Achievìng Financial Literacy through Insurance

The need to achieve financial literacy among Nigerians especially in the area of insurance is a big concern for government, and has challenged operators with regards to massive insurance education and product development.  Ebere Nwoji reports.

While the Lagos State Governor Akinwunmi Ambode at the investiture of Mr. Emmanuel Kayode as the 18th president of Nigerian Council of Registered Insurance Brokers (NCRIB) challenged the insurers to pay more attention  to insurance education, awareness and enlightenment on the members of the public especially the informal sector  to make them see the need to insure their lives and properties, the federal government   through the National Insurance Commission (NAICOM)   challenged the  insurers to play their role in insurance penetration especially in the development of financial inclusion products nationwide.
Challenging the brokers in this regard, Ambode who was represented by the Permanent Secretary Ministry of Finance, Adegbuyi Onikoyi said insurance education for the masses has become necessary because disasters and tragedies are not discriminatory. He noted that the effect can only reduce when more people imbibe the culture of taking up insurance  policies for their properties and lives.
He stated that existing insurance policies are outdated adding that this calls for change of orientation and need for insurance education and enlightenment of the public.

Also the Commissioner for Insurance, Alhaji Mohammed Kari, who was  represented  at the event by the Deputy Commissioner for Insurance, Finance and Admin, George Onekhena  told the brokers that the  Insurance brooking profession holds the potential of facilitating Nigeria’s  economic growth.

These, he said calls for insurance education among Nigerians to achieve financial literacy in the area of insurance has become necessary given the low penetration of insurance in the country and the need to improve on the industry’s contribution to the national economy.

Available records have shown that out of over 170 million population of Nigeria, about 86.6 million lack any form of insurance coverage while only 1.3 million adults representing 1.5 per cent of the population have some categories of insurance cover.

This is so although the federal government envisions an insurance industry, which can turn its fortunes around to rank amongst the twenty largest markets in the world by the year 2020 from the current ranking of being the 60th in the World reckoning.

Immediate past President of the Chartered Insurance Institute of Nigeria (CIIN) Mr. Bola Temowo, at one of the annual education seminar organised by the chartered Insurance Institute of Nigeria in Benin City Edo state said, despite this short fall, it is envisaged that the current record of Nigeria’s insuring population would receive a boost and improve the Industry’s profile in global ranking.

He called on the operators to retool their marketing tools to achieve more success in their bid to disseminate insurance message to Nigerians.

The minimal contribution of insurance to the Gross Domestic Product of the economy (GDP) currently put at 0.6 percent is worrisome to the insurance industry regulator, the National Insurance Commission (NAICOM) and the operators.
The development, which has been blamed on high level of financial exclusion among Nigerians has currently spurred the industry players and the regulator to action compelling them to embark on earnest search for ways of improving the industry’s market share of the huge population of the country.

In doing this, a key solution they have adopted in recent times is popularising of insurance among Nigerians through massive education of the people.

This they said is in line with the Federal Government’s effort to achieve financial literacy among Nigerians.

The insurers believe that the reason for the non patronage of the industry by the people, which has resulted in low premium generation and low contribution of the industry to the GDP is lack of understanding of what insurance is all about and the benefit inherent in it by Nigerians.

Indeed, before now, Nigerians are averse to insurance, many do not regard insurance as part of the finance sector of the economy, those who do see the industry as poor cousin of the bank.

Against this back drop, they failed to see insurance as industry worth patronising.
This cuts across all classes of Nigerians including the educated class.

As a result, when they talk about financial literacy and ways of saving for the future, they only think about banks and perhaps stock market.

This is so whereas life insurance savings is one of the major sources of long term funds. The result is that whereas pension funds has in eleven years  regime of the contributory pension scheme  accumulated over N5trillion mark, insurance, which practice in Nigeria is over 90years accumulated less than N300 billion .

In the face of the rebasing of the economy, its contribution to the GDP declined from 0.7 percent to 0.6 percent.

In South Africa, insurance contribution to the GDP is well over 12 percent, but in Ghana it is put at 2 per cent but with the country’s proposed massive education of its citizens on insurance, Ghana’s  economy is targeting 10 per cent contribution of insurance to the GDP in the next few years.

Here in Nigeria, given the challenge to the industry operators, in their earnest search for solution, industry operators are now riding on the van of micro insurance, which products distribution they are vigorously pursuing using every available channel to create insurance awareness among Nigerians.

