The Group Managing Director, Mutual Benefits Assurance Plc, Mr. Akin Ogunbiyi, speaks on challenges and way forward for the insurance sector in this interview with NIKE POPOOLA.
How can insurance play a better role in Nigeria’s economy?
Insurance anywhere, especially in the developed countries of the world, is actually a tool for wealth and value creation and no growth or development can actually come unless the insurance industry is strong, viable and is able to play its role as the major mover of the economy. In the Nigerian economy today, everything depends on the Federal Government; everything depends on the national budget; but if the national economy will have to witness the growth and development it desires, the private sector has to be well mobilised through enabling environment, policies and programmes that will actually allow direct foreign investment to be channeled into the right sector of the Nigerian economy.
Are there sufficient opportunities do develop insurance business in the country?
The dynamism that our regulator has put in place actually in one way or the other has brought lots of opportunities for the industry. It is for the discerning eyes, it is only the eyes that are smart enough, the intelligent eyes that can actually see the bundles of opportunities that the initiative of the National Insurance Commission has brought to the industry.
How have the challenges in the economy being impacting on the insurance sector?
The global economic crisis has had impact everywhere. Unfortunately, the Nigerian government did not take any cue from what the developed and even developing countries are doing in terms of making conscious efforts and formulating policies to help in reverting the declining trend of the national economy. But notwithstanding, we are different. In Mutual Benefits, our approach in growing our business has actually assisted us in moving the company forward.
Compared to other countries, has the local industry been able to provide enough cover for the populace?
For over 90 years that insurance came to the shores of Nigeria, the industry has not been able to issue up to one million individual policies; whether motor policy, life policy or householder policy; putting everything together, we have not been able to issue up to one million individual policies. If you look at what is happening in developed economies of the world, insurance is a basic point of making value, alleviating poverty and empowering people in terms of what they use the pool of resources that they get to do.
If you look at housing sectors in the developed economies, virtually more than 90 per cent, you will find that it is insurance fund that is being used to fund these. Mutual Benefits, in the last three years, has been able to issue over 250,000 policies. We have international branches and many local branches nationwide. We are using insurance not just in the conventional or traditional way of doing business, but as value creating, a wealth creating medium.
What effect is the regime of ‘no premium, no cover’ having on the industry?
I will commend NAICOM’s efforts at repositioning the insurance industry, in particular, this recent introduction of ‘no premium no cover’. This has resulted in significant increase in productivity and profitability of the industry. There is no doubt that this recent initiative will be one of the lasting legacies of the regulator and the impact of this accomplishment will be felt. This is just the beginning of good things in the industry and it will be a reference point and lasting legacy for younger generations in the industry.
How can the sector be more productive when the economy is tight?
Everybody have to go the way of retail market, create products and services that will add value to the people, that people can see the benefits directly that it is adding to them. When you do that, people will take insurance. Nobody will buy retail insurance on credit, so we are able to get huge premium from this. If you look at our balance sheet in Mutual Benefits, we are well diversified and we take calculated risks, and partnership, strategic alliance in other areas in other to ensure that we create sustainable flow of income to match the liability that we are creating from the retail products and services that we are selling out there. Before the liquidity squeeze, the banks helped in generating some form of liquidity. But today, the reverse is the case, there is liquidity squeeze, the real sector of the economy is groaning, many sectors have closed down. It is not just liquidity squeeze that is affecting insurance, but the banks are not able to oil the economy to provide resources where people can reinvest to create commercial risk.
How can the compulsory insurance policies be better enforced?
NAICOM has the backing of the law and the backing of the Federal Republic of Nigeria. NAICOM has embarked on massive campaigns. If you look at the way it has mobilised, it is not just NAICOM, we have mobilised the Nigerian Police, Nigerian Security and Civil Defence Corps, Federal Road safety Corps, all the necessary arms of government that will be necessary to prosecute, we have mobilised the Nigerian judiciary. If you still fail to comply, they will serve you notice to face the law, it is a straight forward thing. When FRSC introduced seat belts, even commercial motor drivers, once they start their engine, the next thing is to draw their seat belts.
Nigerians are disciplined people, highly educated, and people of honour and respect who know the principle of the rule of law and are ready to abide by it.
How are you planning to penetrate the peasant population in rural areas that lack knowledge of insurance benefits?
We did the empowerment project in the north. We observed that they don’t buy insurance, so we asked ourselves, how do we reach out to them? We did this through empowerment. We approached those states through the Nigeria Union of Teachers. We know that a motorcycle is a symbol status in the north and we approached them and asked how it can be done. We asked them, can we partner with you to give you motorcycles? They agreed and we agreed on some terms.
With this scheme, Mutual Benefits has supplied over 20,000 motorcycles and there has not been a single default. We are risk takers but we have taken strategic calculated risks. Under this scheme, for example, to qualify under the NUT scheme, you must have qualified for gratuity. We find out how much is the motorcycle. So, if you have worked with the NUT for 10 years, your gratuity is more than enough to pay for the motorcycle. So, you sign off your gratuity with the approval of the state government and local government.
Secondly, we got direct deductions, that is, bank standing order, from these people, and when they saw it, they liked it and many of the NUT members took it. Under the programme, we got authorisation on monthly premium from them and we also provide insurance cover for the motorcycles and the riders for death benefit of N250,000. This is how we are able to cover this part of the country.
If I sell 50,000 motorcycles with insurance cover, this is premium that wouldn’t have come to the industry and we are enjoying this scheme.
How have you been able to boost the real estate sector with insurance?
We have invested a lot in that aspect. We have duplexes we are building; bedrooms and two service apartments under it, whether for commercial purpose or for your domestic workers or for children. We are giving mortgage at nine cent and 10 years is the maximum tenor, but you can as well have it for lower than that period. We have had all kinds of offers from banks to buy them all and we said no. If we are going to sell and realise all our profits today, it is actually going to affect our projections. We are not just interested in just expanding our coast; everything is tailored towards adding to the bottomline. And the bottom line is creating commercial risks that Mutual Benefit can take on. We have our challenges with this approach, but then again, we want to commend the cooperation and support we have got from the National Insurance Commission for the various innovations.