Way forward in transforming Nigeria’s underwriting business

NIGERIA’S insurance sector no doubt is a critical part of our economy and has the capacity to boost economic development through risk transfer mechanism.

  Harnessing the sector would be critical as it would create jobs and  foster development in the country. 

 The Nigeria’s insurance sector ranks about 65th in the world and fifth amongst the leading eight insurance markets in Africa – South Africa, Egypt, Morocco, Tunisia, Nigeria, Kenya , Algeria and Mauritius – and contributes about 0.7 per cent to the Gross Domestic Product (GDP) of the economy.

  Insurance density in Nigeria (premium per capita) is approximately N1,200 per person, compared to South Africa’s N102,000 and Kenya’s N3,120.

  At present, with a population of 168 million in Nigeria, only about five to 10 per cent of those who should be insured are covered by any form of insurance, compared to the situation in most developing and developed countries where up to 90 to 95 per cent of the population are insured in one form or another.

  Although ,  the insurance sector has a lot to contribute in terms of productivity and value addition, the Finance Minister , Ngozi Okonjo Iweala said its contribution in Nigeria has been dismal, pointing out that it has the potentials of attracting as much as N5 trillion and create more than 300,000 direct jobs in less than 10 years from the current poor financial base of N300 billion and 30,000 jobs in the sector.

  According to the Minister , “Unleashing the latent energies of the insurance industry to create more jobs and boost economic development is one of our strategic responses to close the gap created by the economic challenges we are confronting at the moment”

  “The insurance industry is an important component of the financial system in any country. Insurance helps in mitigating risks and thereby provides utility for individuals and also for corporations. 

From economics, we know that risk-averse agents facing uncertainty are better off with insurance as it helps them to smoothen their consumption and also improve their planning.  

  “ As Finance Minister, I can tell you that a vibrant insurance industry promotes savings and investments, increases the overall financial assets in an economy and drives development of capital markets. In 

times of natural disasters (such as floods, hurricanes, droughts), insurance companies also help in providing financing to mitigate the social costs of catastrophes.  

  “The insurance industry is a major contributor to job creation across the world. A vibrant insurance industry results in direct job creation for agents, brokers, underwriters, actuaries and so on; and also indirect jobs for many other industries whose risks are covered by the insurance industry. So as you can see the insurance industry is an important sector; and moreover it is big business. “She added.

   Also , the Minister of State for Finance , Bashir Yuguda , maintained that when the insurance sector is properly harnessed it would deliver many important benefits to our nation . 

  He urged the insurance stakeholders to think more about introducing innovative channels in delivering insurance policies by looking at alternative channels such as mobile platforms which are becoming very  important in other fast-growing markets. 

  “A thriving insurance industry contributes to a country’s economy by boosting economic growth and promoting investments.” He added. 

  The Commissioner  for Insurance, National Insurance Commission (NAICOM) , Mr. Fola Daniel said  “ The insurance sector is a critical part of any nation’s economy and has the potential of galvanizing the optimal performance of other sectors.” 

  “The insurance mechanisms reduce the capital needed to operate , increase investments, foster entrepreneurship by reducing uncertainty and expand available risk management options.” He said.

  According to him, the nation need sound and safe insurance companies that will address major challenges such as financial protection , employment and relatively low level of foreign investment . A leader of the insurance sector, Prof. Joe Irukwu, said: “Modern insurance and the economy are so closely interwoven and so dependent on each other that neither can one function efficiently without the other. They are, in effect, inseparable. Just as no modern economy can survive and grow without insurance, no insurance industry anywhere in the modern world can thrive under a weak and badly managed economic environment.”