Managing Director, African Alliance Insurance Plc, Mr. Alphonse Okpor, is worried about Nigerians’ attitude to insurance. He spoke to NIKE POPOOLA on the importance of life insurance
What is your expectation on ‘No premium, no cover regime’?
It is a good idea but it is difficult to implement. Look at the Federal Government, for example, the biggest scheme in the market is the head of service group life scheme. Last year’s premium has not been paid fully, and we are now in another year, so government account has become difficult to say ‘no premium no cover’ to. In most cases, what we do where the premium is not being paid is that we may go into technical agreement, that is paying in instalment; but that agreement has not been done. But when you have paid some deposits, you are expected to be on cover. As it is now, I don’t think any claims will be paid except they finish paying the premium. But for you to cancel the cover because no premium has been paid, then you are losing the whole scheme. And you know the attitude of Nigerians towards insurance. Insurance is on the begging end, especially when it comes to life policy. They, will tell you ‘Don’t worry, I will not die. In some countries, for any young man, the first investment he will do is life policy. But in Nigeria, it is not so, even the government doesn’t see it as a priority.
Some ministries owe premium for years, they don’t pay and they have enjoyed cover. Some will not pay premium when it expires. For some large schemes, the ‘no premium no cover’ is difficult; for small schemes, you can insist. If you don’t do it, some companies will do it, then you will lose out. It is really difficult to implement it but let’s see how it goes.
How can retail insurance benefit the low income earners?
A young man’s first investment should be in life policy. For instance, if you are taking a life cover of N5m with a premium of N1,000 every month. Your immediate estate for the family, in case the person dies, is N5m. If the person doesn’t die, if he pays up to the period required, then the money will be paid back. It is an investment with interest. So it is very beneficial for everybody; it is not only for rich people. Nigerians take up life policies and pay for a month or a year and abandon it after some time. That culture of continuity is still not very clear to Nigerians. They waste money. But for Ghanaians, when they take a policy, they maintain it till maturity. And there is also cooperation between the insurance companies and employers in Ghana. For the employers, if you have a life policy, they can deduct from your salary and pay to the insurance company. We call it check up system. In Nigeria, nobody wants to do that, not even the government. Even though, Nigerians are richer and with more population, Ghanaians have a better attitude towards life policy than Nigerians because of the way they pay premium and stick to it; they pay premium and don’t owe.
What are the major growth areas for the life business?
The major area of growth is in retail marketing, which deals with individual life policy. This area has not been well explored because brokers don’t even delve into that. They go to where the large premium is, and that is group life insurance. The competition in group life insurance has become so tense now that it is unprofitable; underwriters cut the rates so low in almost all accounts. The only growth area that you can really bank on is in retail marketing. And many people are not very equipped for that. It is an area where you can expand your business. But if you don’t have an idea of that area, it will be difficult because most group life businesses are not profitable. In African Alliance, for instance, we do Islamic Insurance; we are also doing Esusu linked to life insurance. We have tried to expand Islamic Insurance in the North, but because of what is happening in the North now, there is a slow down. In the area of retail marketing, I think that is where every company should look up to. Looking at the population of Nigeria, individual life businesses are expected to grow. If we can advertise it and put more efforts into it, I am sure it is an area everybody will be happy with.
Why has group life business continued to be unprofitable?
Many underwriters only look up to group life policy; they look at the total amount involved, but forget the claims coming from it. And they don’t have the skill to go into retail marketing. Some life insurance companies don’t have agency department; what they look up to is this group life; so they will do everything to get it. And that builds up corruption into it. When you are there, you get this bulk money, but before you know it, the claims will come and wipe it off. Because of that competition, nobody is doing adequate pricing of the group life business. Look at the Federal Government insurance for workers, the impression some people have about this and big companies is that the money is free; but it is not. If you go back and look at the claims, even on the head of service insurance, it is a lot. It has to be well priced; otherwise, nobody will make profit on it.
How should life business be underwritten?
As a good administrator, you have to look at the other side of it, the claims, and price correctly. In the normal way of underwriting life business, there is what we call underwriting circle, but because of competition, we don’t employ it. Underwriting circle means when an account is not profitable, you raise the premium; when the account becomes profitable, you reduce the premium. It goes on like that. This is not followed, even when the account is unprofitable, next year, they will reduce the premium. They will say people will not die, I will manage it well, but every year, it shows. Because of the urge, you want to meet your target; you don’t care what happens.
What then is the relevance of insurance annuity?
Annuity as the name implies is the annual income. People who are used to regular income when they are working, when they retire, it is not everybody that will be able to manage the bulk sum. So the idea of annuity is that when you retire, you buy annuity policy that will guarantee income for the person until death comes just as if they are working. The amount may not be the same. But most people have not joined the scheme. Some states have not even bought into it because this is a federal law. Each state has the opportunity to buy into the law and introduce it in their laws before it can be active. Lagos State, for example, is doing very well. We are happy with them. They have many retirees buying annuity from us. Some are not aware of annuity. You either buy programmed withdrawal from the PFA or you buy annuity from insurance company. Programmed withdrawal is for a period of time. Annuity is paid for life. If you live for long and your income stops, are you going to look for work again at that age? All over the world, the tendency when you retire is for everybody to buy annuity and get paid until you die.
What is the orientation of African Alliance Insurance towards product innovation?
We are specialist life office; we have pioneered many new products. We have more than 15 products. We have lots of reserves which we have not used. We started Islamic Insurance. Also, we looked at Nigerians’ attitude towards money market like Esusu contribution and all that, we saw that Nigerians like the market, especially women, so we looked at how to sell our life policy using that channel to market it to them. But we attach life policy to it so that if a person dies, there is a life cover that he enjoys. We have many conventional life policies such as educational and endowment policies to suit many requirements. It is very important to spread the news on life insurance.