Challenges of insurance penetration and sustainable insurance density

CHUKWUMA ONONIWU 

FCILRM (NG), FICRMP (U.K.), alumnus of Abia State University Lagos Business School, Pan Atlantic University, is a consummate insurance broker, insurance management consultant and digital insurance advocate. He is an i.g.i. goldcrest award winner. He can be reached on:: riskswisepro@gmail.com and +234-903-596-8732 (whatsapponly).

It is certainly horrendous that with the humongous population of Nigeria, insurance contributes only a little above one percent to the GDP due to mix of factors, ranging from cultural beliefs, religious beliefs, negative perception, the way insurance was practised in the past which left much to be desired, lack of fast track in claims payment, lack of public enlightenment on the benefits of insurance, low adoption of technology, high casualty of distressed and closed insurance firms, claims repudiation at the slightest breach, and having no other benefit beyond a claim payment in the event of the unexpected; i.e., of mutual financial benefits from the operating financial results of the insurance firm, unlike the practice in Takaful insurance.

Takaful insurance is gaining traction, with non-Muslims equally subscribing to policies from Takaful insurance firms. The insurance firms have need to embrace the business template of mutually consistent  financial benefits, whilst still maintaining their paid-up capital/solvency margin/investment portfolio/ICT investment/shareholders payment/payments to staff/payment of the broker professional fees, loss adjuster professional fees, risk surveyor professional fees, actuarial professional fees, reinsurance premium, superintendent fees, auditor fees, among others.

Certainly, there is a need for a paradigm shift. How come that countries with far far lower populations, like Morocco, have far higher insurance penetration? How come that foreign insurance firms do not last in Nigeria, unlike foreign banks? Certainly there are many, many more questions than answers. The answers will definitely come to light, as a result of diligent stringent collaborative engagement of all stakeholders.

Many clients do not read their insurance policy  documents to know the clauses, terms and conditions.

Many clients do not ask questions about the meaning of the clauses, terms and conditions; many clients are not aware of their rights under the ‘Cooling Off Period’ of an insurance policy document.

Many motor comprehensive policy holders are not aware and do not avail  themselves  of their RIGHTS under the ‘Authorised Repair Limit’ of the motor comprehensive insurance.

Many motor third-party insurance holders are not aware that they are entitled to a claim in the event of damage to a third party motor vehicle or damage to a third party property or medical expenses to a third party arising out of an accident, etc.

Many motor third-party insurance holders believe very very strongly that even their genuine third party motor insurance policy is strictly for the purpose of the police ‘let me go’. Many insurance policy holders believe that they subscribed to an insurance policy, due to the compulsion of the LAW, for instance in motor insurance, in marine insurance, in Employees Group Life Assurance Policy, etc.

IN SUMMARY: Whilst the insurance firms have stepped up on payment of claims, only one quarter of the motor vehicle owners in Nigeria have at least a genuine motor third party insurance policy. Thus, only  compulsion by LAW, since 1950, has not deepened the penetration of motor  insurance and the density of  motor insurance. A lot of motor vehicle  owners, even the educated, believe that third party motor insurance is for “Police let me go!” and “to insure is to fulfil all righteousness.” This is totally wrong.

Incidentally, the law enforcement authorities are not stringent in ENFORCEMENT as they cannot even differentiate between the genuine motor third party insurance policy and the Fake motor third party insurance policy. In this regard, the NAICOM and the insurance firms should collaboratively educate the law enforcement authorities and equip them with the technology adoption to detect fake motor insurance.

The insurance companies need to be innovative and THINK OUTSIDE OF THE BOX. For instance, if a bachelor-client, who has a motor comprehensive insurance policy is travelling abroad for six months, there should be a window for a suspension of insurance cover for the six months and for a continuation of the insurance  cover, after the six months of his travel; instead of the risk free policy being in force when the client is out of the country.