Investors looking for opportunities in the nation’s insurance industry have huge opportunity to come into the sector in the current year, either as microinsurance or Takaful insurance firms as both windows are now open with regulator issuing licenses.
Both openings are currently given a lot of priority by the industry regulator, the National Insurance Commission (NAICOM) because of its target to deepen insurance penetration through development of the retail end of the market.
Fola Daniel, commissioner for insurance said this is a landmark development in the history of insurance industry in Nigeria, because not only will these products change the approach to insurance service delivery in Nigeria it targets to affect the life of individual citizens through poverty reduction.
“This event is very significant because of the vision to use micro-insurance to address the challenges of poverty, which is endemic in our society.”
“The take-off of microinsurance is expected to unlock the over N60 billion business that has remained untapped, as this is expected to help take insurance to the unreached and underserved people at the grass roots and help mitigate their risks for the benefit of the economy.”
Daniel however called on would-be operators to leverage the opportunities provided by technology and initiatives in the banking sector to reach out to the public, stressing that without technology, it would be difficult for operators to operate at maximum benefit.
Yomi Soladoye, managing director, RiskGuard Africa said with well over 864 Micro Finance Banks (MFBs) and a 20 million customer base across the country, the nation’s insurance industry has the capacity to generate a minimum N60 billion annually if at least each borrowing customer of the banks are insured with minimum N3,000 premium.
This will not only facilitate more access to finance for small and medium scale enterprises, poverty alleviation and economic development, but will ensure stability of the micro finance banks in terms of risk management and loan recovery processes.
Soladoye said that from the official report of the Bureau of Statistics which revealed that 112 million Nigerians are poor is a further indication that the potential of micro insurance is huge, essentially necessary to take many people in the population out of poverty.
According to him, this class of the society suffer numerous challenges including Sickness; Accident; Diseases, Drought; Fire; Flood; Storm; Theft; Political Violence; Religious Violence; Unforgiven quarrels ; Death and so require one form of micro insurance to get out of these troubles or move out of poverty. Other risk exposures include Water – borne diseases; Absence of Medical facilities to diagnose and to treat; Ignorance – Cultural and Religious beliefs; Alcoholism; Hazardous Jobs – Snake bite, falling from tree top and social expenses – Wedding, Funeral, and Extended family.
Microinsurance Guidelines
The National Insurance Commission (NAICOM) at the release of operational guidelines for the take-off of micro-insurance in the country threw the door open to industry operators and other interest groups to apply for license.
Subsequently, it inaugurated a 14-man steering committee made up of representatives of stakeholders across the financial services market that would oversee implementation of the scheme in Africa’s most populace black nation. Its role among others will be to respond to issues emanating from implementation of the scheme and make recommendations to NAICOM.
NAICOM however stated that the micro-insurance business is going to be strictly regulated because it has to do with trust, so the Commission’s stance will be strong to enable it protect the policyholders.
“NAICOM will not compromise in its regulatory standard to ensure the smooth running of the micro-insurance, so we shall be definite in our stance to ensure that policyholders are adequately protected.”
Takaful Guidelines
In line with the provisions of the 1997 Insurance Act, and the need to complement the current drive for Financial Inclusion to increase insurance penetration in Nigeria, the National Insurance Commission (NAICOM) has released the guidelines on Takaful Insurance. According to a circular of the guidelines, all intending applicants seeking license from the Commission to transact takaful-insurance business in Nigeria must possess the followings: Certificate of Registration as a full-fledge takaful-insurance company in accordance with International best practice, adding that such a company must have, as part of its name, words or terminologies that connote takaful operations. It said the company must maintain a minimum deposit in a non-interest financial institution at all times and that the provision for the establishment of an Advisory Council of Experts (ACE) must be made in the articles of the company and there should be establishment of investment policy for the participants’ Risk Fund. Takaful means joint guarantee or share responsibility in Arabic, it operates in according to Islamic laws, the products are designed to carter for Muslims and non- Muslims.
The products are meant to encourage saving culture and build capital, over a period of time to meet personal or business needs.
Under takaful plan, people can save regularly for a fixed period that is convenient for them. The accumulated targeted amount can be used to fund obligations such as purchase of land, house, marriage or hajj. It could also be used to meet other long term financial objectives, such as retirement, children education, travelling expenses as well as expected commitment.
By: Modestus Anaesoronye
