The insurance boss called for increased acceptance on insurance policies by Nigerians.
Insurance penetration in Nigeria is still very low, compared to acceptance levels in other countries, the Managing Director/CEO, First Bank of Nigeria, FBN, Insurance, Valentine Ojumah, said.
Mr. Ojumah said despite the wide room for growth, life assurance had just about 0.5 per cent penetration, while general insurance had just about 1.5 per cent penetration.
“Low penetration, slow growth, these are some of the challenges of the Nigerian insurance sector. These are challenges we are coming together to tackle. These are some of the reasons we are in business,” the Managing Director said
Noting the challenges facing the sector, Mr. Ojumah said the firm was the only newly registered insurance company in over 20 years, adding that its management was still battling with the “grand fathers and mothers in this business”, though he said in the last three years, FBN had risen to number four in specialized life insurance, in terms of gross premium income.
Due to the low penetration, he said most of FBN products were directed at low income earners, adding that the company was not afraid of competition, as those who want to be professional about their businesses were welcome.
“It would be very good and healthy for the insurance industry” he said.
He said the insurance sector was key part to the financial sector, pointing out that in developed markets, the insurance sector accounts for a significant portion of the total economy.
In collecting relatively small premiums from many individuals in the economy, he said insurers were able to pull together, better than other institutions, a large pool of funds that could be invested for short or long term periods.
Industry research report by Vetiva Capital Management stated that insurers could serve as a means of long term financing, the sector was important for sustained economic growth; adding that this was expected to deepen and broaden the domestic financial services universe and generate higher savings rates and greater economic development.
“We believe that the Insurance sector is critical to the ability of emerging and transitional economies like Nigeria to grow and develop, as well as provide a reliable cover for risk to the citizens. Insurance provides stability by allowing large and small businesses operate with a lesser risk of volatility or failure,” the report stated.
Before the recapitalisation of insurance firms in 2007, the report identified some of the challenges of the industry to include under capitalization of existing industry players, dearth of appropriate human capital and professional skills, poor returns on capital, existence of too many fringe players and poor asset quality.
Other challenges included prominence of unethical practices, significant corporate governance issues, insurance premium flight, poor business infrastructural facilities, especially in the area of ICT, lack of Innovation in product development, lack of awareness on the part of consumers on the uses/suitability of insurance products, low gross domestic product, GDP, per capita figures and poor corporate governance structures.
After recapitalisation, the report said penetration still remained a challenge, with some of the challenge having to do with the culture and the general mind-set of people to insurance, requiring insurance companies taking their products to the doorsteps of their potential customers.
The Head, Retail Distribution, FBN Insurance, Umekwe Odinakachi, said insurance was important in the advent of death, critical illnesses and permanent disabilities, adding that the company had varying products for life’s eventuality.