By Odimegwu Onwumere
Micro-insurance is not just a scaled down version of regular insurance… the product and processes need to be completely reengineered to meet the characteristics and preferences of the low-income market,” the Team Leader of the International Labour Organisation (ILO) Micro-insurance Innovation Facility, Mr. Craig Churchill made this comment in one of his public presentations.
The proposition by Churchill is what Nigeria has done through the National Insurance Commission (NAICOM), recently. There was the January 2019 micro-insurance guidelines issued by the NAICOM suggesting that unit micro-insurers must have minimum capital base of N40 million; general business arm was anticipated to operate with N25 million, and the life arm to operate with N15 million. After this notice, the NAICOM projected to grant a state micro-insurer license (to a unit micro-insurer) ahead of request following 36 months of triumphant business operation and approval by the Commission.
Capital base of micro-insurance outfits
The NAICOM had last year however lowered the capital base of micro-insurance outfits to make it easier for many investors to come in. But the revised guideline, pundits said, also classified micro-insurance operation into Unit, State and National License.
According to data, “For a National Insurer, such composite micro-insurance operator is expected to be capitalized to the tune of N600 million, while N400 million minimum capital base is needed from a General micro-insurance operators and N200 million for a Life micro-insurer.
“National operators are allowed to have presence in at least six states within the three geopolitical zones of the federation.
“For a State micro-insurer, the minimum capital base is pegged at NI00 million, while a Unit Micro-insurer investor must be capitalized to the tune of N40 million, with operation in one location within a local community.”
The Commission however granted approval to GOXI Micro Insurance Company Limited in February. What the approval means is that GOXI Micro Insurance Company Limited should voyage into the micro-insurance market as a state composite micro-insurance company. But this does not translate to, that the micro-insurance firm did not meet certain obligations before it was mandated to operate in the new capacity.
During the issuance of permission to GOXI Micro insurance, NAICOM's communication director, Salami Rasaaq said, “It is to operate only in any one location within a local community and the company shall prove to the Commission through their business plan that they are going to access the low income earners spread across the location within a reasonable time frame.”
It is without a doubt that Nigeria, as one of the low income countries that Churchill was referring to, has done the needful in order to help low-income households to prevent and mitigate risks that are associated with poor human families that include illness, disability, death, unemployment, and sundry. These families cannot manage consequences that are often associated with the risks they are unable to mitigate. However, there is not-too-much patronage of insurance in the country.
The not-too-much patronage of insurance in the country, experts say that this is as a result of financial non-inclusion that is replete in the country. The finance analysts traced a research, saying, “A survey conducted in Nigeria in 2008 by the Enhancing Financial Innovation and Access (EFInA), a development finance organization revealed that about 53 percent of adults in the country were excluded from financial services.
“The country showed promise at the initial stages, reducing the exclusion rate to 46.3 percent in 2010 from 53 percent in 2008. Two years later, the Central Bank of Nigeria (CBN) in collaboration with stakeholders launched the National Financial Inclusion Strategy aimed at further reducing the exclusion rate to 20 percent by 2020. However, the country had only achieved an exclusion rate of 41.6 percent in 2016, making its 2020 target unrealistic.”
A neglected vital means
Micro-insurance is regarded as a very vital means to help the low income families out their debacles. The study went further, stating, “Specifically, the CBN wanted adult Nigerians with access to payment services to increase to 70 percent in 2020 from 21.6 percent in 2010, while those with access to savings should increase from 24.0 percent to 60 percent; and Credit from 2 percent to 40 percent, Insurance from 1 percent to 40 percent and Pensions from 5 percent to 40 percent, within the same period.
“While progress, albeit slow, is being recorded in some areas, insurance has continued to perform poorly, with only 1 percent of the Nigerian population currently holding any form of insurance policy. The performance of the industry is disheartening, considering its potential and the fact that it started as far back as 1921.”
Importance of micro-insurance
Giving narratives to importance of micro-insurance, professionals' estimations are, “This method of insurance can protect against unexpected losses by pooling the resources of many to compensate for the losses of the few; the more uncertain the event, the more insurance becomes the most economical form of protection.
“Micro-insurance moreover, can break the cycle of poverty experience in Nigeria by providing low-income households, business and farmers with access to post disaster liquidity, thus protect their livelihoods and providing for reconstruction.”
Understanding the importance of micro-finance to the common man, the NAICOM also granted approval to Cassava Micro-insurance Limited to operate as State Composite Micro Insurance Company carrying out Life and General Micro Insurance Business, but in Lagos State only.
Rasaaq said, “Cassava Micro-Insurance is one of the successful company among several applications received in the Commission from Individuals and corporate entities requesting registration as Micro-insurance operators in Nigeria,” adding that this is in NAICOM's constant energy at intensifying insurance incursion and escalating insurance access point in the country.
This is happening in a country where a study last year revealed that Nigeria's financial inclusion was 58.4 percent, whereas the financial inclusion in Kenya was 75 percent.
Growth anchored by technology
Opinion leaders nonetheless said, “For areas that have witnessed impressive growth, the growth has been anchored by technology, particularly the rapid uptake of mobile telephone. However, even these areas are not achieving their true potential.
“In 2017, Kenya and Ghana processed $45.3 billion and $35.9 billion mobile payments respectively. In the whole of Q4 2017, Nigeria processed mobile payments that totaled N307 billion ($1 billion)."
It is therefore believed that the era when it was difficult to sell micro-insurance in Nigeria due to low expectation of mobile money is over, and insurance companies that once focused their strength on policies with higher premiums, will return to help the poor.
Odimegwu Onwumere is a Port Harcourt-based Journalist.