Every new investor coming into the Nigerian insurance sector both from within and outside the shores of Nigeria has pointed to the rich potential of the retail segment of the market that has remained untapped, and, one that is capable of positioning the sector for effective competition with other top markets around the world.
This general impression has kept looking interesting in view of the country’s huge population of over 150 million people; its 70 percent employment concentrated in the agricultural sector; mass market in the grassroots and an array of artisans and market women still not introduced to insurance.
The continued underdevelopment of this critical segment of the market makes Nigeria a fringe player, where it is suppose to lead particularly in Africa, and this is why the sector still contributes less than one percent of the GDP and less than one percent market penetration.
Whereas the retail market should have been the focus of majority of the companies in the effort to capture the huge uninsured populace, the reverse has been the case as companies have concentrated their effort and resources on public and corporate sector accounts.
The implication of this is pressure on the market, with a lot of competition among operating companies each wanting to be part of the meager account because of the huge premium volume, and therefore resulting in an unhealthy competition in product pricing; poor quality risk assessment and shrinking bottom line. Majority of the players who want things done the right way like other successful market around the world are worried about the sustainability and future prospect of the market, particularly in the present economic situation.
Should the market refocus and look at expanding its income profile instead of concentrating only on public sector and corporate clients for premium? Is it not the right time, operators look to starting to invest in the retail end of the business, given that it takes time to mature and holds better future for growth?
Experts who spoke to BusinessDay on this development noted that the issue of improper pricing of risk would remain a major challenge as long as everybody concentrates on the public and corporate sector accounts instead of looking at other areas for expansion.
They therefore suggest that players should expand their focus and begin to invest in development of the retail sector businesses, either by getting micro insurance license as being planned by the National Insurance Commission (NAICOM) or expand their present structures to accommodate retail insurance.
The journey towards development of the retail sector therefore is a long one that would not only require huge financial investment, but will require development of the human and material resources and for a specific type of investors who would patiently wait for the business to mature before it starts to bring returns.
In other words, it must be investors that would wait to allow the business in the retail market pass through the gestation period and begin to bear fruit, so, this will require putting less pressure on management of such organisations.
The reason for this long maturity period is because of the time it will take to study the consumers of the product, understand their needs, design specific products for them and educate them to understand the benefit of the products.
Now, the question to those want to want to invest in retail insurance, either as micro insurance outfit or something else is – would you have the patience to allow the companies to mature?
Another major challenge of the industry in developing new areas of the market is lack of quality investment in research, the patience to wait for its outcome, the courage to tolerate failure before success can be achieved.
If all of these are considered and put in place, there is no doubt that the retail sector will pick up, the market would grow organically, sustainability will be guaranteed, there would less pressure on few public sector and corporate accounts, underpricing of products will reduce and the market would be better for it.