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Chuks Udo Okonta
Insurance, banking and pension share similar services in many ways, as they operate in the financial sector of the economy.
Services such as savings, investing, assets management; financial advisory, retirement management; deposits, risk management; claims payment are common to them.
While the banking and pension sectors seemed to be evolving their services to enable them grow their financial net, the insurance industry needs to also do more to reform and maximise opportunities shared with the banking and pension sectors.
Just like the pension sector, the insurance sector can grow it assets with savings products especially deferred, annuity which is similar to contributory pension.
The same way, the insurance industry can obtain huge savings from its saving products just like the banks.
I was amazed when a young insurance practitioner said “the Insurance industry can never be like the banks”. For him, the banks have grown, while the insurance sector is just playing a catch up game.
Not satisfied with his position, his statement propped me into looking deeply into insurance and banking operations.
From my study, I observed that in several areas, insurance and banks share similar services. Just that the insurance industry has not fully developed and effectively marketed these services.
As an intern in an insurance company, I was privileged to worked in the account department and was saddled with cheque processing. In the course of my duty, I noticed how banks do besieged the insurance company seeking for funds, which are fixed between 30 to 60 days.
The invested funds which are similar to loads granted by banks yielded huge returns to the insurance firm.
As banks thrive on loads, so also insurance firm can thrive on such tenured investments if well developed.
As banks thrive on deposits, so also can insurance thrives on premium when underwriting is well deepened.
The banking elements in insurance need to be developed if the insurance industry is to take its rightful position.
On pension, I’m also puzzled when some insurance practitioners lament that pension business was cede from them.
But a study on life insurance operations revealed that major elements of pension still exist in the insurance sector.
Such elements include, deferred annuity; retiree life annuity, endowment amongst others.
The contributions made by retirement savings account holders in the pension industry is similar to the deferred annuity concept offered by life insurers.
The huge pension assets obtained from enforced contributory pension, can also be achieved through the development of deferred annuity and other saving products.
As a developmental journalist, I have shared with some top executives of the National Insurance Commission (NAICOM) the need to strengthen the deferred annuity business so as to attract more saving assets in the insurance industry.
Imagine if all insurance companies are encouraged to institute a deferred annuity as a voluntary retirement saving platform for their employees, it would boost the insurance assets like that of the pension sector.
The sector also has to aggressively market the deferred annuity retirement platform which is flexible to the public.
Another myth that most insurance practitioners advance why they can’t be like the banks and pension is the claims settlement element in their business. But they are quick to forget that there is no claims elements in savings products.
Though the insurance sector is obligated to pay claims, it should also be noted that what banks suffer as bad loan yearly sometimes exceed the claims paid by the insurance sector.
The lazy argument on government support for the pension industry through enforcement is also advanced, it should also be noted that there are compulsory insurances that are backed by law.
To grow the insurance sector just like the banking and pension, NAICOM should stand firm like its counterparts, the Central Bank of Nigeria (CBN) and National Pension Commission (PenCom) in its oversight of the industry.
Over the years the need to institute the insurance clearance certificate similar to that of PenCom has be on the table of NAICOM without any progressive action.
The contributory pension system though still facing compliance challenges, has been enriched through the compliance certificate concept, which if fully adopted would also promote insurance business.
Insurance practitioners should also improve their services and relate closely with the public. They should esteem prompt claims payment, awareness and education, corporate social responsibility – products donations; robust information technology deployment; partnership amongst others.
