‘Any industry where the regulated dictate for the regulator cannot develop’

Akin Ogunbiyi is the Group Chairman of Mutual Benefits Assurance Plc. In this interview with FEMI ADEKOYA, he talks about the insurance industry and challenges undermining the potential of the sector, despite being one of the oldest sectors in Nigeria.

Despite years of operations, how would you assess the insurance industry, vis-a-vis the banking sector and also considering its low trust index which has affected market penetration?
Insurance penetration in Nigeria today is still under 0.25 per cent and that 0.25 per cent, we have quoted this figure in the last 10 years. I have heard them quote it in the last 20 years.

In fact, when I came into the industry, they were still quoting 0.25 per cent penetration and that’s the situation. It’s very unfortunate even though insurance is over 100 years old in Nigeria. Insurance has focused mainly on corporate insurance. There hasn’t been, any attempt to penetrate informal sectors because if really, insurance is to develop, I will tell you, it is the informal sector, where every transaction that happens in Nigeria today, as of today, is ratio one to nine. That is one per cent for the formal sector and nine per cent for the informal sector.

The informal sectors are not captured in any statistics in any way. If you get to Idumota, trillions of Naira transactions happen, same as the medium markets across the nation. So I will say insurance is not developed. We are focused mainly on corporate insurance, and if you look at the big-time players, where do you find them? You find them in the cities. In fact, I know companies whose marketing strategy is only working on a regional basis.

The top-flight insurance companies don’t have branches everywhere. They have its head offices in Lagos, Abuja, Kaduna and in Port Harcourt. All the big-time insurance companies which I have ever operated, this is how they operate. So nobody has ever taken the time to develop the informer sector. This was the trend until I came into the scene because people call me an apostle of retail insurance. I look at, first when we started; the big brokers control the market. They don’t have trust in us. If you have not produced a five-year financial statement you can’t get business from Hogg Robinson nor from the other big firms. Those are the big time insurance brokers and their focus is mainly on corporates so they control the market. I came in and said I couldn’t wait five years. So we went retail.

Our retail market was fully developed in the 10th year when we moved into Ikorodu road. It was so good that NAICOM copied what we were doing for the industry. We needed to open up the market, patronise the informal sector, the trade association and unions. That meant we must have representation across Nigeria. NAICOM was so worried we were spending so much policyholders’ money. They called me and told me they can’t allow this to happen. I tried convincing them, but they said no. I can say emphatically that it was God’s intervention that the firm was not taken over. NAICOM set up five panels, three from outside and two from NAICOM to investigate what we were doing. They investigated and came to the conclusion that replication should be made on what Mutual Benefits was doing for the entire industry. We then came up with a Market Development and Restructuring Initiative. Insurance is still where we left it. If other insurance companies replicate our strategies, insurance won’t be where it is today.

The National Insurance Commission (NAICOM) recently suspended the licences of some big players in the industry. Should we expect to see more of this?
I wish we had very powerful and reasonable regulators. We have had companies that have been on the brink for so long. The boldness to sanitise the industry was absent. If you look at the companies disrupting the market today, it is the big players. These big insurance firms dictate for NAICOM. When the regulation dictates for the regulator, it is a major issue. We’ve always had these challenges. All insurance companies that are no more, went of their own volition not because NAICOM was involved. If NAICOM were forthright about its responsibilities, NAICOM would have taken over the licenses of these firms. There is no boldness on the part of the regulator over the years to do the right thing. If insurance is going to be developed, NAICOM needs to develop the capacity to supervise the industry. People say we are over-regulated but that is not true. We are only regulated on the basis of capitalization. NAICOM doesn’t have the capacity to supervise the industry effectively. We would have done better in the industry if there were strong regulations. I am telling you, we have extremely weak regulations.

Going forward, how can the sector improve its capacity to be able to take advantage of the available local content policies because indigenous firms complain about not being allowed to play in some sectors because the enabling laws are there?
It still boils down to NAICOM. We have the capacity to take on any risk in this market. We don’t even need to get to N10 billion or N8 billion, but we are there now. Look at the industry, they said we don’t have the capacity, let’s raise capacity for you. They went to court to stop that law on capitalisation. But even before then, I would say we don’t even need to do beyond N2 billion and N3 billion. What is the essence of reinsurance? The re-insurance that we have gives us multiples of capacity, but we have not used it.

