By Kunle Ogedengbe
Coordinating Minister of the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala was happy that insurance made it to the new gross domestic products of Nigeria in the rebased economy. This is not surprising as insurance contributes a meager unit of less than one per cent into the country’s GDP very unlike in the country that Nigeria displaced in the number one economy of Africa, South Africa where insurance about ten per cent into the GDP.
In the rebased GDP of Nigeria which is now $510 billion as number 26th in the world and first in Africa, the services sector where insurance is included contributes 52 per cent into the GDP but the particular contribution of insurance is still meager at N355.36 billion.
The direct cause of this is the little or non-acceptance of insurance by the Nigerian people. It is unbelievable that a country of 170 million people have meager people on insurance compared to South Africa with a population of 50 million people.
Many reasons have been adduced for this low level of insurance penetration in Nigeria. These include poor government patronage, inadequate marketing of the middle class, poor management capacity of industry pioneers, inertia economy, inadequate capital base and problem of bad perception.
Other reasons are unscrupulous behaviour of some underwriters, high receivables, poor pay and the consequent dearth of skilled workforce and inadequate investment in information and communication technology.
With these challenges, insurers need to transfer their negative perspective to a positive one. This paradigm change should involve changing hostility to sympathy, prejudice to acceptance, apathy to interest and ignorance to knowledge. By these changes, more people of the 170 million population will be bound to embrace insurance thereby increasing the sector’s contribution to the GDP from the meager less than one per cent possibly to double digits.
In this wise, the positive transfer or paradigm change will increase patronage of insurance which will lead to increased premium income for the industry and more profitability. This increase in acceptance will also lead to higher internal motivation for the staff of the insurance industry and not make the larger society not to keep seeing them as the poor cousin of the banking industry.
Furthermore, the changed paradigm will positively ensure that issues that surround insurance penetration into the larger Nigerian society are mutually beneficially managed. Such issues usually revolve round the technical nature of insurance. In most instances, insurance details are only understood by the insurers but with more acceptance people will be more willing to understand the technicalities and other demands of insurance. Even media owners will be motivated to devote more time and space to insurance contents. The same applies to government who appear not to be too keen on insurance as a critical player in the economy. It is only the rebased economy that captures insurance which was not always captured very as noted by Dr. Okonjo-Iweala.
The insurers will also gain more as the interaction and people’s acceptance will lead to more product development as another stream of insurance penetration and premium income generation. As a result, the industry will be more competitive and play the leadership role it is meant to play in Africa which led to the headquarters of the Africa Reinsurance Corporation to be based in Nigeria.
Obviously, the victim of low insurance penetration is everybody. Researchers are of the position that no economy can develop more than its level of insurance development. This is very apt and correct in the case of Nigeria as the country is fighting poverty, unemployment, inequality and external dependence; indices which the British economist Dudley Seers says must be moving towards zero if not zero for there to be development.
In the case of Nigeria, these indices need to be checked for the country’s development and transformation as aimed by the government of President Goodluck Jonathan. Here, insurance holds the ace and the people’s change of attitude to embrace insurance for it to increase its level of penetration in the society is a task for everyone.