To boost penetration and build capacity to grow insurance in Nigeria, the regulatory authorities should consider raising insurance firms’ capital base to N20 bn for life and N30 bn for non-life operators, Chairman Heirs Holdings and Heirs Insurance Group, Tony Elumelu, has said.
Elumelu, who is also the Group Founder of UBA and Tony Elumelu Foundation, who made the call on Monday in Abuja while delivering the keynote lecture at the 2023 National Insurance Conference organized by the National Insurance Commission (NAICOM) also said the capital base for brokers should be increased to a minimum of N1 billion.
The insurance industry, he noted, required significant transformation to enable it to effectively play its role not only as a national good and a roof for the people but also as a foundation for infrastructure in the economy.
“A vibrant industry supports businesses, enables savings, and supports investment. It trains our youth, formalizes our economy, generates tax revenue,” he said.
With capital requirements currently at N8bn for Life insurance and N10 billion for general insurance, Elumelu said the devaluation of the currency would translate the amount to a paltry $8 million and $10 million respectively.
To give the sector the financial muscle and backbone to handle more complex insurance transactions whilst extending its reach, he said the capital base of insurance companies should be raised to N20 bn for Life and N30 bn for Non-life respectively.
Also, the dichotomy in insurance authorizations/licenses between life and non-life must be reviewed to allow consolidated operators to have N50 bn.
In addition, all insurers should be made to mandatorily contribute 0.5% of total revenue to drive industry awareness for 5 years.
Despite the important role the insurance sector plays in the economy, Elumelu lamented that the contribution of the insurance sector to the nation’s gross domestic product (GDP) currently stands at less than one percent.
Expressing worry that this contribution was too small to cater to the need of over 200 million people for insurance products for health, protection of lives, livelihoods, and savings, he said the insurance industry must build the capacity to play a strategic role in the country’s future and development.
A healthy, trusted, and innovative insurance sector, he pointed out, should be the mechanism for creating savings and channeling these savings into the infrastructure investments the country needs.
Acknowledging the huge potential of the sector to help the country achieve its economic transformation, Elumelu urged the conference to instigate concrete policy actions towards the transformation of the insurance industry to play its role in Nigeria’s development.
With investments in Financial Services, Power, Energy, Real Estate, Hospitality, Healthcare, and Technology in Nigeria and across Africa, Elumelu said his Heirs Holdings Group was committed to its vision driven by his philosophy of Africapitalism.
To create economic wealth through investments as well as provide social good, he said the philosophy of Africapitalism guiding the Group’s long-term investment strategy in strategic sectors was to act as a catalyst of economic growth by creating social wealth for the communities and countries it operates in.
He said Heirs Group ventured into the Insurance sector in 2021 because of the opportunity they saw to significantly contribute to the transformation of the sector.
Although Heirs Insurance Group has become one of the fastest-growing insurance Groups in Nigeria, he said more needs to be done to boost the insurance industry’s capacity to play the kind of role it plays in mobilizing investments and protecting lives in other countries such as the USA, UK, Netherlands, South Africa, Ghana, and Kenya.
Speaking specifically on the topic of his lecture, titled: “Redefining Safety: Insurance Solutions for Public Buildings and Buildings under Construction”, bemoaned the growing incidence of collapsed buildings under construction in recent times.
Referencing statistics from the Building Collapse Prevention Guild (BCPG), which showed that over the past 49 years, Nigeria recorded cases of 533 building collapses, Elumelu said this translated to an average of 11 such tragedies per year.
In 2019 alone, he said there were 43 recorded cases of building collapses with calamitous consequences to lives and the economy, apart from a further estimated 36,000 buildings across the at risk of impending collapse.
Highlighting the role of insurance in curbing the problem, Elumelu also underlined the important roles of professional associations such as the Council for the Regulation of Engineering in Nigeria (COREN), the Nigerian Institute of Estate Surveyors and Valuers (NIESV), and the Nigerian Society of Engineers (NSE).
The problem, he pointed out, required a multi-sectoral approach to deal with the root cause of building collapses in the country, beginning with the strict enforcement of the relevant provisions in the Insurance Act 2003 requiring that no person shall construct any building of more than two floors without insuring with a registered insurer.
Although the Act imposes the duty to insure a building under construction, he said there were still questions bordering on the number of public buildings in the country that are insured in compliance with the Act, the monitoring authorities, punitive actions for non-compliance, awareness level for the provisions of the law on the insurance of public buildings and how well does the insurance industry understand its role on the insurance of public buildings.
“Nigeria needs to build ports, roads, power stations, schools, hospitals, and homes. But this cannot happen if building codes and legislation are flouted. Insurance should be as central to our construction industry, as the concrete that binds our buildings,” he said.