Indeed, operators are using the micro insurance platform to introduce Nigerians in different geographical locations to insurance business transaction. Under the micro insurance initiative, government in collaboration with the industry operators have targeted that  before the end of this year (2015), over 10 million farmers will have access to insurance through Federal Government Agricultural insurance programme.

Managing Director of the Nigeria Agricultural Insurance Corporation (NAIC) Mr, Bode Opadokun said this is achievable before the end of the year.

Before embarking on the micro insurance initiative, NAICOM in collaboration with a German agency had conducted a study nationwide on why insurance consumption in the country is on its low ebb and discovered that lack of awareness and ignorance is the main reason for peoples failure to buy insurance .Before the study , it was generally assumed that poverty was primary reason for Nigerians’ apathy to insurance , but the study proved this wrong as people in the rural areas of the country when they received little education on insurance especially micro insurance with its tailored products to suit their needs embraced insurance.

Based on this discovery, the industry operators have insisted on mass education on insurance. This has seen them securing approval from Federal and state ministries of education for inclusion of insurance as subject of study in the curriculum of senior secondary schools in the country.

Institutions, which benefited in this regard included Ahmadu Bello University, Zaria, LagosState University, University of Uyo, University of Lagos, Niger Delta University Bayelsa, Federal Polytechnic Offa, Institute of Management Technology ( IMT)  Enugu, Evans Enwerem University, Owerri.

To ensure that they achieve huge success in this regard, the industry operators have focused on the use of massive product distribution channels to ensure that their products get to Nigerians at all levels.

This has seen them going into partnership with business operators in other subsectors whose products get to Nigerians en mass.

The operators have seen the mobile network telephone operators as their best partners in this regard thus attaching their products to the mobile telephone network and delivering insurance policies especially life insurance policies to the domain of the various telephone network subscribers.

For instance, Airtel mobile network is in partnership with First life insurance in distribution of its pady4life insurance product, MTN mobile network operator is in partnership with Mansard insurance in selling its life insurance protection plan tagged MTN yellow life, also Airtel mobile network is in another partnership with Cornerstone Insurance and microensure to sell its life insurance products. This is just but a few to be mentioned, others abound.

The essence of this is to bring insurance services closer to Nigerians and create insurance awareness among them as well as make them understand how it works and what they stand to benefit from insurance.

In his effort to ensure that insurance industry contributes its quota to the long walk of achieving this all important financial literacy among Nigerians, the immediate past commissioner for insurance Mr. Fola Daniel  after the official launch of the micro insurance initiative, released the guidelines as well as spelt out the modus operandi for the business especially the minimum capital base required to enter into the business.

In his bid to accommodate all and sundry in the insurance awareness programmme, he launched a special line of business for the Muslim faithfuls, whose faith runs contrary to conventional insurance.

This is tagged Takaful insurance, which is based on mutual benefit.
Apparently, aside creating insurance awareness among Nigerians, the micro insurance is targeted at growing the premium income of the industry through mass patronage of its products.

Having done all these, the former commissioner urged the industry to ensure they use the opportunity of the economic transformation and windows of opportunities opened to them through the market development initiative to grow their turnover by ensuring a major turnaround in their usual way of doing the business.

“You are all aware of the recent rebasing of the economy which now makes the Nigerian economy the largest in Africa and 26th largest economy in the world. This has however, placed enormous wake-up call on the insurance industry. With the old based economy, the sector barely contributed 0.7 per cent to the Gross
Domestic Product, GDP. With the rebasing, the contribution of the sector to GDP has dropped to 0.6per cent. This therefore calls for more dynamic strategies to deepen insurance reach amongst the vast populace’’.

According to him, the industry operators must as a matter of deliberate policy, come up with new ways of doing the business in order to achieve better result.
‘’Our marketing strategy must change; our product design and packaging must change; our approach to policyholders and their complaints must change and all hands must be on deck to ensure that the message of insurance is taken to the grassroots’’, the commissioner stated.

He said if the operators must move the insurance market from its present level to an optimal pedestal within the financial services sector, then, there must also be a consensus on how best to tackle the challenges facing the industry.

“We have a lot to offer but we seem not to be taking advantage of the huge potential before us. The fundamentals for thriving insurance industry are there in the country -a vast population, an active economy and a well-capitalised industry.”

He said the promotion of financial literacy in the country this time coincides with NAICOM’s focus on Micro insurance, Takaful and Agricultural insurance as a vehicle for reaching the teaming masses of the country.

Source: Thisday