The sluggish take-off of micro and takaful insurance schemes expected to drive penetration among a low-income mass of the population as well as the grassroots is pulling back the insurance sector’s push to meet its financial inclusion target.
The Nigerian Financial Inclusion Strategy 2012 expects that by 2015 no fewer than 21 percent of the adult population would have one form of insurance or the other; while in 2020, no few than 40 percent of the adult population would have one form of the insurance policy or the other.
But this has not been possible as the two schemes expected to boost activity in the country’s underwriting business are in the sluggish start, contributing less than 1 percent of the total industry premium put at about N490 billion at the end of 2019.
As at the end of 2019, five registered micro-insurance and five registered takaful insurance firms have cumulatively generated paltry N2.350 billion and paid out claims amounting to N615 million.
However, in all, only about 3 million adult Nigerians have one form of insurance policy or the other, being about 1.5 percent of the total country’s population put at 200 million.
READ ALSO: Sovereign Trust Insurance set to mark 25 years of doing business in Nigeria
Zubairu Darazo of the National Insurance Commission (NAICOM) released the figures during a presentation titled ‘Insurance Development In Nigeria -The Financial Inclusion Option’ in Uyo, Akwa Ibom State, recently.
Darazo said the G20 countries including Nigeria made a commitment to improving access to financial services by reaching out to low-income population through Microfinance, Microinsurance, and Micro pensions, and the segregated or underserved through alternative financing institutions such as Non-interest Financial Institution, Noninterest Banks, and Takaful Companies.
He said the challenges faced in achieving the target in the insurance industry were due to lack of proper understanding of both concepts by operators and consumers.
According to Darazo, other challenges include poor public awareness as well as lack of skilled manpower among the operating companies.
He, however, noted that the Commission had a positive outlook for both takaful and micro-insurance going forward.
A number of stakeholder engagements workshops and sensitisation programmes are lined up for the year 2021, while market development and enforcement of compulsory insurance drive embarked on by the Commission is expected to improve the uptake of Takaful and Microinsurance as well, he stated.
NAICOM says the goal of achieving the target of 40 percent adult population penetration will be pursued through a broad range of coordinated interventions.
According to the Commission, these include to provide enabling environment and framework for the excluded and low-income population to participate and benefit from insurances, through the development of legal and regulatory frameworks on Takaful and Microinsurance, heralding the release of the guidelines in 2013.
Other measures include liberalisation of Insurance intermediaries: referral agencies and new insurance agents; define and implement insurance literacy programmes; enforce the quick settlement of claims and sanctions for infractions, through the establishment of a dedicated department complaints bureau in the Commission.
“We are also incentivising insurance companies to develop micro-insurance products, Takaful insurance and index-based insurance products to serve low-income/rural individuals,” the Commission said.
According to a PWC report on ‘African Insurance Trend,’ approximately, only 1.5 percent of all Nigerian adults are covered by insurance today.
The report shows that uninsured Nigerians face risks and require better mechanisms to mitigate these risks as an alternative to the informal arrangements currently in use.
