Come June 30, 2020 when the insurance industry recapitalization would have come to an end, the sector is expected to bubble with a lot of funds that will enable surviving players undertake strategic initiatives to enhance their services and also make profit for shareholders.
The exercise is expected to cover the shortfall of approximately N169.1 billion, where the current capital is at estimated N300 billion, with the shortfall representing the different between the existing capital and the new capital, according to Coronation research.
Given the industry penetration rate of 0.31 percent in a country of over 170 million people, the potential is hugely untapped.
Everyone who has looked at the market including experts and researchers have pointed to the fact that the growth of the industry lies in exploring the micro insurance space, as this will be the right platform to educate and build trust among the populace.
According to Guy, Czartoryski, head, Coronation Research, “to position the sector for radical growth, one must consider the lessons learned in Asian markets of India, and also in West Africa Ghana which shows how insurance can be rolled out to tens of millions of customers.
He said that cooperation between regulators is critical, as are distribution partnerships with banks and telecom companies.
“Fresh capital is necessary for development, but a fresh strategic approach is required to reach the industry’s potential, and this he said is rolling out products and strategies that unbundles micro insurance consumers.
Pius Apere, managing director/CEO, Achor Actuarial Services Limited had asked the National Insurance Commission not to throw away companies that may not meet the recapitalization requirement, as he believes that they could be useful in unbundling the micro insurance space, which he said hold key to growth of the industry.
Apere said that the current capital requirement for micro insurance license prescribed by NAICOM, put between N15million to N200 million for life business, and N25 million to N400 million for general business, depending on the coverage area and space is small and not enough to deepen penetration, or even become profitable companies.
“The above capital is not enough to acquire the necessary infrastructural technology and hire and train large number of sales agents to sell the products, so converting few existing conventional insurers with their already developed infrastructure and human capacity to micro insurance will make the miracle, Apere said.
The question is, ‘what role is the new ‘big’ capital going to play in developing the micro insurance market’?
Are conventional insurance players allowed by law to do micro insurance?, now that the ANSWER IS NO, how do they get into doing micro insurance?
Does this mean that every conventional player that wants to play in micro space needs a micro insurance license? This may be the thinking of forward looking companies like Consolidated Hallmark Insurance Plc that has applied for micro insurance license ahead of the new capital requirement in the industry. This may be the way to go.
NAICOM had early last year given June 30, 2018 deadline to non-life insurance companies to unbundle microinsurance products for standalone license.
At the moment, only two stand alone applications have been approved, which according to expert are not sufficient to achieve the strategic intent of the micro insurance project, which is to reach the mass of uninsured and increase penetration.
The Revised Microinsurance Guideline which became effective 1st January, 2018 further stated that, “No person shall commence or carry on any class of Microinsurance business without being registered or authorized by the Commission.
Section 10, sub section 1 and 2 of the revised Microinsurance guidelines released by NAICOM said “Existing Conventional microinsurers shall wind down their window operations for non-life classes within 18 months from the effective date of these guidelines and in not later than 24 months transfer the life classes to a dedicated microinsurance company.”
Low-income households and micro, small and medium enterprises are particularly vulnerable to risks, be they related to health, agriculture, property or death. These risks often carry heavy financial implications as individuals, businesses and households attempt to deal with them. Since very few of these groups have access to efficient and effective formal risk management and social protection mechanisms, recuperating losses and recovering from shock is at best difficult, and more often impossible.
According to the microinsurance network, Microinsurance provides poor and low-income households with the means to protect themselves against the effects of risk. The role of microinsurance must therefore be viewed alongside government provision of basic health services, employment and education, etc., all of which go towards alleviating poverty.
There are many microinsurance schemes around the world today, but they still only meet a fraction of the overall need. It is difficult to estimate how many people are still uninsured or inadequately insured from risks.
