The Commissioner for Insurance, National Insurance Commission, Mr Sunday Thomas, in this interview with NIKE POPOOLA, speaks on efforts to drive inclusion and capacity of the sector
Huge losses occurred nationwide from the looting and wanton destructions that emanated from #EndSARS protests. Lagos alone is estimating losses in billions of naira. Is the insurance industry capable of paying these claims?
Why are you in doubt? What is the essence of the industry? A crop of people have talked about the capability of the industry being able to pay. I don’t know where that doubt is coming from because as far as I am concerned, insurance exists for times like this. What we should be asking ourselves whether those properties are insured. Are premiums paid? As long as these questions are in affirmative in terms of answer, I can rest assure everyone that the claims will be paid knowing quite well the nature of insurance and how it works.
That is why we have insurance and reinsurance which is the second level. All the assets may not necessarily be domesticated. The foreign companies are also involved in this matter. So we don’t need to bother ourselves over these. It is a time for the insurance industry to showcase its capabilities. And I can rest assure the general public that the insurance industry is going to be alert to its responsibilities. There is nothing to worry about.
The only thing I just want to say is that the business world, the individuals should learn and see insurance as a fallback position for them. There is nothing to worry about. What they want is that are the assets properly insured? Yes. In terms of premium paid, yes. If that is the case, there is nothing to worry about.
You must be aware that loss adjusters are already in the field to get estimates of whatever was lost.
Do people really buy covers like riot insurance in Nigeria which can entitle them to ask for claims?
There is what we call extended cover, if there is extended cover for these risks, why not. The ordinary cover may not have provision for it but if there is an extended cover, they will be adequately covered.
The insurance sector’s growth dropped in second quarter just like Nigeria’s GDP also dropped. Nigeria is expected to go into recession when the GDP result for the third quarter is released. Do you think these huge losses from EndSARS would worsen the recession result for insurance sector in the third quarter?
Remember, insurance is part of the economy first and foremost. Then, two, the best you can do to protect existing assets is to guard yourself against things that will totally take away your assets from you and that is insurance. And if you insure in terms of recession, I assure you that once the recession is over, you can still come back to business. And that is what it is. I don’t think that should be a big challenge to anyone. Of course as a business concern, their portfolio is going to be hit by these occurrences, but that is why they are in business. They are not in business to accumulate premium. They are also in business to pay claims, and in paying claims, they will have to pay and I can reassure that they are ready and prepared to pay.
Has the COVID-19 affected the underwriting business?
Of course it has, you know that sales have been at a downward trend. Most activities have been at a very low end. So to that extent, yes
NAICOM is trying to drive financial inclusion in the sector through the development of microinsurance, but only a few companies have bought licences to operate in this regard. Why is the microinsurance drive still so slow with just three companies after many years?
It is one of the areas we want to fast-track the process. We have a couple of applications that we should be able to conclude soon. One thing is for you to initiate something; another is for others to see the viability of the vision. We have this but people seem to be catching up with us in terms of our vision and their understanding of these vision.
For us, microinsurance in financial inclusion generally is the way to go. Financial inclusion is going to help us and it is going to drive penetration. I believe that with the way we are going about it, things will get better. We are trying to rejig the entire guideline to be more realistic.
What we had before in the guideline issued about six years ago was the national, state and the unit licensing of micro insurance companies. The amount of capital required for this with respect to some of the sectors is looking unrealistic and we may have to thinker with it.
Do you plan to reduce the requirements for entry to have a microinsurance licence?
No, it can’t get lower because if you look at unit which requires N40m or thereabout, what can it do when you want to establish a sustainable company. But it looked adequate as at the time it was conceptualised but obviously it is no longer adequate. Then, the exchange rate was about N160 to a dollar and now it is N380 to a dollar. This does not seem good to drive the business from a sustainable basis. So we are looking at it. So far, we have two companies that are states and one that has a national outlook which is Consolidated Hallmark. Already, the company has insurance culture. The national company is required to operate with N600m and of course, it will not be adequate.
So, we still believe that we need to do much more in microinsurance and financial inclusion in general for us to get the desired penetration. We know that only 1.5 million Nigerians have one form of insurance cover or the other.
Certainly, the figure has changed but not as substantial as it should be. With little enforcement that is being done on motor insurance for example, many are coming into the net. Of course, we need to do much more than we have ever done before. You will recollect that in the last three years or so, we have been hovering around N350bn to N400bn premium. I believe that in the next two years, we must make a remarkable change. If we cannot hit a trillion in the next two years, we should reach half a trillion. We must hit 50 per cent increase over what it is now. In which case, we should be talking of N700bn instead of still dancing around N400bn which is not progress. That is not my vision. Actually, we should be in the realm of a trillion naira in the two years.
Insuretech adoption by the insurance sector had hiccups because of issues that concerned regulations from other regulators in the financial sector. To what extent has NAICOM been able engage other regulators to enable underwriters to explore all electronic means to drive insurance growth?
We are close to it. The Central Bank of Nigeria, the Nigerian Communication Commissions and NAICOM have been meeting. They are close to resolving this matter. I must also sound a note of warning that technology will not automatically translate to efficient service delivery in the sense that financial inclusion requires attending to the needs of the lower end of the pyramid. But how many people are actually transacting business using technology? Majority of them still try to go to banks. In which case, brick and mortar is still very relevant. Even as popular as banking is, you still find banks opening branches around despite being technologically driven. This is not to talk of a sector that is trying to catch up in terms of trust. Will somebody in my village buy insurance using technology when he does not know who he is talking to, or where his money is going to and what value will they deliver in his hand. So, it is going to be difficult. But as a distribution methodology, I go for technology. You can use it to distribute to those who already have knowledge of products, those who are conversant with the deliverables of insurance.
Again, one other factor you will need to look at is the issue of financial literacy which is very low. Even, an average Nigerian, probably well read, educated has the finance but does not even understand what insurance is all about. That is why this year as a commission and part of our development effort is to carry out a lot of awareness creation.
We will be quite heavy in creating awareness, selling the benefit of insurance on a wholesale basis. We will be visiting all the states. Plans are already on if we can get an appointment with the governors.
We will follow through with the mechanisms of the state and we will be able to sustain it. Because with what we have done in the past, the mechanism for sustenance was not put in place.
Is NAICOM trying to rejig the Market Development and Restructuring Initiative?
Yes. We are re-jigging MDRI for sustainability. We believe that MDRI is a good concept, well thought of and put together but we are enhancing it. Part of the enhancement is to get agencies of states involved and get the supply end of the team to be available because we don’t just want to cultivate the demand side but part of the supply side. This is why at one of the fora when I spoke to the industry, I told them they can create like a consortium if they think it might not be too profitable for them to have individual branch. They can come together as a group participating in the premium and risk that may come from that particular area.
Why is the commission investing in an academy?
The academy essentially is to train regulators. Just as the market is bereft of human capital, we also have capacity issues. And so, we found it is cheaper for us to bring somebody from the United States and more developed insurance regulatory jurisdiction, to bring them here to train 20 or 30 people than to send 10 abroad. I think for us, it is more economical.
Then, above all, knowledge sharing on continuous basis is relevant. So, it is one of those things we want to do as frequently as possible.
Does the commission have enough capacity to effectively check the industry as much as should?
There are two areas you will be looking at when you are talking about capacity. You will talk about the number and skill. We are conscious of the number, hence the recent engagement of some people for recruitment. We believe this should be able to bridge some gaps.
The second one which is skill is the reason why we are establishing the academy. This will pump knowledge into the head of the staff. They will know of current developments and will be conversant with our responsibilities. We believe the academy should be the game changer.