Microfinance Banks seeking o take advantage of the microinsurance business to deepen financial inclusion have been advised to influence regulation to pave the way.
The present microinsurance and bancassurance guidelines regulating the business limits the potential,
Chidiebere Nwokeocha, executive director, Business Development, Cornerstone Insurance Plc said
Nwokeocha who spoke in Lagos at the 6th Annual Symposium of the Nigerian Microfinance Platform (NMP) organised by the Microfinance Learning and Development Center (MLDC) said microfinance banks need to extend their microinsurance product offerings beyond credit life & fire.
According to him, microinsurance should be seen as an additional income stream for microfinance banks.
Speaking on the theme – ‘Microinsurance Delivery in a Pandemic: Market Development Opportunities for Microfinance Banks in Nigeria’, Nwokeocha said microfinance banks should participate more in shaping regulation, as present microinsurance and bancassurance guidelines limit the potential of partnerships.
According to him, Microfinance banks should capture retail market share and partner with other retail channel platforms, as well as develop operating platforms leveraging technology to grow microinsurance profitably.
He noted that microfinance banks during the Covid-19 pandemic witnessed reduced income, layoffs which led to lower deposits, loan defaults, and higher withdrawals; while microinsurance saw a drop in revenue, as insurance is not a high priority expense, inability to sell, as retail insurance is heavily dependent on agency sales forces; and on the increased interest in health insurance.
Nwokeocha further stated that to be profitable and also to achieve scale, microinsurance is best sold to clusters and not on a retail basis.
“Because the target market is largely unfamiliar with the concept of insurance and may also distrust the product, there is a model and a process for building microinsurance penetration in any cluster.”
He said the first step is to offer the product for free, usually as part of a loyalty scheme. “For example, customers who increase their savings deposits qualify for free insurance.”
“Those who get their claims settled and “taste” the product become strong advocates within their communities.” The loyalty scheme is not modelled to be an additional cost to the MFB, the insurance premiums are paid out of the increase in deposits.
“The second stage is to offer freemium upsells. Individuals who get free insurance have an opportunity to buy insurance for their spouses and children.”