The head of the Nigeria-based reinsurance company says that governments are failing to do enough to strengthen the industry and to encourage people to buy insurance products
Most cars owners do not have it. Plenty of small businesses lack it. A majority of people have not got it either. On the whole, insurance is not very common in Nigeria.
Nigeria’s insurance industry contributes less to GDP revenues than the Nollywood film industry
Expanding coverage will take a cultural shift from the government, those taking out policies and the insurers themselves, says Corneille Karekezi, who runs the African Reinsurance Corporation.
The informal sector remains a stumbling block for many insurers. “The bigger the formal sector you have, the more interaction there is with the banks.” Insurance penetration in the majority of African countries remains low.
The continental average penetration rate – South Africa excluded – is 0.6% for non-life insurance and 0.3% for life insurance, according to a report from audit company KPMG.
In Nigeria, the continent’s largest economy, insurance’s contribution to gross domestic product (GDP) hovers around 0.6% despite attempts to grow the industry.
“Insurance must be even smaller than Nollywood,” Karekezi jokes. But it is true, and the film industry is indeed contributing more to GDP, at 1.4%, according to data from the National Bureau of Statistics.
Recent studies found that only one out of eight cars in Nigeria is insured. It is a major problem for a country with poor roads and frequent car accidents.
Karekezi says that insurers and regulators are fighting back with a campaign to raise awareness.
“The National Insurance Commission (NAICOM) doesn’t have its own arms, legs and eyes.
Its heart is the culture, [and] the average Nigerian thinks that God will take care of the future. For now, NAICOM is just regulations,” says Karekezi.
He points out that while the average middle-class Nigerian may own a car, television and house, most lack insurance. “People have lost faith in insurers because they don’t pay.”
Karekezi argues that the insurance regulator and government should be more assertive. “How can we make sure that when we harvest [crops] we put aside some seeds for the next season? People don’t do that. You’ll need government agencies in the area to manage that risk [and] insurance against drought,” he says.
“You could impose insurance on people to whom you have given seeds, whether it’s a gift or donation. Intelligent and smart compulsory insurance will benefit people.”
But insurance companies would have to meet customers half way, and that would mean less paperwork and lower premiums.
Again, it falls to the regulator to make sure these processes are duly managed, he explains.
Karekezi says that African insurers can look to the continent for inspiration.
South Africa has developed a mature market with tailor-made products to suit a number of different demographics, he adds.
“There is insurance for funerals, people with diabetes and AIDS. They [insurers] are attacking the niches because the general public is insured.”
Nevertheless, the rest of Africa is attracting a lot of investment interest. A number of insurance companies are seeking to invest an estimated $3bn.
Despite much interest from abroad, Karekezi says, local companies are still dominating the market.
But companies can only do so much. Morocco’s government has a comprehensive five-year insurance development plan complete with targets.
The country currently has an insurance penetration rate at 3.1%, and companies such as Wafa Assurance and Saham are increasingly acquiring firms in neighbouring countries and across sub-Saharan Africa.
“Insurance development has to be a top-down approach,” he concludes. “It’s a macro thing, but unfortunately many countries do not think about that.”