The most obvious potential impacts of the Covid-19 on insurers are the pressure on sales from reduced business activity, the upsurge in claims arising from life, health, travel and business interruption insurance etc. The covid-19 impacts no doubt has affected the implementation of the ongoing recapitalisation exercise in the industry. Pius Apere, chairman /CEO, Achor Actuarial Services Limited, an actuarial Scientist and Chartered Insurer in this article reviews the industry, the recapitalisation exercise and post Covid-19 pandemic ear. Modestus Anaesoronye presents the report.
There had been a lot of great expectations from the investors and the insuring public when the insurance regulator first announced the recapitalization guidelines for the insurance companies operating in the Nigerian insurance industry about two years ago. The recapitalization exercise had been designed to provide the required capital base to address some critical challenges facing the industry over the decades in order to reform the sector for sustainable economic growth and development. The key critical challenges to address are inability to pay genuine claims, lack of innovation in product development, inability to underwrite bigger risks, low market penetration, just to mention a few.
The recent extension of the recapitalization deadline to 30th September 2021 is a welcomed development, as it would allow insurers space to review their strategic initiatives/plans to meet the recapitalization deadline.
This write-up highlights some critical lifestyle changes, possible challenges and opportunities which could arise from recapitalization and/or covid-19 pandemic that would affect the Nigeria insurance industry.
Conduct of Insurance Business
Marketing and distribution channels
The impact of covid-19 on businesses (e.g. business interruption), economy (e.g. volatility of markets) and human lives (e.g. death) has put pressure on insurance business sales resulting from reduced business activity e.g. less use of face-to-face channels, social/physical distancing etc. Covid-19 has induced a considerable use of direct marketing (i.e. internet, telephone, social media, such as Twitter and Facebook) both for marketing and selling insurance products, as information about customers could be obtained from online sources. In this regard, insurers may need actuarial services to cope with the operational challenge of quickly adjusting pricing models in a fast-changing business environment. This underscores the importance of actuarial departments for insurers in the recapitalization era.
Digitalization of Insurance Systems and Processes
Recapitalization will provide an insurer with the required resources to invest in acquiring appropriate modern software and hardware technologies (e.g. laptops, mobile devices, remote connectivity systems, video conferencing facilities etc.).Insurers with these capabilities will be in a much stronger and competitive position than others in terms of creating new digital products, underwriting, claims management, and administrative processes. Digitalization will no doubt lead to an increase in sales, insurance penetration and profitability of an insurer over the long term.
Change in Work Culture
The concept of working remotely from home is not new in the advanced economies but it could be entirely new to developing economies where the level of digitalization is low. Covid-19 has led to a change in work culture from total reliance on physical co-locations of people to remote working (i.e. use of virtual work-place). In this case, a greater percentage of the staff workforce are expected to be working from home, with only a fraction of staff on-site for managerial duties and/or critical jobs that cannot be done remotely. The change in work culture still has a challenge in dealing with complex operations such as high value claims where evaluating the physical evidence and obtaining expert reports in-person is frequently a key part of the claims management process.
The insurance industry should embrace the new work culture moving forward (even in the post covid-19 era) because, if it is well managed, it would increase the efficiency and profitability of an insurer.
Human Capital Development
The recapitalization would also place all insurers at least on the same level playing field in terms capital base being the most important critical success factor. The second key critical success factor for an insurer is the availability of appropriate human capital (i.e. the crop of professionals with good change management and leadership skills). Thus, a company’s staff recruitment and training policy is crucial in the recapitalization era.
Staff Recruitment and Training
The insurance industry is at the crossroad to recruit and retain a new crop of professionals in order to meet the new challenges that will face the insurance companies during the recapitalization era. In the same vein, the importance of retraining of existing employees (e.g. CIIN qualified members) to bridge the skills gap in order to keep abreast with modern and international best business practices cannot be overemphasized.
Therefore, there is an urgent need for the insurers to have small functional libraries equipped with adequate study resources (e.g. CIIN study materials, basic and/or advanced Excel textbooks etc.) for self-training purpose. The Chartered Insurance Institute of Nigeria (CIIN) has recently restructured its curriculum in line with international best standards and the production of appropriate study textbooks to meet the new curriculum is a step in the right direction.
Virtual Learning and Online CIIN Examinations
CIIN has the primary responsibility of catering for the manpower development needs of the Nigerian insurance industry. Covid-19 pandemic had made it impossible for CIIN to fulfill this importance duty i.e. the usual face-to-face learning process and conduct of professional examinations have been hampered as result of Covid-19 lockdown. There is still great uncertainty whether the industry will ever return back to status quo prior to covd-19. Thus, CIIN should be prepared to move forward by considering alternative ways in fulfilling its primary responsibility even beyond covid-19 pandemic.
As an alternative, virtual learning process and online CIIN Examinations could be introduced, as similar learning methods and examination process have been deployed successfully by some international professional bodies during the period of covid-19 lockdown. Although there are likely to be challenges in conducting such online professional examinations in Nigeria due to unreliable internet network connectivity, irregular electricity power supply, candidates without personal computers and/or typing skills etc. Despite these challenges, the online examinations could be conducted successfully, after careful planning process, particularly for the Foundation Courses to start with where the number of student enrolments may be high, using the following process:
Online examinations can be written by candidates in their respective companies using their office computers being set in a training or Board room. This would guarantee access to reliable internet connectivity, the supply of electricity power, availability of computers provided by employers and meeting the social/physical distancing requirements.
At least two qualified CIIN members in the company may be trained as invigilators to avoid possible cases of examination malpractices such as plagiarism, collusion etc.
At the start time of any examination, candidates will access the written examination paper from the CIIN online platform.
Answers will be typed if there is no provision for handwritten answers allowed for the particular examination. In this case, answers will be typed into either Word or Excel depending on the examination. At the end of the examination the electronic ‘examination scripts’ will then be uploaded onto CIIN online platform. A separate arrangement (i.e. using one examination hall) will be made in the CIIN office for the few very candidates without employers.
The challenges from covid-19 had no doubt impacted on the recapitalization exercise leading to the recent extension of the deadline by the regulator. Therefore, the insurance industry stakeholders are expected to be prepared to manage the above challenges effectively to achieve the benefits of the recapitalization moving forward.