By KOLA ADENIYI
The just concluded recapitalization in Nigeria’s insurance industry, which brought the number of operators in the industry down to 71, has been acclaimed to be one of the best things to happen to the industry in decades. More so is the splitting of life and general businesses.
Tony Aletor, managing director/chief executive officer, Capital Express Insurance Company Limited, sees this as long overdue. Now that the government has taken the bull by the horns to separate the two businesses, he says that the business of insurance in Nigeria has just begun to take shape. Aletor notes that “All over the world, life assurance takes the lead in insurance.”
Pat Azurunwa lent credence to this by asserting that more than 60 per cent of insurance premium comes from life assurance in countries where circumstances are normal. But in Nigeria, things are not so. And the reasons are not far-fetched. Aletor recounted that back in the 1960’s and early 1970’s, life assurance business was thriving because people who schooled abroad saw the beauty of life assurance covers and returned to Nigeria to patronize it.
But along came challenging periods, the peak of which was the introduction of the Structural Adjustment Program unable to promote the business of life assurance, it was actually anti-life assurance. He observes that survival became such an issue that most insurance companies ventured into general business as an alternative to closing shop. Subsequently, life business became a minor department in most of the companies, mannered by non-specialists.
To worsen the situation, it was at that time that inflation crept into the economy baring its fangs in a devastating manner. The few people who still patronized life assurance soon realized that the whole thing was fast losing value. What seemed to them to be attractive at the beginning was turning out to be a mirage, and that discouraged them.
Thus, life assurance was finally relegated to the background. But through the years, some operators did not lose sight of the appeal of the business. They jumped at it at the slightest opportunity. Now, can they survive the post-consolidation era?
Maurice Ndubusi, insurance expert and lecturer at the University of Lagos, is certain that good times are here for life operators in Nigeria. “They will survive!” he assured. In spite of the reality that the compulsory group life policy that comes with the pension reform appears to be the actual appeal, Peju Osipitan, managing director, Unic Insurance is very optimistic. “Group life insurance is more than enough attraction for any company. If you take a look at the budget and how much goes into salary, you will know that the market is more than enough. If it is enforced, billions of naira will be coming into life companies in terms of premium,” she told the magazine. To her, this is sufficient for the operators.
But as the industry takes shape, more avenues are beginning to open up. Seyi Ifaturoti, managing director, Equity Life Insurance Company, observes that “people are beginning to see the value in transacting life business in Nigeria.”
Osipitan points out that health insurance is another profitable business for life operators. Although that appears to be on slow lane at the moment, she maintains that by the time the companies come together and design more suitable products, which they can easily market, business will pick up.
Opportunities coming on the wings of the entire financial sector reforms are equally enormous. Azurunwa observed that the sumptuous capital base of the banks is beginning to expand their scope. Some of them are now looking towards real estate development. In response to this, many mortgage companies and estate developers are springing up in the country, opening up the sector to massive investment. Azurunwa says that this will trickle down to the insurance industry in a very short time. To him, the time has come when banks will no longer insist on collateral to grant housing loans. All they need do will be to request for a mortgage protection plan from prospective customers. By that, the banks are simply shifting the risk in housing financing to the insurance industry, a development which has the potential of boosting life insurance business beyond measure. Aletor has also seen this. “With the mortgage system, the economy is being redefined and we are going to get a well-structured middle class. With that, life assurance should be able to regain its glory. With the middle class coming up again, the sky is the limit for any life company.” Aletor’s argument is that time has come when the majority of Nigerians will not need to possess all the capital to own their houses. All they will need is a mortgage protection plan from a life assurance company which will stand in as their valid collateral as the payment is spread over a reasonably long period. An added advantage in this is that the houses bought under this arrangement are automatically insured. Experts believe that this is one of the strongholds of the middle class in any economy, and as the middle class takes form, life assurance will in turn become more profitable.
Aside from all these, insurance operators observe that the focus of life assurance is already shifting from death to investment so structured that policy holders can reap at intervals. Enaboifoh Godfrey, a marketing executive with Crusader Insurance, explains that this became necessary as increase in investment in the capital market is becoming a threat to life policies. According to him, a good number of their prospective customers would rather put their money into stock where they are sure of quicker returns. As a response, more emphasis has to be placed on the investment side of life policies, although it is not an entirely novel idea. Aletor pointed out that “Life assurance is either a protection cover or an investment cover, or a combination of the two. “With attention shifting to investment cover, Azurunwa believes that there is going to be mass appeal for life assurance in times to come. According to him, this is because the long-term nature of the policies will make for sufficient money for long-term investments. The only problem he foresees is the skill for product development. To him, there is going to be the need repackage a lot of products while innovation is also required for the design of new ones that are more suitable and appealing to every cadre of the society. Already, findings reveal that this is one of the major issues in the industry at the moment as companies’ makes moves to integrate the variances in their products. Capital Express Insurance, an amalgamation of 15 different insurance companies is currently integrating all its products such that it will be left with those with the best appeal.
