THE CHALLENGES OF THE NIGERIAN INSURANCE INDUSTRY
The master copy concept of insurance is that of spreading risks. Insurance facilitates investment yesteryear reducing the amount of working capital missive of the alphabet that businesses in addition to individuals ask to maintain at manus to protect themselves from uncertain events. According to some scholars, insurance is a barometer of economical activity inwards a Earth in addition to thus, protects the success of emerging economies.
Insurance inwards Nigeria tin sack last traced dorsum to the 20th century when Nigeria’s economic scheme was exclusively theme on agriculture. There was a ask for merchants to carry their cash crops to Europe in addition to also reducing the opportunity of such transportation. This majorly contributed to the authorization of marine insurance inwards Nigeria at that time.
Despite its importance for economical development, the gross premium collected yesteryear insurance companies inwards Nigeria is near 1.9 Billion U.S.A. of America Dollars compared to the 3.8 Billion U.S.A. of America Dollars collected inwards South Africa.
In the United Kingdom, the insurance manufacture contributes near 20% of the total gross domestic product of the country. In South Africa, the insurance manufacture contributes 17% of the total gross domestic product in addition to inwards Kenya, the insurance manufacture contributes 3.4% of its nation’s GDP. However, inwards spite the astronomical growth of the Insurance companies from exactly i agency inwards 1918 – Royal Exchange Assurance Agency to the acquaint release of 56 Insurance companies equally stated on National Insurance Commission (“NAICOM’s”) website, the Nigerian Insurance manufacture contributes a meagre 0.7% of the total gross domestic product of Nigeria. It volition last correct to enjoin that the performance of Nigerian insurance manufacture is sub-optimal.
In defiance of National Insurance Commission's constant endeavour to cure in addition to mitigate the challenges causing the sub-optimal performance of the insurance industry, in that location are soundless a brace of challenges militating against the growth of the insurance industry.
Antagonistic in addition to hostile economy
Influenza A virus subtype H5N1 stable economic scheme promotes the savings necessary to finance investments which is a prerequisite for achieving a feasible insurance manufacture which tin sack tending sustain economical growth. Insurance companies are sensitive to economical fundamentals in addition to sometimes take away hold to ingredient a lot of economical variables in addition to so equally to brand the correct investment decisions.
These variables include unusual central reserves, authorities debt, authorities deficits, inflation, involvement rates in addition to central rates which take away hold all suffered inwards recent years equally a final result of Nigeria’s financial indiscipline in addition to misappropriation.
What this way is that for the insurance manufacture to thrive in addition to achieve its potentials, the authorities must last sincere inwards promoting a favourable environs that volition allow the financial service industries thrive. This volition tending growth the operational efficiency of the insurance industry.
Presently, insurance companies are unwilling to invest the premiums inwards long-term instruments because of the fearfulness of inflation built upwards over several years due to financial indiscipline in addition to high inflation. It is a really uncomplicated regulation of economic science in addition to investment that short-term investment volition yield lower returns. If these tendency continues to occur, insurance companies volition non last able to solve their liquidity problems which powerfulness deter insurers to pay claims.
The Nigerian marketplace is doubtful of Insurance Companies
Anybody who has spoken to the average Nigerian near insurance tin sack give a firsthand sense of how Nigerians to a greater extent than ofttimes than non take away hold a negative mental attitude toward insurance. This accounts for the depression patronage of insurance companies inwards Nigeria.
The negative mental attitude of Nigerians powerfulness non last unconnected to the pitiable mental attitude of the insurers equally regards non-payment of claims. Some insurance companies are really notorious of defaulting inwards payment of claims which has adversely affected the publicity for the manufacture in addition to consequently the confidence inwards the manufacture purchase the prospective assured.
Also, in that location are clauses inwards policy documents which escalates the distrust inwards Nigerians.
Inadequate access to data Technology
Despite beingness inwards a Earth where data applied scientific discipline seems to last ruling everything, many companies inwards the insurance manufacture soundless do non take away hold a fully automated and/or integrated figurer software system. The challenge hither is that document direction arrangement is relatively pitiable compared to other sectors inwards the economy.
It is an unfortunate truth that manual services are soundless prevalent inwards the manufacture which leads to delay inwards village of claims, fraudulent practices, mistakes in addition to errors inwards the entire occupation organisation operations.
There is also no regulatory guideline on best information technology infrastructure for insurers in addition to re-insurers to adopt for both operational in addition to reporting purposes.
Weak Regulatory Framework
The regulatory framework for insurance is really weak. National Insurance Commission is empowered to ensure the effective administration, supervision, regulation in addition to command of insurance occupation organisation inwards Nigeria.
Historically inwards Nigeria, authorities policies in addition to legislations were made concerning insurance manufacture exactly to whittle downward unusual authorization inwards the industry. There is an urgent ask to review the laws regulating the Insurance industry. The Marine Insurance Act, 1961 is clearly outdated equally it was a verbatim reproduction of the Marine Insurance Act 1906 of the Britain which has been reviewed inwards the UK.
There is also a ask for policies making some insurance products compulsory in addition to machinery to ensure total implementation of such policies. More stringent policies inwards relation to retaining to a greater extent than local content inwards some special opportunity such equally aviation in addition to oil& gas must last made yesteryear the legislators in addition to National Insurance Commission.
