Nigeria's new Banks and Other Financial Institutions Act (BOFIA) 2020, took nearly 30 years in the making. While criticised for being a 'mixed bag', some argue its presence could provide opportunities to investors in Africa.
Abuja should take lead on life insurance: African Alliance CEO
Nigeria’s government must take the lead to make life insurance obligatory, Funmi Omo, CEO of Nigerian life insurer African Alliance Insurance, told The Africa Report.
The government “must institute insurance policies to address the needs” of different parts of the population, Omo said. Compulsory insurance means that “people don’t have to think too deeply, it becomes part of their daily lives”.
Nigeria’s overall insurance penetration rate of less than 1% lags that of regional peers. The picture is even worse in life insurance. According to the 2019 Africa Insurance Barometer, Nigeria’s inflation-adjusted life insurance premiums contracted between 2013 and 2017, while most other African countries achieved growth.
Excluding South Africa, Nigeria’s life insurance premiums in 2017 made up just 4% of the African total. “Making certain life insurance plans such as whole life plans mandatory will ensure a wider reach and access to insurance for everyone,” and provide a boost to the economy, Omo said.
Historically poor records on payouts are one reason for the low industry penetration.
- African Alliance is counting on a multi-channel approach to claims payment to change perceptions.
- Omo said the company is using its website, digital channels, social media pages as well as branches to help smooth the claims processes.
The company has also cleaned and archived its customer data. Clean data is essential to managing claims, she said.
- Cultural and religious biases against life insurance are also part of the problem, Omo added.
- Nigeria’s religious organisations and cultural icons have their part to play in making the importance of life insurance more widely understood, she argues. “There must be mass sensitisation of its importance.”
New capital rules from the National Insurance Commission (NAICOM) scheduled to take effect at the end of December 2020 are intended to produce a more robust industry with better financing. According to research from Chapel Hill Denham in August, among the country’s life insurers, African Alliance had the biggest shortfall to bridge to meet the new rules at N13.2bn ($360m).
That is about a third of the entire shortfall for the nine Nigerian life insurance companies surveyed, which total N39bn. “The fate of insurers with material capital shortfall lies in M&As,” Chapel Hill Denham says.
- The postponement of the NAICOM deadline, originally set for June 30, was “most likely to give more time for all key stakeholders to consolidate plans and meet the new target and objectives,” Omo said.
- African Alliance is implementing a strategy to meet the new rules, Omo said. “We are confident of scaling through by the deadline,” she said. “African Alliance is ready, as always, to work with the government.”
- Omo even hopes that African Alliance will be able to expand abroad. “Our main goal is to expand beyond Nigeria and across West Africa.” The company’s Ghana Life subsidiary is doing “quite well” in that market, she says.
Bottom line: Even a stronger, refinanced life industry in Nigeria may struggle to increase penetration unless the government and civil society takes the lead in making life insurance compulsory.