Oluwakayode Adelowokan
Introduction
Insurance penetration in Nigeria is standing at 6 per cent
compared to other countries in Africa and the rest of the world.
The renewed focus on micro-insurance, a specialised platform
for the provision of insurance services, particularly to the poor, low income
and non-salary earners, has truly pushed it above other issues in the insurance
market globally.
Before micro-insurance became prominent in Nigeria, a few
innovative operators in the country, ventured into retail insurance, designing
and selling low priced insurance products, or better still “scaled down version
of regular insurances”, with a view to shoring up their bottom lines.
With micro-insurance gaining ground in the Nigerian insurance
market, operators and stakeholders agree that this is the way forward but many
operators are confused and do not know where to start.
In the Nigerian insurance market, there were a few
fore-runners and a champion of micro-insurance and review of their exploits would
serve as a guide to some other operators to get their strategies right.
12 years ago, some innovative operators developed various
products and distribution channels in order to increase their market
share. This propped up banassurance and
retail insurance which many equated to micro-insurance before now.
When the International Labour Organisation (ILO) highlighted
the necessary ingredients in products and distribution channels that could pass
the test of micro-insurance, it then became clear that what many operators
prided selves of having were retail insurance products and channels and
microinsurance.
Microinsurance, a means
to poverty alleviation
The needs of the poor and low income earners differ in many
ways from those of the middle class, rich and affluent in the society. Most importantly, they need protection for
their work tools, unemployment protection, sickness cover and funeral
insurance.
Recently, the Group Managing Director of Mutual Benefits
Assurance Plc, Mr. Akin Ogunbiyi, said microinsurance was the only way insurers
could alleviate poverty, empower low income earners and give them a decent
level of living.
Ogunbiyi who was a guest speaker at the 2014 Business Journal
Insurance summit said, “Insurance is offering protection for both lives and
properties against unforeseen incidents that put you back to the post you were
before the loss. Microinsurance is the insurances of the poor.”
Deputy Director, Authorization & Policy Directorate,
National Insurance Commission (NAICOM), Akah
Lampe, once defined microinsurance as, “Insurance that is accessed by
[or accessible to] the low-income population, provided by a variety of
different entities, but run in accordance with generally accepted insurance
practices.”
Also the Team Leader of the ILO Micro-insurance Innovation
Facility, Mr. Craig Churchill said: “Micro-insurance is not just a scaled down
version of regular insurance… the products and processes need to be completely
reengineered to meet the characteristics and preferences of the low-income
market. It is not a specific product or
product line. It is also not limited to a specific provider type.
Micro-insurance is the provision of cover to a specific market segment, i.e.
low income persons.”
Who are microinsurance
consumers?
Meanwhile, the Senior Manager at National Insurance
Commission (NAICOM), Sabiu Abubakar, identified three key consumers of micro-insurance,
who are low income earners, lack access to insurance services and lack
financial literacy.
Abubakar in his paper titled, ‘Registration Requirements For
Microinsurance Operation In Nigeria’ said 70% of Nigerians are living below
poverty level, 52.50% are adult population living in rural areas and more than
87.9 million of their population are adults and more than 26.5% of the adult population
have no form of education.
Also, Sabiu Abubakar, note that no insurer, brokers, or agent
can effectively provide insurance to low income earners without use of
Cooperative societies, Esusu/Adashi group, Age group associations,
Non-Governmental Organizations, Postal Agencies, Mobile Payment Systems, Postal
Agencies, Telecommunication Companies, Microfinance institutions etc.
Regulator’s role
As away to rebuild the lost trust in insurance industry in
Nigeria and harness the benefits in microinsurance for the low income earners,
NAICOM must play big in the area of adequate licensing of operators.
Conclusion
Meanwhile, the role of microinsurance as an ex-ante
intervention which reduces the vulnerability of the community ex-post in the
event of a disaster becomes crucial. Micro-insurance as a tool for risk
transfer for the poorest community faces some challenges also which includes
the literacy level of the community to understand and appreciate the importance
of micro-insurance.
The poorest segment of the society has mostly very few assets
and they are in most cases mobile. They do not have proper individual
identification as recognized by the government and other agencies. Apart from
that, the poorest community of the society is heterogeneous in nature and
designing the micro-insurance product requires asset of critical mass which has
similar socio-economic status, needs and aspirations.
It has also been observed that the low income household has
other priorities which are related with their immediate physiological needs and
thus does not have the resources to invest for future.
In the light of the above mentioned scenario, it becomes the
responsibilities of the government, international aid agencies and responsive
microinsurance to address the issue through pro-poor policy decisions and
implementation of the same.
In the same vein, since the micro-insurance cannot be taken
up at the household level for the poor community, some meso-level initiatives
with government as the key partner needs to be designed. The risk which is
entirely borne by the community has to be shared with government, institutional
donors and micro-insurance agencies. The government needs to come out with a
regulation which is a win-win situation both for the community as well as the micro-insurance
agencies and other private players.
Similarly, the challenges of targeting the under privileged
clients for microinsurance can only be overcome if the products are cost
effective, institutionally simple and designed specifically for the poorest
section of the society and the insurance companies must be ready to divicify
from the conventional businesses and build offices in the rural areas.
