Micro insurance significant for deepening financial inclusion
By Cynthia Ezekwe & Olivia Nnorom
Experts in the insurance industry have identified micro insurance as a veritable means of deepening financial inclusion, and increasing insurance penetration in Nigeria. This is as insurance operators earnestly seek increased patronisation of insurance products by Nigerians as a means of safeguarding their lives and properties.
The National Insurance Commission (NAICOM) defines micro-insurance as the insurance that is developed for the low income population provided by licensed institutions operated in accordance with generally accepted insurance principles and funded by premiums.
This means that micro insurance schemes are designed to protect individuals in the low-income class against specific loss, in exchange for regular premium payments proportional to the likelihood and cost of the risk involved. It is also a vehicle used to reach out to the uninsured poor who are active income earners in a bid to increase the number of individuals with access to insurance and insurance penetration.
The Commission described micro insurance as an effective safety net in developing economies like Nigeria where a significant proportion of the population are in the low income class, as it targets the segment of the population that is vulnerable to falling into poverty in the event of any loss.
It also disclosed that micro insurance is one of the most significant insurance packages that can be utilised by insurers in achieving financial literacy among Nigerians by using the sale and distribution of various insurance products to educate Nigerians on the nature of risks they face in their day-to-day living, how to make provisions for such risks through the purchase of insurance policies and how to use insurance to cushion the effects of demise of the breadwinner of the family among others.
In this regard, NAICOM, released the guideline for micro-insurance operation in Nigeria in 2013, as an avenue to increase penetration and meet insurance services needs of those in low income class.
The 2013 guideline established a uniform set of regulations and standards for the conduct of micro-insurance business in Nigeria, recognising micro-insurance as services developed for low income population with low valued policies provided by licensed institutions operated in accordance with generally accepted insurance principles and funded by premium.
The guideline was revised in 2018 in line with best practices that will enhance the performance of the micro-insurance market. The revised guideline stated that the minimum paid up capital for micro-insurance service providers is determined by the geographic coverage of the service provider.
According to the guideline, the paid up capital for a micro-insurance company that operates just a unit, i.e, a business outlet at only one location, is fixed at N40,000,000. Where a micro-insurance service provider concentrates operation in one state only, a paid up capital of N100,000,000 is applicable, while micro-insurance firms with presence in more than one state in Nigeria are to have N600,000,000 as minimum paid up capital. This paid up capital allows a licensed micro-insurance company to operate as a composite entity offering both life and non-life products.
Speaking on the need to ensure effective implementation of micro insurance, Adelani Adedeji, managing director and chief executive officer, Aceline Brokers Insurance Limited, said, “Micro-insurance is insurance that is designed and tailored to meet the needs of low-income individuals at an affordable cost. It is observed that low-income individuals are the most exposed to risk, yet they are the least protected. When the unexpected occurs, it usually affects their livelihood, hence the need for micro-insurance.”
Adedeji observed that micro-insurance has not gained much popularity and acceptance in Nigeria yet as a result of a low level of awareness of the benefit of micro-insurance to the general populace. He also noted that the industry has not intensified efforts in developing tailor-made products for low-income individuals.’’
Pointing out the benefits of micro insurance, Efe Isiorho, the business development manager, GOXI Micro Insurance, explained that traders could have their goods insured with as low as N500 under the GOXI Ma Business insurance package.
Eddie Efekoha, the group managing director/chief executive Officer (CEO), CHI Plc, while speaking at the unveiling of CHI Micro Insurance Limited held recently in Lagos, disclosed that the company would leverage the opportunities in the grassroots to make headway, explaining its plan to insure about 100 million uninsured grassroot dwellers, while collaborating with artisans, Small and Medium Enterprises (SMEs), microfinance banks (MfBs), cooperative societies, trade associations, among others.
Yemi Soladoye, managing director, Risk Guard African Insurance Brokers Limited, noted that the target groups for micro insurance in Nigeria are the farmers, the artisans, the market women in the rural, semi-urban and urban areas and the low-income people of Nigeria in general.
Soladoye explained that since insurance is to satisfy the security needs of human beings and those earning below $2 per day are still struggling to satisfy the physiological needs of food, shelter and clothing, iInsurance for them could only be provided through government support.