Another major occupation is National Insurance Commission inability to ensure that in that location are criterion premium rates on certainly insurance products. Insurance companies must adhere to the policy such that in that location is a benchmark for rates when negotiating premiums.
Lack of skilled personnel
As funny equally it may seem, in that location is a huge shortfall of skilled professionals (underwriters, brokers, actuaries, etc.) inwards the entire insurance industry. Insurance companies inadequately educate their staffs. Majority of the insurance companies attract low-skilled personnel due to inadequate remuneration packet thus, in that location is ever the inability to retain competent employees.
Many overstep executives inwards the insurance manufacture are marketers who take away hold rose through the ranks non because of their strong technical background of the manufacture but because of their distinctive salesmanship in addition to the powerfulness to convey inwards to a greater extent than clients than the others. The author thinks bringing inwards client should last a major requirement of promotion, however, the combination of a goodness technical background in addition to occupation organisation skills should last the pre- requisite. Many marketers out in that location would give whatever charge per unit of measurement to the prospective assured, non looking at of import factors such equally claims history in addition to other major factors.
Poor noesis of Insurance Services yesteryear the prospective assured
The insurance civilisation inwards Nigeria is really low. This may non last unconnected to the lack of noesis near life insurance products. Many educated Nigerians soundless do non watch a argue for insurance. Scholars take away hold stated that in that location is an urgent ask for insurance companies to renew their marketing communication strategy that should last based on creating awareness in addition to informing the consumers of the benefits inherent to insurance.
Nigeria is a field plagued amongst a depression grade of development, vast income inequalities,and cultural multifariousness inwards price of language, religion, ethnicity in addition to resources command crises.
The depression criterion of living is a major argue for the pitiable mental attitude of Nigerians towards insurance services. The per working capital missive of the alphabet income inwards Nigeria is really depression in addition to thence insurance penetration into the economic scheme is jump to last low.
Possible actions to ensure optimal functioning of Insurance Industry inwards Nigeria
The Federal Government must also examine the extant legislations on insurance inwards Nigeria. Particularly the Insurance Act 2003 in addition to the National Insurance Commission Act 1997. The Insurance Act must also last good implemented yesteryear NAICOM or whatever other authorities establishment saddled amongst such implementation responsibility. For instance, Section 64 of the Insurance Act makes compulsory insurance of edifice nether construction which is to a greater extent than than 2 floors. The full general implementation of the Insurance Act has left to a greater extent than to last desired. The limitation of liability on 3rd political party insurance is likewise small-scale inwards line amongst the acquaint solar daytime economy. Several sections of the insurance Act take away hold also been badly implemented. We cannot overemphasize the ask for an adequate legislation in addition to policy to create operational environment.
The formulation of economical policies which volition give room for investment volition also tending the insurance industry. As before stated, where in that location are investment friendly policies, insurance companies would also last able to brand long term investment for amend returns on such investments. Also, it is noteworthy of stating that if the economic scheme is inwards a amend shape, the prospective assure volition take away hold the liquidity to procure insurance.
Customer services inwards the insurance manufacture is below par. Many of these companies are having occupation satisfying their customers inwards price of production offerings, character of services in addition to sophistication of products offered. Customer service is clearly of import for winning novel customers in addition to retaining existing ones. The showtime pace of changing the human face upwards of the manufacture is ensuring an special client experience. Insurance companies must uncovering a way to supply customers amongst a meshing based self-service insurance platform where customers tin sack stance policy coverage, pay bills, brand changes to policies, submit claims in addition to cheque the condition of claim progress. Brokers should last able to obtain online quotes, proposal in addition to plans, blueprint for their customers.
Employing to a greater extent than adequate staff amongst related professional person background is also key. It is also of import that the Chartered found of Insurance must regularly review in addition to expand their curriculum to run across amongst the acquaint marketplace ask in addition to build the capacity of pupil members. Insurance companies must also allocate a per centum of its budget to Continuous Professional Development to maintain staff abreast of professional person standards in addition to practices.
Insurance companies must also uncovering ways to sensitise the world near the utilization of insurance. The authorities also has a role to play inwards this yesteryear making relevant laws that volition tending brand certainly insurance policies compulsory in addition to harsh sanctions for non-compliance of same.
Generally, approximately the world, in that location is a epitome shift from newspaper oriented procedure which is manual to automated process. Insurance companies inwards Nigeria must follow this growing trend. Insurance companies must employ the expertise of showtime tier applied scientific discipline firms to develop software to growth operational efficiency.
In this fourth dimension of harsh economical realities, insurance companies are soundless struggling to uncovering their feet equally a major financial service sector inwards Nigeria. The perceived stagnant growth of insurance manufacture continues to last a key challenge that the Earth must overcome inwards lodge to encourage greater levels of investment.
In stance of the fact that no modern economic scheme tin sack part effectively without an organized insurance manufacture thence insurance companies ask to last innovative equally their success volition depend on their powerfulness to devise novel ways to approach insurance inwards Nigeria. Furthermore, the Federal government, insurance companies, insurance professionals in addition to all relevant agencies must ensure that they operate together to ensure the insurance manufacture reaches its much publicized potential tiptop which is obscure at the moment.