Experts in the insurance industry have charged weak operators in the market to embrace mergers and acquisitions (M&A) to form big-ticket firms that would compete globally.
The Group Managing Director/Chief Executive, Continental Reinsurance, Femi Oyetunji, warned that unless the number of insurance firms is reduced to 20 strong underwriting companies, the insurance market cannot compete with their international counterparts.
He said: “If we don’t reduce the number of insurance companies in the market, we are not going anywhere. My personal belief is that 15 to 20 well-capitalized, skilled insurance companies will transform the industry.”
He said he would like to see insurance companies for stronger synergy. He said the biggest threat at the moment is global players with large capital, adding that all that it takes to drive growth is here.
“We can see the danger, having seen the trend. Why we have not seen many of them at the moment is because of the economic situation. Once the situation improves, the big players from America and Europe will come in and dominate, and that is where the benefits will go. If the global players are based in the US, UK, or Germany, they will take the benefits to those places.
“What I will like to see is consolidation, having fewer insurance companies that have the requisite skills, the analytics, the technology and the products that people want. That is what will move the market from the current less than one per cent penetration to at least double of that size at first, then we can get to five per cent, ten per cent and more. Imagine the kind of industry we will have when the penetration gets to five per cent,” he said.
Also, PriceWaterhouseCoopers (PwC), a multinational professional services network of firms, last week, in their latest report titled ‘Insurance penetration in Nigeria’, observed that the Nigerian insurance industry is performing below its risk capacity evident by the low patronage of insurance services in the country.
According to the report, the insurance sector if successful will support development and growth in the economy, encourage savings and investment, aid job creation and growth in capital markets and financial assets.
The insurance stocks on the Nigerian Stock Exchange (NSE) are not performing well as they should, given the apathy of investors who believe that insurance firms are not well managed, thus affecting profitability.
Besides, from the regulatory issues which operators in the industry are grappling with, poor patronage of insurance in Nigeria could be blamed on relationship management by some insurance companies which sometimes are below par because an average customer simply wants to be comfortable.
Such relationship challenges, according to the report, have their basis in weak corporate governance and risk management framework which sometimes makes the companies seem unfriendly particularly when there are claims to be made to customers thus creating doubts about how well the insurance companies may be trusted.
“At the heart of this, customers often complain about the lack of flexibility and technology-driven innovation in terms of the kind of insurance policies and packages that meet today’s upwardly mobile audience of contemporary insurance,” the report said.
The report further explained the implications of these challenges on the industry are rife. In 2018, the Enhancing Financial Innovation and Access, EFInA report stated also that of the 99.6 million adult population in Nigeria, only 1.6 per cent have insurance covers even though nearly 40 per cent of them have access to financial services
According to PwC, lack of awareness remains a key barrier as a massive 77.2 per cent of the adult population is not aware of insurance. Although largely due to the knowledge gap, the low-income level of the citizens makes it difficult to be convinced of buying insurance on a risk that may not happen, the benefits notwithstanding. Essentially, there is an urgent need to address these issues and grow the insurance industry in Nigeria.
To this end, experts have said that insurance companies in Nigeria must be deliberate and diligent in addressing these issues to curate the lethargy in patronage.