Foreign insurers seen to gain market share mid term

Despite their seeming slow start, foreign insurance companies which pitched their tents in Nigeria in the past few years will likely make remarkable impact in the medium and long term, analysts say.

These companies, including Old Mutual, NSIA, Metropolitan Life and Sanlam, all of South African origin, the analysts note, have come with huge capital and technical capacity, for which their group companies are known, to enable them implement strategic initiatives that would impact on the market and the way insurance services are delivered in Nigeria.

This expected impact, however, will depend on which areas of the business they decide to play or deploy their resources, as concentrating on corporate accounts rather than seeking ways to develop the retail market would not help the industry in its search for insurance penetration, according to the analysts.

Wale Onaolapo, managing director/CEO, Sovereign Trust Insurance plc, says he is optimistic that the presence of foreign insurers in the Nigerian market would in no distant time impact on penetration and service delivery.

“The few foreign players that have fully settled into business are doing their best to navigate the market. They have brought the impact of their financial capital to bear positively on the available underwriting capacity. However, there is still a lot of work to be done by the foreign players and their indigenous counterparts to deepen penetration, especially in the retail segment,” Onaolapo said in an interview with BusinessDay.

According to him, a number of strategic initiatives had been launched, with the belief that positive results could only begin to manifest in the medium term given the nature of insurance business.

Onaolapo said there was no doubt that the foreign players had deep pockets, which could lead to the conclusion that they were better positioned in using financial muscle to implement their strategies, adding, “Indigenous operators are, however, deeply entrenched such that the foreign brands in the country have had to contend with the stiff competitive landscape.”

According to him, the potential for growth was huge as he believed the industry would continue to grow as efforts continue to be made towards creating accessibility of insurance products across the country.

“Nigeria’s population defines the market size in terms of economic opportunities. And, considering the very low penetration rate of insurance services, there is no doubt that there exists very huge opportunities yet to be tapped,” he said.

“As soon as operators are able to get their marketing strategies right, I reckon the potentials of the Nigerian insurance industry will be unlocked and investors are bound to reap benefits from their investments in the long term,” he added.

Femi Ogun, managing director/CEO, Peril Guard Insurance Brokers limited, said it was too early to assess the impact of the foreign players in the Nigerian market, noting, however, that their coming would not close penetration gap if they still concentrated their efforts on corporate accounts rather than exploring the micro insurance option.

“I don’t think that they are making a big impact yet. The problem of majority of the population is imbibing insurance as a form of protection. They have not been able to do much about that. However, I am quick to say that it is early days yet,” he said, noting that practitioners were still chasing after the very few corporate accounts, foreign insurers inclusive.

“I believe that if and when micro insurance takes a foothold, the landscape will change dramatically for all practitioners,” he added.

Keith Alford, managing director, Old Mutual Life Assurance, however, said the company was targeting to become number one in the Nigerian insurance market in the next three years, even though he was not specific on what parameters these would be measured.

Noting that its strength lay in its pedigree and over 160 years experience, Alford said Old Mutual had carried out a survey on the Nigerian market and also taken time to understand the need of Nigerians.

“We are not going to bring anything different or new products per se, but we are going to do it right, that is our strategy,” he said.

Another indigenous operator who carved anonymity was, however, pessimistic about the expectation of the foreign players on the level of potential in the Nigerian market.

“I can weigh the appetite of the foreign investors, looking at our population. That is obvious, being that insurance is a game of numbers, but that is not all it means because you have to also consider individuals’ economic capacity and spending power,” the operator said, adding that the population as it were was yet to translate to business because majority of the population lived below poverty line, meaning they could hardly consider insurance as a priority.

“I agree that the foreign insurers have huge capital to execute innovative strategies, but still they would have to contend with competition in the operating environment. Remember, they would still lobby to get some accounts,” he argued.

In the last two years, the nation’s insurance industry has continued to witness a number of strategic initiatives towards market penetration, including the unveiling of mobile telephony insurance where FBN Assurance, jointly owned by FBN Holdings plc and Sanlam of South Africa, partnered Airtel and recently Etisalat for airtime insurance.

Similarly, Mansard Insurance, another indigenous firm with a reasonable proportion of foreign interest, unveiled another airtime insurance policy in partnership with MTN, another major mobile telephony operator.

This is outside the vigour in which most of the foreign players, who incidentally have affiliation with the banks, are pursuing bancassurance – distributing and selling their products through the banks outlets across the country.

Modestus Anaesoronye