Agents drive new insurance market growth

The rising contribution of insurance agents to industry premium has revealed a hidden potential capable of increasing market penetration, creating new jobs and growth in the sector.

Insurance penetration, which has remain low despite a lot of investment in the sector, could grow faster if more attention and investment are channelled into agency business expansion and better wage for field men.

According to figures released by Insurance Practitioners Group, out of the N490.8 billion premium realised in 2019, agents contributed 34 percent, which equals N166.2 billion.

This is as insurance brokers, another major intermediary, contributed N257.2 billion, which is 52 percent, while underwriter’s direct marketing contributed 14 percent of the total sectorial premium.

An insurance agent is a person or organisation who/that solicits, negotiates or instigates insurance contracts on behalf of an insurer and can be independent or an employee of the insurer.

Bayo Akinola, an insurance practitioner who commented on the figures, noted that agency business deserved better treatment in the industry.

His argument is that insurance companies should invest in agency marketing, pay good wage and provide training opportunities to enhance the quality of their services.

This, according to industry analysts, could create job for young graduates, enhance economic growth, and improve standard of living and better protection for people and their assets.

According to Coenraad Vrolijk, regional CEO, Allianz Africa, in an interview with BusinessDay, growing agency marketing is key to unlocking Nigeria’s retail potential, and this is where the growth of the industry lies.

Kenya very distinct economy in Africa has an insurance penetration of 2.7 percent of GDP, and here in Nigeria it is just 0.3 percent, he said.

“What is driving Kenya growth is not corporate business because it is either 0.4 or 0.5 or 0.6 percent contribution. The difference is retail through mobile operators’ sales, but in addition all the insurance companies have really big agents’ sales force and branch network,” he said.

There are 25,000 agents in Kenya selling insurance to 40 million people, so Nigeria should have 100,000 agents selling to 200 million people, but today Nigeria has, may be just about 10,000 agents, he noted.

“I don’t know the exact number because people don’t publish theirs. But we don’t have more than 10,000 agents selling insurance to 200 million people in Nigeria,” he said.

Williams Boye, partner at Premium Consult, stated that the new investment in the industry would no doubt redefine service delivery, product development and in the long run produce new set of market leaders.

“Attention should be on development of retail products, agency marketing expansion, e-insurance, telemarketing, vendor marketing, among other growth areas,” Boye said.

According to a PwC report on ‘African Insurance Trend’ approximately, only 1.5 percent of all Nigerian adults – about 3 million – are covered by insurance today.

The report shows further that uninsured Nigerians face risks and require better mechanisms to mitigate these risks as an alternative to the informal arrangements currently in use.

“The low insurance penetration in Nigeria is, in part, a consequence of the lack of trust and confidence in insurance companies. A contributor to this perception of the market is the limited knowledge of insurance among the public,” the report noted.

Rotimi Okpaise, a sector stakeholder, had told BusinessDay during conversation on deepening penetration in Nigeria that the potential of the Nigerian insurance sector was huge and needed collaboration and far-reaching strategies to develop the retail market.

The growth of the insurance sector lies within the retail market, as concentrating efforts on corporate businesses, which has remained the same over the years, would not yield the needed result and the industry would not go far in its efforts to contribute to the nation’s GDP, Okpaise said.

This segment of the market presents the insurance industry with an ‘exciting’ opportunity of providing the ‘needed’ service of financial inclusion/protection and simultaneously increase the sector’s contributions to the nation’s GDP, he said.

Pius Apere, speaking on ‘Recapitalisation as a Catalyst for Deepening Insurance Penetration in Nigeria,’ highlighted that over the years, the Nigeria insurance industry had maintained brokers focused marketing strategy with complex product designs aiming at high net-worth policyholders, corporate businesses, especially the oil and gas industry, leading to limited gross premium income (GPI) growth, and hence low insurance penetration rate.

Apere also emphasised the need to make those who sell insurance knowledgeable enough to be able to pass the message to the consumers. His emphasis is on training the sales people including the agents.

Acquiring the necessary technology will not automatically translates to efficient service delivery without having the right staff recruitment, training and retaining policy, Apere said.