Insurance is sold not bought” is the refrain of many an insurance practitioner in Nigeria. And to justify this paradigm, they allude to the fact that even in more advanced economies no one just buys insurance if there were no regulatory enforcement to that effect.
That position has an ally in the BGL Insurance Report 2010, which showed that “The growth target expected for the [Nigerian insurance] industry by the regulators would only be achieved through the enforcement of compulsory insurance.”
Furthermore, the apex regulatory body, the National Insurance Commission (NAICOM), is intensely focused on ensuring the industry delivers on its huge potentials with such regulatory-driven efforts as ‘No Premium, No Cover’, compulsory Third-party motor insurance, micro-insurance and Takaful (non-conventional) insurance, among others.
However, the industry has not been able to fully leverage those interventions because more needs to be done with key success factors like consumer education, prompt claims settlement, innovative (differentiated) products, employee engagement and technology.
As a background to the reality of the Nigerian context, the Enhancing Financial Innovation and Access (EFInA) Report 2008 found that, “The levels of awareness about insurance is low, with 48% of the adult population saying that they have never heard of the word “insurance” and 17% indicating they have heard of it but do not understand what it means.” Almost a decade later, it remains to be seen if those statistics have improved significantly.
The Meristem Insurance Industry Report 2014 stated that “Of individuals who have insurance, the product with the highest penetration is vehicle insurance.” Yet without enforcement, vehicle insurance (which has the dismissive phraseology, “police let me pass”) may not even attract as much patronage, with many in the target audience growing increasingly sceptical- even scornful- with the way it is delivered.
This reminds me of an encounter at the FRSC licensing office sometime ago, where an applicant for the driver’s licence who also needed to renew his third-party motor insurance vowed never to patronise insurance companies because of what he termed “dubious practices”. As I tried to make him see reason that it was better to purchase the policy from a legitimate insurer, he scowled at me in disbelief, stating without mincing words that I was being naive.
About fifteen minutes later, he emerged with a policy document he obtained from some peddler at two thousand naira- rather than the official rate of five thousand naira. His rationale? He was cutting his losses in advance, since, in his estimation, he would still have to bear the full burden in the event of exposure to a risk. He insisted that it was commonsensical to save three thousand naira as he would be left to bear his cross because the insurer will not come to his aid- on a third party insurance for that matter!
Clearly, informal support systems as personal savings; disposing of personal assets; borrowing money from family and friends; asking for donations or just doing nothing- as burdensome as they are- will continue to be primary risk mitigation mechanisms if practitioners kept doing insurance by the playbook of the sixties. Evidently, that man is only one of thousands of customers who have slipped through the net due to unpleasant experiences they had or heard about.
Indeed, there are a few bright stars, but the negative perception of the industry has led to a situation where demand is driven largely by corporate entities relative to the critical retail mass. How many Nigerians have insurances for their flats or houses, jewellery, or even cars? How many small business owners have a fire or burglary policy?
Yet insurance is not rocket science. The Geneva Association, a leading international insurance think tank affirms that “At its most basic and fundamental level, the insurance mechanism involves individuals or entities (policyholders) paying a fixed amount at regular intervals (premium) into a common fund (the insurance scheme), from which money is drawn (payout for a claim) to compensate one or more policyholders who are victims of a predefined event under specific circumstances (scope of coverage).”
To be fair, enforcement has its merits, seeing that the regulator is interested in the growth of the market as it fulfils its promise to customers. However, the entire value chain- including agents, brokers, loss adjusters, and so forth- must ensure that insurance is “perceived not only as a protection mechanism, but more importantly as a partnership that allows individuals and businesses to spread their wings and go where they might otherwise not have dared to go.”
Olufemi Adeyemo
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