How would you assess the insurance industry in the country?
The performance of any sector of the economy is a function of the players, the resources at their disposal, the market environment and other social factors that interplay. If we have to assess the Nigerian insurance industry based on what this nation has in terms of potential for the insurance industry, the answer is, of course, we have performed poorly. The statistics that are being carried around are that Nigeria contributes less than one per cent to the gross premium income generated in Africa, let’s not talk about the rest of the world. Again and look at the insurance industry against the banks, our own contribution even to the gross domestic product, GDP, is less than one per cent. The average share capital of the whole insurance industry is below N40 billion. Today, you have one bank with share capital in excess of N40 billion. The gross premium income generated in 2004 is still below N700 billion. That again is also less than the turnover of one bank. So, you have a situation where one bank is bigger than the entire industry. The truth of the matter is that the industry is not really equipped to play the role it is supposed to play in the economy like ours.
Is the new capital base requirement for insurance companies adequate?
I dare say it is. At least, it will help at this point in time. It will move us to another level.
Does the second coming of banks to the capital market bother you? Would it affect the industry?
It is difficult to say. This is a free economy but inasmuch as one would wish the banks should stay off the capital market for a while so that other players can also get chance to raise their own funds, you can’t lock anybody out. Not all the 25 banks will be able to come back anyway. Only those that know they have something to offer will dare to come back. If you ask me what impact it would have on my industry, I will say I don’t care the number of banks that are coming back to raise funds. If I need to come to the market to raise funds, I will simply have to work harder and package myself. The insurance industry has no problem; it is the players that have problems. The industry, as it stands, has great potential. If well-harnessed by proper thinking, it has the potential of becoming bigger than any other sectors of the economy, bigger than oil, bigger than banking, bigger than telecommunication.
But most insurers in Nigeria are accused of hardly paying claims.
I agree with you. Part of the problem was how insurance was introduced into the country. It was a government thing. The early practitioners might not have come into the industry with the intention to serve. The insurance industry is a service industry, but when a service industry turns out to become a selfish industry that seeks to protect its own interest first before that of the customers then there is a problem. A lot of the problem we also have in the industry is not restricted only to the practitioners but also to the patrons of the industry. A lot of people will not obey their own side of the contract. Insurance companies that have been around for quite a while have not been buoyant enough to become generous. So, when the new capitalization comes in place, there will be bigger pockets, they can afford to be generous and they will overlook a number of things.
Even then the insurance sector does not appear active in the market despite the capitalization drive?
Part of the reasons you are not seeing so much activities on the surface is that the insurance man is a very cautious man. That is part of the reasons why insurance companies don’t crash as easily as other financial institutions do. We are a very resilient people; our shock absorber is very strong. If it happens that five or 10 companies emerge after recapitalization. I will say it is good enough.
Out of 103?
Do we really need all this number to do the job that we want to do in this country? It is not in the multiplicity of compnies that you impact on the economy. We have only (four) GSM operators and the impact is being felt nationwide. So it is not in the number. Five companies might be enough to do the job. You see, insurance people are the people who are used to the business of sharing. An insurance man takes a risk and co-insures it with so many other people. The insurance man would not rush to the stock market as the bankers did or to the Corporate Affairs Commission to go and pay for the increased share capital only to find out later they cannot raise the money. We are talking right now underground, discussing with ourselves to see how we can come together and minimize the cost because if all of us go to raise share capital, we would not raise the money. From June, July onward you will see a lot of activities. By then people would have aggregated their resources and say this is where we are going. If only five companies are left, (they will) incorporate all the other players. So, nobody will be left out and this would be better for the economy.
