The efforts to take low-cost insurance policies to the grass roots under the microinsurance platform will soon receive a boost with the National Insurance Commission’s (NAICOMs) current move to facilitate licensing of core players.
“The Commission will conclude approval of one by the end of February, while three or four others would have received approval by the first half of the year, while we hope to increase it to five or six by end of the year”, Sunday Thomas, deputy commissioner for Insurance, Technical, said in a telephone conversation with BusinessDay.
Thomas said the NAICOM is eager to see the micro insurance companies take off to drive grass roots insurance.
“Certainly, we must list something off the ground, and we are working towards it seriously, Thomas assured.
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Thomas said that this approval was in a bid to increase insurance penetration and acceptance in the country, adding that it would also complement the commission’s efforts on insurance penetration.
Ayodele Iyun, an insurance practitioner in a presentation titled ‘Micro-Insurance: Nigeria’s Untapped Insurance Market,’ said low insurance awareness and inaccessibility to insurance services, especially by the low income earners and the poor has over time been identified as one of the major factors responsible for Nigeria’s low insurance rate.
He said there is a general perception amongst most low income persons in Nigeria that insurance is only meant for the wealthy who can afford it, and this trend has left majority of the people in this class that accounted for the larger percentage of country’s population ‘’ Uninsured” and vulnerable to numerous perils.
He further observed that with the recent level of success achieved in developed countries and some African countries in the area of Micro-insurance, this breakthrough once again provides the Nigeria insurance industry the opportunity to explore the potential inherent in the micro-insurance market which has been left untapped over a long period of time.
The Concept of Microinsurance
Micro-insurance is intended to protect the poor in the society, particularly the low-income earners mostly earning their living in the informal sector. Low income persons live in risky environments and are exposed to numerous perils. Severe weather can wipe out a family’s crop and leave them nothing to eat until the next harvest. The death of a breadwinner can force children out of school and into the labour market. Micro-insurance is intended to help low income families cope with these and other risks.
Micro-insurance, according to Craig Churchill (2006) is a mechanism to protect low-income people against specific perils in exchange for regular premium payments proportionate to the likelihood and cost of the risks involved. Micro insurance operations can be likened to the regular insurance; however the focus is basically on the low income earners.
Micro insurance entails the development of insurance products to cater for the micro businesses, individuals with a very modest or below-average lifestyle, and individuals with personal effects that are not so valuable. Simply, it is insurance that focuses on the needs and assets of the poor. The group of people who do not belong to those normally regarded as “high net-worth individuals”.
Micro-insurance can cover a variety of different risks, including illness, accidental injuries, livestock, death and property loss – any risk that is insurable, as long as the product is affordable and accessible for low-income households. Micro-insurance can be packaged as a single cover or several covers can be infused together into a composite product.
In Nigeria, micro-insurance products can be packaged for farmers, livestock breeders, fishermen, artisans, small scale traders, small scale producers, thrift and credit societies, small scale associations, members of communities and other low income earners.
Features of Microinsurance Market
The following are the key features of the micro-insurance market; some differentiate it from the regular insurance market: Relevant to the risks: the types of covers provided should be relevant to the need of the low income earners. It should cover their areas of exposure and be tailor made; All Encompassing: considering the target market, micro-insurance tends to be as inclusive as possible, unlike regular insurance that exclude certain persons; Affordable and Flexible; the premium has to be affordable with flexible payment pattern in order to achieve wider coverage among low income earners.; Simple contract wordings; clearly defined terms and simple rules are usually applied for ease of understanding, unlike regular insurance associated with complex conditions and so much legal definitions.
