Role of media in deepening insurance penetration
I want to thank the organizers for inviting me to the 2018 Insurance Industry Consultative Council (IICC) media retreat. Although by no means a core insurance professional, my exposure to the industry dates back to 1987 when I worked at the Nigerian Agricultural Insurance Corporation as its image maker. Ever since, I have certainly paid more than a passing interest in the affairs of the industry both from the standpoint of a media practitioner who has a duty to inform and educate the public on the state of affairs in the industry but also as a consumer of its products. I therefore stand as friend of the industry with a duty not just to ensure that the industry better serves the public but to thrive as a vital service delivery sector. In doing so, you will therefore in the course of this paper permit me some qualified privilege to lay bare some of the troubling developments that I see as not only putting the industry at grave risk but also as endangering public policy – to enable us chart a sustainable future for the industry.
The topic Role of the media in deepening insurance penetration is certainly an interesting one. Aside asserting a mutuality of interest – some kind of symbiosis between the media as the fourth estate of the real and the financial services delivery sector, it certainly glosses over the more familiar characterization of the media as a foe rather than a friend. For me, it is heartwarming that the topic acknowledges that the media has an important contribution to make in deepening insurance practice in Nigeria. Moreover, the fact that my colleagues are here in their numbers, and that the Insurance Industry Consultative Council (IICC) accepts the challenge of creating a framework for an enduring partnership even when the perception about what form the partnership should take is not necessarily shared would seem to me one of the signs of the changing times.
The media has certainly come a long way from its traditional role of merely reporting events to being a major player in influencing and shaping public discourse. For while the traditional roles of informing, educating, and entertaining and just as crucially, playing a watchdog role on governments and institutions remain, the exercise of these functions have long exceeded the traditional boundaries of passivity to one of active engagement, this has even become more obviously in the age of citizen journalism and the New Media. With new technologies comes the dramatic shift in emphasis from medium to content and the democratization of information dissemination. While this itself poses enormous challenges, the industry can only ignore developments in the media sector to its peril.
More crucially is the kind of engagement that the industry can bring to bear in not only getting its message across but also to ensure that it makes maximum impact – as against the refusal to engage which results in perennial fighting of fires by organizations when things go wrong.
That itself assumes that the industry has developed a coherent agenda. To the extent that the media can only interpret things from its own perspective, taking it into confidence seems to me a good start in the partnership process. A good example is the current quest to amend the Pensions Act – given its wide ranging implication for the industry.
The insurance industry today
Ada Ufomadu in her article published in Africa’s Insurance Markets Uncovered, described the Nigerian insurance industrial as “resilient” despite what she also acknowledged as “lingering apathy… driven largely by cultural and religious beliefs.
For proof, she cited a compounded annual growth rate (CAGR) of 10.2% in gross premium Income (GPI) since 2012; the growth of the industry’s Gross Premium Income by an estimated 10% to ₦356 billion – which she noted, benefited from the enforcement of compulsory insurance policies, particularly in the group life and motor insurance business lines.
The downside to this is the abysmal penetration level. Compared with South Africa’s 16.9% and Kenya’s 2.9 percent, Nigeria’s insurance penetration, variously put at between 0.3 – 0.4% makes the insurance sector a non-starter. Even worse is that only 1% of the Nigerian population holds any form of insurance policy. Considering that the industry which started in 1921 is actually older than those of China, India and Malaysia, we must worry given the vast advances in insurance practices in those climes, why things have remained in the current sorry state. The question is – what kind of future do we envisage for the insurance? This is where the media as an accurate mirror of the state of things can provide immeasurable help. I shall return to that later.
Wither the 99 percent?
The insurance industry has certainly evolved over time. Whereas regulation and control of the industry started in 1961, the indigenization which berthed in the sector in the 70s would open vast spaces of opportunities for indigenous participation. This would be followed by the liberalisation of the sector in the 80s which, far from deepening the industry in any substantive way, merely fostered the illusion of sectoral growth while hastening the decline of the industry as indeed professionalism.
As it were, the industry has been impacted by the negative waves of globalization, deepening poverty and equality to the extent that increasing number of the population is caught in the daily struggle to eke out an existence. The result has been the plunge in the demand for insurance products in the ranking of priorities.
What to do?
Without attempting to be presumptuous, permit me to frame the challenge this way:
Do our practitioners truly understand our environment and its peculiarities? In an environment where risks are routinely prayed out and banished as ‘not my portion’, how do you get the prospective consumer of the insurance product to accept to dump the intangible of faith for an equally intangible product administered by human institutions? This is in the realm of public education and awareness. Obviously, the media can in good measure help break down a number of cultural/sociological abhorrent barriers impeding the business.
Are the products truly relevant? Does it match the consumer’s perception of utility? Is the problem essentially one of communication or messaging? Considering the saying that insurance products are not bought but sold, what is the industry response to the marketing challenge? And, how much of current technologies are being used to market insurance products?
Let me end on the note of what I consider as the survival imperative in the nation’s insurance industry.
We must acknowledge that things are not what they ought to be. A few disturbing developments readily comes to mind. First, we see the rules of industry and codes of self regulation increasingly set aside. The most obvious one in this regard is rate cutting. The result is the unhealthy price competition which ensures that less than 50 percent of their expected earning actually comes into the coffers despite the enormous risk borne by the insurance companies. Before now, we knew of the roles of offices committee in setting industry wide premiums. Once upon a time, the offices committee which every insurance company as members of NIA belong, and its self regulatory mechanism, has been slowly and steadily eroded. In other words, the rules and conventions attenuating has long been jettisoned. Fire for instance which used to be charged at 0.2% minimum is currently 0.08 percent. How does the industry survive given that the cost environment is actually spiraling upwards not going down?
Time to return to the old path. One way is for NAICOM to shed its regulatory indifference. The industry must make the various offices functional.
Businesses thrive on credit. No premium no cover. Result short term cover. I hear that maximum insurance cover is now three months. How does one build the investment arm of the pool in such a situation? Will that not impair their claim payment abilities particularly at a time claims are increasing?
What about the dearth of professionalism as a result of which those manning key areas in the industry are not professionals? Is it that CIIN is not producing the right number of professionals or the growth in the industry has outstripped the training capacity?
How many of our insurance companies healthy in the real sense of it? How many are able to pay claim as at and when due particularly now that premium income has gone down by half just as claims have escalated.
As hard as the task of reflecting these realities are to the media and the practitioner, it seems to me the long road towards a vibrant insurance industry that we all crave for.
February 1, 2018.