On insurance penetration, he observed that with a poor insurance culture, insurance penetration in the country was low, as a result of poor legislation that does not allow proper enforcement of insurance laws, including enforcement of compulsory insurance.
Also, he said inefficient insurance processes, especially around the settlement of claims foster the public’s lack of confidence and trust in insurers, while the mindset of insurance practitioners in the country towards the existing regulatory framework was equally unhelpful.
Besides, he said poor capitalization requirements in insurance were crucial drawbacks, which has necessitated the call for the review of the existing legislation governing the insurance industry.
Emphasizing the complete overhaul of the Insurance Act of 2003, Elumelu commended NAICOM for already spearheading the initiative, adding that a Bill needs to be passed urgently to ensure the new Act can drive implementation and enforcement of Compulsory Insurance in Nigeria.
He said strict implementation and stronger punitive enforcement measures would boost insurance penetration, while risks of unforeseen incidents would be avoided if due process was followed in respect of contractors’ insurance in construction.
NAICOM, he said, must work with relevant government bodies to ensure compliance and enforcement of the provisions of the laws governing insurance.
On settlement of claims, Elumelu said due to inefficient processes as a result the insurance industry was still largely manual, and payment of claims has been slow, due to poor public confidence and unprofessionalism by operators.
To make insurance a lifestyle, he urged the regulatory authorities to work with insurance companies to embark on nationwide insurance awareness campaigns in local languages to continuously enlighten Nigerians on the benefits of insurance.
In his welcome address, the Commissioner for Insurance, Olorundare Thomas, said the conference was one of the initiatives by NAICOM to sensitize the general public about the place of insurance in redefining safety in Nigeria.
Apart from discussing current and emerging issues, he said the conference was to help usher in a new era of collaboration with stakeholders to facilitate improvement in National Safety Standards.
He said NAICOM, under his leadership, was focused on implementing initiatives to foster the development of the Nigerian insurance industry and align its fortune with those of its peers in Africa.
Some of the initiatives include currently being implemented the medium-term NAICOM Strategic Plan 2021–2023, while the 10-Year Strategic Roadmap and the Guidance Note for the Insurances of Government Assets and Liabilities are to be rolled out..
To improve the safety and soundness of the Nigerian insurance sector to continue to de-risk economic activities of the country through prudential regulatory and good corporate governance practices, the NAICOM boss said the Commission’s supervisory regime was being reviewed to align with global best practices.
This initiative, he said, has enhanced the Commission’s distress management and market restructuring, adding the benefits of the Implementation of Project E-Regulation through an operationalized Business Process Management Solution and NAICOM Portal.
He said the BPMS was currently being used to process applications from insurance institutions, while the portal remains the focal point for the generation of unique policy identification numbers for all policies as well as a repository for statistical data, including verification of insurance policies issued in Nigeria.
Implementation of an actuarial capacity development programme for the Nigerian insurance industry, he noted, has helped to develop some Certified Actuarial Analysts in Nigeria, adding that the Commission would continue to engage relevant stakeholders to develop additional Actuarial professionals for the industry.
To further open up the insurance, he announced 12 additional new entrants and insurance distribution channels, adding that the licensing of these companies has enhanced the availability of insurance products as well as increased local insurance capacity in Nigeria.
As part of its support to government initiatives, he said the Commission mobilized the insurance industry to contribute about N500m and free Life Insurance cover for front-line workers in the management of the COVID-19 Pandemic
In addition, he said NAICOM has continued to reach out to State governments and relevant security agencies in the enforcement of compulsory insurance.
Also, the Commission provided financial assistance to tertiary institutions in the country to facilitate the education of professionals required by the insurance sector, while projects have been completed in five tertiary institutions, apart from seven others are at various stages of completion.
Despite the growth, he said the roadmap identified the challenges to include a talent gap, comparatively low public awareness, insurance affordability, lack of trust and confidence in insurers, cultural and religious bias, inadequate distribution channels, low enforcement of insurance, and others.
On performance, Thomas reported that the industry premium income between 2014 and 2022 grew at an average of 13.6%; from a premium income of N282 bn to N726.2 bn, while total assets of the sector also grew at an average of 12% for the same period; from an asset base of N827.5 bn in 2014 to N2.33 trn in 2022.
Over the next decade (2024-2033), he said the Insurance industry planned to continue its transformation journey along seven strategic areas, namely to transform the regulatory environment to sustain the industry growth; transition to a risk-based capital model, and promote insurance awareness and adoption.
Other areas include broadening insurance product offerings and improving the effectiveness of distribution channels; enhancing digitalization of the insurance industry; deepening the industry’s talent pool and capabilities, and supporting Nigeria’s economic transformation and sustainability agenda.
