How budget delay jeopardises insurance growth
The delay in passage of the 2019 national budget is currently posing some difficulties on targeted operations that are designed to raise the bar for Nigeria’s troubled insurance sector.Industry operators, who are longing to witness an early passage of the budget, are worried that the process might take longer than expected, as the lawmakers’ attention appears to have shifted to election campaigns.
Early passage would have triggered new insurance policies and renewals by corporate organisations, government agencies, and some private entities that rely on the National budget for their operational plans.
President Muhammadu Buhari presented the 2019 national budget to the National Assembly on December 19, 2018, and with most insurance firms relying on government businesses for survival, they fear that appropriation for the budget would also be delayed until later in the year, which may pose a challenge on the industry’s profitability.
Commenting on the development, President, Chartered Insurance Institute of Nigeria (CIIN), Eddie Efekoha, said delay in the passage of the budget has always affected the spending pattern of the public sector, noting that late passage may slow down growth in the sector.
Efekoha, also the Managing Director/Chief Executive Officer, Consolidated Hallmark Insurance Plc, who spoke at a workshop in Lagos, argued that even if the budget is passed into law, late appropriation of funds for specific projects is also a major concern.He said: “When the President presented the budget last December, 2018, I was scared of when it would be passed, and necessary appropriation made. If the public sector is not working, nothing is working, and that is the challenge we are having.
“For some underwriters whose major business is in the public sector, 2018 was a failed year. The loss ratios have not helped us because we have had a lot of claims paid,” he said.Contributing, the Managing Director/Chief Executive Officer, Cornerstone Insurance Plc, Ganiyu Musa, warns that the forthcoming elections would lead to increased spending by Nigerians, thereby exacerbating the inflation levels.
With inflation rate estimated at about 12 per cent, he envisages a fall in oil prices at the international market, thereby, affecting the cost of insurance claims in Nigeria’s oil and gas sector.However, with improved interest and investment in agriculture, Musa projects that underwriters will make more premium income from agric businesses this year, through agricultural insurance policies.
He said the circular from the National Insurance Commission (NAICOM), mandating insurance operators to charge six to eight per cent per mile, about 300 per cent higher than the market rate on group life, is one of the best initiatives from the industry regulator. He added that this singular act will shoot up the bottom-line of the underwriting firms, and in turn, impact positively on the insurance industry in 2019.
He continued, “The industry is going to benefit a lot in terms of improved premium growth if the right premium is charged on cover. Price rate competition is a major challenge in insurance industry, and that is why I applaud the enforcement of ratings on group life, and third party; and that, to a large effect, will increase the premium income of the industry in the current year and years to come.”
The Managing Director, NSIA Insurance Limited, Mrs. Ebelechukwu Nwachukwu, said the industry last year, grew significantly in terms of the quality of products insurers rolled out, the quality of distribution channels, the quality of people they engaged, and the commitment of insurers to grow the people, thereby, increasing insurance penetration in Nigeria.
To her, “If we can push all of these over in 2019, I have no doubt at all that penetration will increase and premium will rise also. Today, the industry is paying better salary and so people are better; operators study more than any other industry I have engaged with, they are dedicated to writing examinations, attending seminars, conferences and workshops, they want to be heard and an insurance person wants to be heard intelligently.”
The Chairman, Nigerian Insurers Association (NIA), Tope Smart, noting that with the economy projected to expand by about 2.5 per cent this year, the insurance industry will also take advantage of this expected growth.
“The industry will continue to prioritise claims settlement, and both the regulator and operators are working together to put insurance companies on their toes to pay genuine claims through NIA, and NAICOM complaint bureaus,” he said.