offering of financial security; the industry’s proven track record of resilience; payment of compensation; flexibility of terms and conditions; the conservative approach of the industry in Nigeria; and its offering of excellent employment opportunities.
But the analysis also went on to identify other weaknesses and threats. It noted that the industry is weakened by its ineffective communication with the public, its inadequate adoption of digital solutions, a trend that has become critical in different economic sectors across the world.
Also, the sector is weakened by an unwholesome low self-discipline among its market players; inappropriate succession planning and its seeming isolation in the economy because of its poor connection with other sectors.
The insurance industry in Nigeria continues to be threatened especially by this lack of connection to other sectors of the economy. For years analysts have classed the industry as underperforming compared to its banking sector counterpart in the financial services industry.
While it had been dominated by indigenous operators for decades, foreign players who had seen the large size of the country’s population as an opportunity to drive insurance uptake by individuals and businesses have often found themselves stuck in the slow to no growth outcome of their adventure into the Nigerian insurance market.
The SWOT analysis done on the industry by the stakeholders found that the changing climate of global business and economy has produced new sets of threats. Specifically, the insurance industry in Nigeria is seen as coming under the threats of changing consumer needs and behaviours; increased competition from fintech companies; technology disruption; and changing demographics.
Gam-Ikon, in his note accompanying the outcomes of the exercise, said it is “especially interesting to see how the threats have heightened along with the opportunities and it does seem the efforts to turn the threats into opportunities are yet to yield desired results.”
He particularly observed that “one major threat that scares the insurance operators is ‘Changes in Government’s Policies’, from liberalising insurance services to intervening to have the populace pay insurance premiums directly to government coffers. This just scares everyone,” said Gam-Ikon.
According to him, the exercise has personally reawakened him to the fact that insurance is still, mostly, considered as a professional service or legal requirement, which Nigerians will look for, rather than a BUSINESS that needs to find and convince customers! Very contradictory and complex for some stakeholders,” he said.
But amid the challenges and threats that the industry faces lie opportunities which the SWOT analysis brought out.
According to the outcomes that were shared with Business a.m. which followed the exercise in the four weeks it lasted, some of the opportunities that the industry throws up are derivable from its identified threats and weaknesses.
For instance, for the Nigerian insurance industry, opportunities exist in the emergent digital environment in which fintech firms present increased competition and technology offers disruption.
Other opportunities identified by the exercise are increasing demand for risk protection; the fact that there are more individuals and businesses without insurance (meaning that the market continues to be available for exploration); the opportunity for partnerships and collaborations; the dire need for capacity building and innovation; the fact that there is greater awareness now of the role of insurtech firms; the increased access to technology; and the better awareness of intermediaries.
The accompanying note to the result of the SWOT analysis expressed delight at the outcome, observing thus: “The delight is in [the insurance industry in Nigeria and all its stakeholders] knowing where we truly stand and recognising what we need to address to get better, as well as the hurdles that are placed on our way to glory.”
Ekerete Gam-Ikon noted that those who have been following or watching the insurance industry in Nigeria over the last two decades would have observed and seen its certain Strengths, Weaknesses, Opportunities and Threats that have remained the same.
“We have to decide to use this SWOT Analysis Result to assess and determine the direction of the insurance industry in Nigeria and the mindset of existing and potential policyholders,” he admonished.
According to him, this should happen in such a way that “9-12 months from now when we choose to revisit and review it, we will see significant improvements as Weaknesses turn to Strengths and Threats turn to Opportunities.”
He called on Nigerian insurance industry stakeholders, either as policyholders or investors, to see the results of the SWOT analysis as a tool available to them to use to their advantage
“With the knowledge you’ve gathered from this and many other information and data we’ve shared, you’ll agree that making insurance work for us in Nigeria is a task that can be done.
“There’s a new spirit of ‘Let’s use what we have to get what we want’ amongst us. The knowledge we have is power when put to use,” he further admonished.