Insurance companies have rejected the microinsurance window on concerns around capital requirement and cost of governance.
According to the operators who have raised these concerns, the microinsurance guideline is not attractive in terms of capital requirements in relation to prospect of business to write.
They also argue that cost of governance structure for the scheme should be streamlined in terms of operational cost,
According to NAICOM only five insurance companies have shown interest in the microinsurance window since it was released on 30th November 2020.
In an industry meeting recently, NAICOM has accepted to review the guideline, while it has also mandated the relevant committees of the Nigerian Insurers Association (NIA) to identify specific issues regarding the guidelines for consideration and appropriate action.
As part of the Commission’s effort to deepen financial inclusion, NAICOM on 30th November issued a circular signed by Leonard Akah, director, Policy and Regulation for the Commissioner for Insurance on microinsurance window operations for insurance companies.
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“As part of the ongoing pursuit to support financial inclusion and increase insurance penetration in Nigeria, the commission hereby permits microinsurance window operation for conventional insurance companies”.
Meanwhile, NAICOM had granted micro insurance licence to Goxi Microinsurance for state operations, and CHI Microinsurance for national license (life).
In its microinsurance guidelines released in 2018, National Microinsurer, minimum capital base is N600 million, hence w the general business will have N400 million and life business will have N200 million.
“Its operation is nationwide with presence in at least six states within three geopolitical zones of the federation. The company shall prove to the Commission through their business plan that they are going to access the low income earners spread across the country within a reasonable time frame,” NAICOM stated.
According to the guideline, a Unit Microinsurer must have minimum capital base of N40 million, general business arm will operate with N25 million, and life arm will operate with N15 million.
“It is to operate only in any one location within a local community and the company shall prove to the Commission through their business plan that they are going to access the low income earners spread across the location within a reasonable time frame.
“For a State Microinsurer, minimum capital base is N100 million, general business will have N60 million, the life arm will have N40 million.
“It is to operate only in any one state of the federation (for this purpose Abuja is regarded as a state) with at least three branches or office locations, each in a different local government area. The company shall prove to the Commission through their business plan that they are going to access the low income earners spread across the state within a reasonable time frame. The Commission shall grant a national microinsurer licence to a state microinsurer upon application following 60 months of successful business operation and approval by the Commission,” NAICOM said.
The regulator said that it issued the new guideline to the industry as part of the financial inclusion strategy to stimulate growth in the sector especially the retail end of the market, drive insurance penetration and service the lower income earners who hitherto have been excluded from insurance.
Globally, an estimated 500 million people have microinsurance, up from 78 million in 2008.
Craig Churchill, head of the ILO’s Microinsurance Innovation Facility had hinted the growing value and viability of this insurance mechanism aimed at low-income people.
He said microinsurance is coming of age, an insurance mechanism for protecting low-income people against risks, such as accident, illness, death in the family or natural disaster, has developed rapidly over the past few years.
Across Asia, the number of people covered by microinsurance grew by 40 per cent between 2010 and 2012, while in Africa, it grew by more than 200 per cent between 2008 and 2012. Overall, the number of people with microinsurance worldwide has increased from an estimated 78 million to more than 500 million in the past five years.
At the same time, an increasing number of governments are viewing microinsurance as an important mechanism to provide not only disaster cover, but financial security, poverty reduction, economic growth and improved access to healthcare for low-income households.
