NAICOM, insurers, TETFUND, govts must ensure funding to produce actuaries

PIUS APERE, PhD

Dr Pius Apere, PhD, FCII, an actuarial scientist and chartered insurer, is chairman/CEO, Achor Actuarial Services Limited. He can be reached via comment@businessamlive.com

Given the severe shortage of actuaries in Nigeria, how has this gap affected the insurance industry in terms of risk assessment, policy pricing, regulatory compliance, and overall sector growth?

Pricing actuaries are responsible for evaluating and quantifying risks associated with insurance policies. This involves analyzing various factors such as the nature of the risk, market trends, and historical data to determine appropriate premium rates.
The shortage of actuaries leads to designing and pricing of insurance products without using the profit-testing technique. This is a process of assessing the profitability of an insurance product in advance of it being sold and written in the books of the insurance company. This actuarial technique involves projecting future financial outcomes by analyzing cashflows associated with different scenarios. The absence of this technique results in selling loss-making insurance products in the market.

The shortage of actuaries in Nigeria may give rise to low insurance market penetration in the country due to the limited number of different insurance products meeting the needs of the wider insuring public. The product development skills are exclusively under the control of actuaries.

The insurance regulator also needs to have in-house actuarial skills for the approval of new products designed by insurers before they are sold in the insurance market.

What factors are responsible for this shortage?

Limited awareness of the importance of actuaries in the economic development in Nigeria results in inadequate funding of actuarial training programmes e.g. Government Actuary Department (GAD) is a department of the UK Government established in 1919 that provides actuarial solutions including financial risk analysis, modelling and advice, to support the UK public service.

Writing overseas actuarial professional examinations – Students find it difficult to write foreign professional examinations without financial and study time support from employers, governments and scholarship awarding organisations.

There is no actuarial professional body in Nigeria that conducts its own examinations in the country. Thus, students rely on foreign actuarial professional examinations with high costs due to affordability and foreign exchange fluctuations.

How has the insurance industry been coping, and what immediate and long-term measures should be taken to resolve this issue?

The insurance industry had been relying on the foreign actuaries who are working for actuarial consultancy firms abroad (e.g. South Africa, Kenya etc.) with huge costs to the insurance companies.

The Institute and Faculty of Actuaries (IFoA) UK has granted accreditation to University of Lagos (Unilag) Postgraduate M.Sc. degree programme in Actuarial Science. This will provide successful students with six exemptions from the IFoA qualifications. This will be the fastest and cost-effective route to increase the qualified actuaries in Nigeria. Thus, this programme needs to be fully supported, not only by NAICOM and the insurance industry but also by the federal and state governments, including TETFUND, to ensure that adequate funding and sensitization are available for the training of Nigerian actuaries over the medium to long term.