Meaning of Insurance
Insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. It is also a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools client’s risks to make payments more affordable for the insured.
Brief History of Insurance in Nigeria
The J. C. Obande commission report of 1961 resulted in the establishment of a Nigerian Department of Insurance in the Federal Ministry of Trade, which later transferred to the ministry of finance.
The insurance companies of act of 1961 classified insurance businesses into various classes for registration and provided forms for record keeping.
The insurance decree of 1979 provided for the authorization of insurers, modes of operation, organization and transfers, administrative and enforcement guidelines and penalties.
Keywords: Banking institutions, strategic market, national economy, and marketing.
The National Insurance Commission was established in 1997 with the responsibility of regulating and supervising insurance in Nigeria.
The commission has since been the main insurance regulator in Nigeria. The insurance special supervisory fund decree of 1989 strengthened the insurance supervisory board and included a provision mandating that all insurance companies contribute 1 percent of their gross earnings to the fund.
As a result of insurance decrees and development since 1961, the insurance industry in Nigeria has been growing steadily. Incomes have increased at a rate of approximately 18 percent per year
Problems of Nigerian Insurance:
1. The Nigerian Market is Doubtful of Insurance Companies
Anybody who has spoken to the average Nigerian about insurance can give firsthand experience of how Nigerians generally have a negative attitude towards insurance. This account for the low patronage of insurance companies in Nigeria.
2. Inadequate Access to Information Technology
Despite being in a world where information technology seems to be ruling everything, many companies in the insurance industry still do not have a fully automated and/or integrated computer software system.
The challenges here is that document management system is relatively poor compared to other sectors in the economy.
3. Antagonistic and Hostile Economy
A stable economy promotes savings necessary to finance investments which is prerequisite for achieving a viable insurance industry which can help sustain economic growth.
Insurance companies are so sensitive to economic fundamentals and sometimes have to factor a lot of economic variables so as to make the right investment decisions.
4. Weak Regulatory Framework
The regulatory framework for insurance is very weak. National insurance commission is empowered to ensure the effective administration, supervision, regulation and control of insurance business in Nigeria.
5. Lack of Skilled Personnel
As funny as it may seem, there is a huge shortfall of skilled professionals in the entire insurance industry. Insurance companies inadequately train their staffs.
Majority of the insurance companies attract low-skilled personnel due to inadequate remuneration package thus, there is always the inability to retain competent employees.
6. Poor Knowledge of Insurance Services by Prospective Assured
The insurance culture in Nigeria is very low. This may not be unconnected to the lack of knowledge about life insurance products.
Many educated Nigerians still do not see a reason for insurance. Scholars have stated that there is an urgent need for insurance companies to renew their marketing communication strategy that should be based on creating awareness and informing the consumers of the benefit inherent to insurance.
7. Emerging Threats Amidst Macroeconomic Uncertainty
The Nigerian industry like most other industries is affected by the macroeconomic environment. The downturn in Nigeria’s fortunes which had its roots at declining global crude oil prices since 2014 has triggered changes in the consumption pattern of insurance products in recent times.
While contributions from the non-life business segment have been on a decline, the industry has seen increased surrenders in the life business segment.
8. Lack of Training
The lack of training of board of directors on basic insurance operations results in inadequate supervision of executive management activities by the board.
9. The Demand for Actuaries
The demand for actuaries in the Nigerian financial services industry became more pronounced following the introduction of IFRS.
Incidentally in the insurance industry, every insurance company needs to have actuary, as IFRS requires that every entity’s balance sheet reflects true and fair representation of the obligations.
Thus, the death of actuaries in Nigeria would not only affect the insurance companies operations but also the oversight functions of the regulatory body. Furthermore, there is lack of awareness about the actuarial profession and what actuaries can do.
10. Lack of Support/Embrace Contribution of Other Non-Insurance Special Skills
Insurance companies also place emphasis on technical skills as against specialized business skills. This restricts the growth and development of non-insurance skilled professionals within the insurance industry.
1. Engagement of adequate staff with professional background to carry out oversight functions
The CIIN should ensure that the insurance professionals live up to the bidding of true professional in word and deed. To this end, the CIIN should constantly review and expand their curriculum beyond core insurance courses in order to build knowledge capacity.
2. Employment of non-insurance skilled professional without discrimination should be emphasized
Actuarial professional training programs are needed to create the awareness of the profession. Funds should also be allocated for the training of employees and/or Board of Directors.
3. Investment in IT infrastructure
There should be a regulatory guideline on best IT infrastructure for insurers and reinsurers to adopt for both operational and reporting purposes.
4. Risk and capital management
Capital adequacy is a measure of financial strength of an organization usually expressed as a ratio of its capital to its assets.
Partnership is another way we can use to improve insurance penetration in Nigeria. Insurance companies must learn to partner with other companies in other to further their goals.
This means there will be insurance covers on telephone lines, SIM card etc. Insurance companies must partner with telecommunication companies, the media and others to create agency distribution channel in order to reach customers, audience and listeners of such platforms or business.
6. Compulsory enforcement
Nigerian government has to take insurance industry seriously. This is because of its untapped potentials. To achieve this, Nigerian government has to enact laws that will make it mandatory for companies with staff strength as low as 3 to have insurance covers.
7. Non-delay in compensation payment
It is disheartening to hear stories that individuals who hear stories that individuals who have their properties and goods insured lose them and the insurance companies refused to pay them.
8. Affordable premium
Many Nigerians often get discouraged when they hear they have to pay certain amount monthly in order to maintain an insurance scheme.
9. Massive Public enlightenment
One of the ways to improve insurance penetration in Nigeria is to improve enlightenment of the people on one on one basis. The common practice of insurance companies sending marketers to companies to get them to patronize the biz of their companies is not enough.
10. Service quality and responsive claims payment
Today’s business demands that the focus of management is to the provision and delivery of qualitative and customer satisfying products and services in order to confront the competition passed by new entrants.
Hence, any forward-looking operator must adopt a change in attitude in terms of prompt and responsive payment claims.
For any organization to remain viable, its management must provide periodic review of its objectives, resources and opportunities.
It must constantly re-examine its basic business and focus, target audience and select customer groups, differential advantages, channels of communication and messages, against the backdrop of new developments, trends and market needs.Click here to see the latest Jobs opportunities in Nigeria.
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