Nigeria’s insurance industry positions itself as Africa’s regional hub
The Nigerian insurance sector is witnessing a paradigm shift with major developments changing the phase of the insurance market in the country. Through the instrumentality of the National Insurance Commission (NAICOM), some reforms were instituted, coupled with fundamental partnerships. To this effect, the sector is projected to take over the helm of affairs of the industry in Africa within the next few years.
Before now, several challenges had bedeviled the insurance industry and they have threatened its existence. At the initial stage, many Nigerians lacked understanding of the industry and its workings. The quota the sector contributed to the country’s GDP at a point was below 1%, prompting the government’s minimal recognition of the industry as an efficient contributor to the financial sector.
There was also a low awareness of the need for insurance for the public. In addition to this was a poor regulatory framework and inevitably, the public, (which was supposed to be the insurance market), lost confidence in the sector.
However, since NAICOM, the industry regulator rolled out a series of reforms, The sector has undergone remarkable transformations with the introduction of its Market and Restructuring Initiatives (MDRI), NAICOM aimed to popularize insurance in Nigeria. Some of the other reforms include the Risk Based Supervision, migration to International Financial reporting Standard (IFRS), Market Conduct Reforms, Claims Settlement Reforms and Financial Inclusion.
Similarly, the implementation of the no premium no cover policy, which obligates the insured to pay premium before getting insurance security, and corporate governance reform.
The reforms had recorded significant impacts for the sector. First in line is the attraction of foreign investors and emergence of strategic partnerships. A very strong indication of this is the investment of Old Mutual insurance firm in Oceanic Insurance, Sanlam Group in First Life Insurance, Assur Africa Holding, and an association of three European Development Finance Institutions (DFIs).
Equally, there is a boost in the confidence of Nigerians and the government’s recognition of the sector that currently boasts of its credibility. Public confidence ultimately means a high patronage from the most populated African country- the main reason foreign investors took interest in the sector.
NAICOM had also played a significant role in the sector. In 2012, the commission had intervened to help many insured people get a total of N1.2 billion claims, which increased to N2.2 billion in 2013. This conducive environment for insurance firms was created to launch more sensitization campaigns.
The most significant reform that earned the trust of the public came in 2005 and has endured to date is the recapitalization policy. This reviewed upwards the capital base of life assurance companies to N2 billion from N150 million and N3 billion from N200 million for general insurance businesses. It reduced the number of insurance firms from 103 to 49, but however increased their capacities to accept and retain risks- meaning more efficiency.
NAICOM’s reform on migration to IFRS have resulted in better financial discipline of firms. The no premium no cover policy has been working for the benefit of both the insurer and the insured.
Although challenges are still prevalent, better opportunities remain that can place the industry on a global ranking. The continued performance of these reforms is largely dependent on NAICOM’s ability to consistently grease the wheels of reforms and provide the support the sector needs to achieve its full potential.
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