Driving Financial Inclusion through Micro-insurance Including Takaful

To find new ways of bringing more Nigerians under insurance cover, increase patronage and improve the sector’s contribution to the country’s Gross Domestic Product, Insurance practitioners and regulators recently held a national conference. Ebere Nwoji reports

The Insurance Industry Consultative Council (IICC), a body comprising the National Insurance Commission(NAICOM) , the Nigeria Insurers Association (NIA), the Chartered Insurance institute of Nigeria(CIIN), the Nigerian Council of Registered Insurance Brokers(NCRIB) and Institute of Loss Adjusters of Nigeria(ILAN),recently collaborated with their sister sub-sectors in the finance services sector especially banking industry to draw a roadmap for achieving financial inclusion in insurance industry.

Operators and leaders of the above institutions gathered in Abuja for a three-day session on how to achieve financial inclusion in insurance industry through micro insurance distribution among Nigerians.
The target is to bring in many more Nigerians under insurance cover and change the present situation in which less than one per cent of the Nigeria’s population have insurance cover.

Discussions at this year’s conference which has the theme: “Insurance Industry and Financial Inclusion,” mainly focused on how the industry can successfully reach the unreached Nigerian population with insurance products that meet their needs to encourage savings and risk transfers among the less privileged living in less developed parts of the country who due to ignorance of what insurance can do, often bear their own risk, a situation which has continued to impoverish them.

Speakers at the conference believed that insurance holds the key to poverty alleviation among poor and rural dwellers. The insurers agreed to make a paradigm shift from the existing marketing culture which places much emphasis on the corporate and public sector markets while neglecting the retail market segment with its numerous potentials.

Issues on the use of mobile telecommunication technology to easily capture the huge underserved population of Nigeria with suitable insurance products received much emphasis as the industry operators were advised to pay less attention on the traditional distribution channels that make use of insurance brokers and agents as foot soldiers in the sale of insurance and embrace the use of mobile telephone technology which ensures swift result.
The insurers reached a number of agreements regarding deepening insurance penetration in Nigeria.

One of the agreements was that mobile telephone technology is a tool to drive financial inclusion in the insurance industry therefore regulators of both finance and communication sectors mainly the Central Bank of Nigeria, (CBN), the Nigerian Communication Commission, (NCC) and NAICOM must work together to ensure that insurance products and services can be delivered through mobile technology.
Another agreement is that insurance service providers should learn and understand the financial behaviours of the people and give them products that suit their needs.

The insurers also agreed that there is need for the industry to have an insurance ombudsman and NAICOM should sensitise directors of companies on the new insurance industry roadmap and micro insurance guideline for the purpose of approving funds.
The Chairman Zenith Bank Plc, Mr Jim Ovia, defined financial inclusion saying within the context of insurance, financial inclusion means making insurance services readily accessible to all.

“Providing access to useful and affordable financial products and services that meet the needs of every individual,” he said.
He raised the question on who is financially excluded in Nigeria?
In providing the answer, Ovia, quoted 2016 Enhancing Financial Innovation and Access (EFInA) survey, which said that the total adult population ( that individuals from 18 years and above) of Nigeria is 96.4 million.

He said of this adult population,59.6 million (62 per cent) are based in rural areas,56.2 million (58 per cent) are under 35 years,18.4 million (19 per cent) get their main source of income from subsistence/commercial farming,18.9 million (20 per cent) get their main source of income from own business (non-farming), 7.9 million (4 per cent) get their main source of income from the formal sector while 21.8m (23 per cent) have no formal education.

He said in the real sense of it, every adult ought to have one insurance cover or the other and as many adults as possible that do not have insurance cover is financially excluded insurance wise.
According to him, there are many reasons why people are financially excluded saying premiums may be too expensive for many in the low-income category, or the products design and terms and conditions are too complex or that products are not customised for low income.

He also reasoned that there may be mistrust of insurers especially given the gap between when an insurance product is bought and when benefits may be enjoyed.
He also said that for some insurance products, sometimes the person buying the product may not even be the one that enjoys the benefits. An example of such is the pure life assurance products, saying this discourages also people from buying insurance products.
Ovia also observed that financial illiteracy which can arise as a result of lack of adequate engagement with the population as to the purposes and benefits of insurance stands as another reason for people’s exclusion from insurance services.

He said without insurance, the poverty and ill health cycle in less developed parts of the country will continue adding that Insurance is one of the primary solutions to break the poverty cycle .

“This exclusion from insurance products often results in people being trapped in a poverty cycle which is exacerbated by poor health. This is especially so because of the risk transfer mechanism of insurance,” he said.
He added that to achieve financial inclusion in insurance sector, the regulators of both finance and communication sectors should come to the drawing board on how to collaborate and use each other’s channels for insurance distribution.

The Commissioner for insurance, Alhaji Mohammed Kari, said NAICOM, as a regulator, has done all it could to enhance micro insurance distribution in the country.
He said the commission, to this effect launched four specific products lines as bottom-up for the excluded low-income members of the society. These, according to him, are micro insurance which guidelines it has released, Bancassurance, Takaful insurance and Index based Agric insurance .

On his part, the Chairman, Organising Committee of the conference, Alhaji Femi Hassan, said the retail insurance market was like already cooked food on the table kept at a distance from the consumers who are the insurers. He urged the insurers to cover up the gap and tap the gains in the market.
The IICC Chairperson and CIIN President, Mrs Funmi Babington-Ashaye, expressed satisfaction that financial inclusion in insurance sector was chosen as theme of the conference.

She said this is coming six years after the financial inclusion strategy and initiative was launched by the federal government.
She also said micro insurance scheme, which is looked upon as a tool to achieve the financial inclusiveness in insurance industry, is a good strategy that would assist the industry to cover the gap between insurers and the grass root population.

She said the industry needs to embark on research to be able to come up with right technology that will act as a van to convey suitable insurance products to the door steps of average Nigerians that need insurance services.
Given the low level of insurance penetration in Nigeria, NAICOM has since 2009 intensified efforts towards improving the situation.

The commission launched a medium term plan tagged Market Development and restructuring Initiative(MDRI) which had been standing as a tripod on which every efforts targeted at deepening insurance penetration in Nigeria rests.
The initiative has the objective of enforcing compulsory insurances, curbing activities of fake insurance operators, using agents to reach Nigerians with low cost insurance services among other objectives.

The financial inclusion efforts in insurance industry is an aspect of the market development but which is targeted at mass marketing efforts through mobile telephone technology.
Insurance experts said if this is achieved, the insurers would open the gate to over N60 billion annual market opportunities lying untapped in the retail/micro insurance market.