Despite the proliferation of mobile phones in Africa’s largest economy, only less than 1 percent of the population of 200 million have an insurance cover, an abysmally poor figure that shows a lot of people are alienated from the financial ecosystem.
More worrisome is that the country’s penetration is one of the lowest in Sub Saharan Africa.
South Africa, the continent most industrialized nation has a penetration rate of 16.9 percent, Namibia (6.69 percent); Lesotho, (4.76 percent); Mauritius,(4.18 percent), Zimbabwe (4.09 percent); Kenya (2.83 percent), and Swaziland, (2.44 percent).
To help deepen insurance penetration in the country and propel economic growth, Prudential Zenith Life Insurance has launched a payment service which allows mobile phone customers in Nigeria to buy protection policies wherever they are.
Customers who dial *5966# on their mobile phones will be able to purchase a life insurance or hospital cash plan policy in a matter of minutes.
The product, which industry experts say is a game-changer in the financial system, will definitely thrive because of the country’s copious mobile device user.
Nigeria currently has over 172 million mobile subscribers according to the Nigeria Communications Commission (NCC) figures, as the commission added that the figure may rise to over 201 million by 2025.
Despite its growing young population that craves for consumption, Nigeria lags Ghana in mobile insurance.
Ghana’s smaller size gives it a geographical advantage over Nigeria in terms of selling insurance. But mobile money makes the last mile to the remote customer easier and economically viable even in larger countries.
By 2017, Ghana had over 11 million active mobile-money accounts, mostly provided by South Africa’s MTN. Through these accounts, Ghanaians can open savings accounts or even buy government treasury bills by phone. Other international players have jumped on board. In September 2017, emerging markets insurance company BIMA partnered with Vodafone to provide life insurance to Ghana’s fishing communities.
Chairman and Founder of Zenith Bank, Jim Ovia, is optimistic the payment service device can help Nigeria underwrite a million people through the mobile phone every year.
“Some people think it will take 40 years to write traditional insurance for one person, but with this product, it can be done in one year. “We expect this to be the game changer and definitely it will be,” said Ovia.
The country’s insurance industry has been plagued with sundry challenges inhibiting its growth, but the regulator has been formulating policies that will enable operators to shore up their capital and take on more risk.
First, the population’s apathy to insurance stemming from cultural constraints, low per capita income and the low insurance literacy, in particular, were identified by experts as inimical to growth.
Second, inadequate regulatory enforcement and some unfavourable government policies which resulted in fragmentation within the industry;
Third, low capacity building and inability to attract specialised insurance skillset linked to inadequate funding and capitalisation;
Fourth, poor governance structures ascribed to inefficiency present in owner-managed institution;
Fifth, unhealthy competition amongst the players in the market place which gives little consideration to insurance risk;
And lastly, inadequate capitalisation which restricts underwriting capacity or the company’s ability to absorb insurance risk.
The launch of the payment service marks the first step forward in the actualization of financial inclusion in Nigeria, according to Ferdinand Moolman Chief Executive Officer, MTN Nigeria Communications.
“Access to insurance is an important safety in the world full of perils. In many parts of the world insurance is considered paramount to economic growth,” said Moolman.
The country’s financial inclusion rate stood at 63.2 per cent in 2018, according to The Central Bank of Nigeria (CBN)’s 2018 Annual Report on the National Financial Inclusion Strategy Implementation.
The CBN said the figure showed a marginal increase of 4.8 per cent from 58.4 per cent in 2016 to 63.2 per cent in 2018.
Less than 6 percent of Nigerians use their handsets to transact using mobile money, compared with 73 percent of Kenyans, where more than two-thirds of adults have a bank account, according to the World Bank. That’s even though there are more than two phones for every bank account in the West African nation.
“As we adopt digital technology, we are very optimistic millions of Nigerians will embrace the product,” said Kehinde Aborishade, Chief Executive officer (CEO) of Zenith General Insurance Limited.
“It will help deepen financial inclusion in Nigeria. The new product called mobile insurance is a game-changer,” said Aborishade.
Ovia said during the launch of the product that no country can develop without bringing banking service close to the people and that insurance is a powerful tool to pull people out of poverty.
Poverty has risen in Nigeria, with almost 100 million people living on less than a $1 (£0.63) a day, despite economic growth, according to a recent data by National Bureau of Statistics.
Historical Background of Zenith Insurance
Prudential Zenith Life Insurance Limited is part of Prudential Plc, one of the oldest and most strongly capitalised life insurance companies in the world. It provides a range of insurance and investment-linked savings products designed to suit corporate and individual customers’ budgets.
Prudential Zenith Life seeks to remove uncertainty from life’s big events, providing customers with the freedom to confront the future with greater confidence. It is equally committed to meeting the long-term savings and protection needs of families and businesses in Nigeria. Whether someone is starting a family, saving for a child’s education or planning for old age, Prudential Zenith Life provides customers with financial peace of mind.
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