Current capital for micro insurance is looking unrealistic - Thomas
Since the appointment of Sunday Thomas as the Commissioner for Insurance/ceo of the National Insurance Commission in acting capacity in August 2019 and his eventual confirmation by President Mohammadu Buhari in May 2020, a lot has taken place in the nation’s insurance industry. He is fast focusing on market development and growth of the sector. In this interview with Modestus Anaesoronye, he shares his vision and plan for the industry. Excerpt:
We are far behind schedule so we are doing a catch up. Some of the things we ought to have done have been delayed, so we are drawing them down from the drawing board to full implementation. I wouldn’t consider it as being fast. We are just trying as much as possible to keep up with our strategic document in the sense that we have set for ourselves what we want to accomplish this year and if we don’t start early it will be a challenge. The environment is changing and very frequently. What you can do today you don’t have to differ to tomorrow. So why can’t we do things that we have all it takes to do now. Of course, I took over in Acting Capacity last year and since then we just continued from where my predecessors stopped. We try to conclude those things that have been in the works and we are also looking at ways to see how we can put them into reality.
The potential of the insurance sector is huge. We have found ourselves where we are today not by reason of in action by my predecessors but probably the environment was not too conducive to get certain things done. The environment changes from time to time. So, we are presently leveraging on a fairly good environment to see how fast we can run. This is why its seems as if we are running so fast. Although the Covid-19 pandemic has since slowed us down, we are trying to do everything in our capacity to forge ahead.
Micro insurance is one key area the Commission has identified for development. But progress in this area seems slow having been in the works since 2010, we have only three registered micro insurance companies. Why is this so?
It is one of the areas we want to fast track the process. We have a couple of applications that we should be able to conclude soon. One thing is for you to initiate something; another is for others to see the viability of the vision. We have this but people seem to be catching up with us in terms of our vision and their understanding of these vision. For us, micro insurance in financial inclusion generally is the way to go. Financial inclusion is going to help us and it is going to drive penetration. I believe that with the way we are going about it, things will get better. We are trying to rejig the entire guideline to be more realistic. What we had before in the guideline issued about six years ago was the National, State and the Unit licensing of micro insurance companies. The amount of capital required for this with respect to some of the sectors is looking unrealistic and we may have to thinker with it.
So, are you considering reducing the amounts?
No, it can’t get lower because if you look at unit which requires N40 million or thereabout, what can it do when you want to establish a sustainable company. But it looked adequate as at the time it was conceptualised but obviously it is no longer adequate. The exchange rate was about n 160 to a dollar and now it is N380 to a dollar. This does not seem good to drive the business from a sustainable basis. So we are looking at it. So far, we have two that are States and one that has a National outlook which is Consolidated Hallmark. Already, the company has insurance culture. The National company is required to operate with N600 million and of course, it will not be adequate. So, we still believe that we need to do much more in microinsurance and financial inclusion in general, for us to get the desired penetration. We know that only 1.5 million Nigerians have one form of insurance cover or the other.
Has the figure changed?
Certainly, the figure has changed but not as substantial as it should be. With little enforcement that is being done on motor insurance for example, many are coming into the net. Of course, we need to do much more than we have ever done before because the number has changed significantly. You will recollect that in the last three years or so, we have been hovering around N350 billion to N400 billion premium. I believe that in the next 2years, we must make a remarkable change. If we cannot hit a trillion in the next two years, we should reach half a trillion. We must hit 50 per cent increase over what it is now. In which case, we should be talking of N700 billion instead of still dancing around N400 billion which is not progress. That is not my vision. Actually, we should be in the realm of a trillion naira in the 2 years.
Insurance regulators and stakeholders across the world have identified mobile telephony transaction as growth booster but this has been stalled in Nigeria due to prolonged discussions between concerned regulators. How far has NAICOM gone with this?
We are close to it. The Central Bank of Nigeria (CBN), the Nigerian Communication Commissions (NCC) and NAICOM have been meeting. Essentially CBN and NCC and of course occasionally, NAICOM is brought into the discussion. They are close to resolving this matter. I must also sound a note of warning that technology will not automatically translate to efficient service delivery in the sense that financial inclusion requires attending to the needs of the lower end of the pyramid. But how many people are actually transacting business using technology? Majority of them still try to go to banks. In which case, brick and mortar is still very relevant. Even as popular as banking is, you still find banks opening branches around despite being technologically driven they are. This is not to talk of a sector that is doing catch up in terms of trust. Will somebody in my village buy insurance using technology when he doesn’t know who he’s talking to, or where his money is going to and what value will they deliver in his hand. So, it’s going to be difficult. But as a distribution methodology, I go for technology. You can use it to distribute to those who already have knowledge of products, which is those who are conversant with the deliverables of insurance. Again, one other factor you will need to look at is the issue of financial literacy which is very low. Even an average Nigerian, probably well read, educated have the finance don’t even understand what insurance is all about. And that is why this year as a Commission and part of our development effort, is to carry out a lot of awareness creation. We will be quite heavy in creating awareness, selling the benefit of insurance on a wholesale basis. We will be visiting all the states. Plans are already on. If we can get an appointment with the governors, we’ll follow through with the mechanisms of the state and we will be able to sustain it. Because with what we have done in the past, the mechanism for sustenance was not put in place.
What are the mechanisms for sustenance?
First and foremost, we must have our offices in the places we want to visit. Secondly, relevant committees will be set up in the states. Three, there is a role unit that will monitor the performance in the state. With this of course, the mechanism of the state will be fully deployed for enforcement and we believe that is going to make a difference.
But some observers think enforcement has been one that the Commission has not been able to do
Well, when I hear this statement, I respond by saying that we must do this in a way that will still identify the fact that there is a difference between regulation and the job of the law enforcement agencies. We are the regulator and we have a responsibility for sensitising the relevant enforcement agencies. But we must do this in a way that will still identify that there’s a difference between regulation and the job of the law enforcement agencies. For example, NAICOM cannot go and say they are checking license or any other vehicle particulars. But it can sensitize the relevant agencies by collaborating with them to do just that. All these things we tend to do as part of our awareness creation. It is going to be on a sustainable basis.
It appears the Commission is going back to Market Development and Restructuring Initiative (MDRI)?
Yes. We are re-jigging MDRI for sustainability. We believe that MDRI is a good concept, well thought of and put together but we are enhancing it. Part of the enhancement is to get agencies of states involved and get the supply end of the team to be available because we don’t just want to cultivate the demand side but part of the supply side. This is why at one of the fora when I spoke to the industry, I told them they can create like a consortium if they think it might not be too profitable for them to have individual branches.