Now, we have got N18 billion. How much do you need to start a bank? You need N25 billion, and there’s nothing this government will do that the money will not pass through the bank. So, the bank will make free money. I say it’s in insurance that you have the creativity and ingenuity of marketing, but banks just take free money. As you’re seated now, if you send money to someone, they’ll take your money.

How would you rate the capacity of insurance companies as pension managers?
Before the Pension Reform Act, which formed PENCOM, came up, the insurance industry had the benefit of underwriting pensions. However, because there was no supervision, the same experience that people are having now was the experience at that time. You do your investment savings scheme and when the time lapses for you to collect your money, the insurance starts telling you stories, and it wasn’t so much that the people didn’t get direct benefits. Not all insurance companies were doing that, but if there had been effective supervision, they would have sanitised the industry at that time. But look at since they came up with pension contributions, the Pension Act took that pension directly from the insurance industry to the government agencies, how many trillions do we have?

The Market Development and Restructuring Initiative (MDRI) were to take up to N1 trillion in 2012. By 2022, we were still at 400,000. The good thing that the law did was the low premium, and low cover that made sure everybody paid for insurance premiums. Now, we have a pension.

The government made it compulsory and this is the role that I keep saying that NAICOM can play. If NAICOM had come to the rescue of the industry when we had that pension, we would have been talking of several trillions of naira as income now.

Fola Adeola interviewed me and I gave him the idea. I didn’t know he was going to do it for the government. But the point is, the way the pension is run, what are we using it for? How is it easy for people to get their benefits? The same issue that we were having with the insurance industry is still there. In fact, it’s now bigger because what is at stake is far larger and bigger than what was at stake at that time. If you check the pension account now, how can you borrow some people’s money? The Federal Government was borrowing from the pension fund, and they have taken everything. So, people retire today, what happens to them? People who retired yesterday, what happened to them? This is the crisis. It is unfortunate. So, the people running the pension office have no money to settle anybody. Yes, you can put pension assets in infrastructural development that will generate cash flow over a period of time. When the government borrows it, go and ask where the trillions are. It is in private pockets.

There is nothing wrong with taking money. America is the most leveraged in the world now and yet is the wealthiest. You can borrow money, you can be leveraged but when you take money, what are we going to use it for?
How would you rate the compliance of industry players with the ethical standards of the industry?
Unethical practice is the bane of this industry. I have said it, it is still happening. I delivered a paper at CIN on development and I said the people killing this industry were two groups: the big brokers and the big underwriters. I said it openly. The big brokers compete on the basis of price and not on the basis of service. So, if something is N1 billion, for them to get their cut, it will be basically on pricing. They will price themselves as low as possible. Sometimes, you can call it an N1 billion premium. They can do it for N50 million. They will compete among themselves and they will bring it down to N50m. Who loses? Well, the industry loses. The big brokers and the big underwriters are the ones.

I once had a personal experience with a broker. He said, “Look, I am a broker. I want this business. Whether I quote it one naira or not, as long as I have my commission, when anything happens, it is his (insurance company) problem.”

That was what he told me. When you talk of unethical practices, NAICOM has a big role to play. If the lending rate in the country is 22 per cent, that means the savings interest will be about eight or nine per cent and a bank says, “I’ll give you 60 per cent return on your money,” will the Central Bank of Nigeria allow that bank to run? So, what are you regulating when the regulator is saying that the industry has given so many discounts? Who are the companies involved? What have you done to them? NAICOM has to be up and doing. We have a better way of doing it now. There is technology, and it can regulate us better.

There is still untapped potential in the insurance industry. What can you say to young people who desire a career in this sector?
I still say that the insurance sector has huge potential. As it is today, I don’t think the statistics have changed, but I think if we’re still at 0.25 penetration, that means there is an opportunity for development in the sector. For the young ones, get professionally qualified, and read a lot. In those youthful days, I read a lot to get ideas. The globalisation of the world today has made it easier for anybody who wants to do anything. So, there is nothing new you want to do in the industry. Rather, you can copy and see how it can work.

You have to be forthright and have an appetite for risk-taking. It may not need to take as much risk as I’ve done. For the young ones, there are a lot of opportunities in the insurance industry. I want to encourage them to start. Try and see how you can challenge the status quo, and things will fall in line.