Roadmap for Insurance Financial Inclusion

As we all recall, the National Financial Inclusion strategy 2012 was launched with a view to reducing the percentage of the excluded from 46.3% to 20% by 2020. Presently, 41.6% of Nigeria’s adult population is still excluded from financial services. Painfully, since the launch of the strategy in 2012, the level achieved in the insurance subsector has been poor. According to EfinA 2016 survey, the Insurance sector achieved just 2% from 2010 to 2016. The figure now cannot be higher than 4%, taking the best-case scenario. It is very clear that the Insurance Industry still has a long way to go towards achieving its 40% financial Inclusion target in 2020. It is therefore a welcome development that the Insurance Industry has now come together to articulate strategies for achieving the goals set for our sector come 2020/2021.

As we all know, financial Inclusion is one of the strategies for deepening insurance and reaching a large segment of the populace. Accordingly, the industry, in my view, should focus more on the retail end of the market that we have abandoned for many years. The Retail end is actually the future of the industry.

As defined, financial inclusion means that individuals and businesses have access to useful and affordable financial products that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way. Our role as an Industry is to include and insure every single person in the country anywhere and everywhere; whether in the villages, farms or in the marketplace.

The poor and low-income persons have challenges not only with the creation of wealth but also, with meeting their needs when an unforeseen incident occurs. This class of Nigerians are particularly vulnerable to financial risks when faced by events such as illness and incapacity to work or the loss of property. We must assist them to manage and overcome these risks.

To do this, we must come up with Insurance policies through research/survey, listen to our valued customers or the insuring public before rolling out products to meet their needs. We must take insurance to them in the comfort of their homes, shops, farms, etc.

THE JOURNEY SO FAR

Regulators’ Role
National Insurance Commission (NAICOM) has achieved considerable milestones with the compulsory insurance regulations as well as getting the insurance companies to adopt global best practices. NAICOM has a prominent role to play, like CBN, by setting direction for the insurance industry and developing the appropriate regulatory legal framework. There is no doubt that Micro-insurance products can offer a sustainable solution to the challenge of financial inclusion.

The Institute and Other Key Stakeholders
The CIIN and the Nigeria Insurers Association (NIA) have also been in the vanguard of aggressive marketing of the benefits of insurance to business and rural community. For instance, the Insurance Industry Consultative Council (IICC) was established as a uniform platform for intra-industry co-operation aimed at developing and marketing the industry to the under-served. Through this platform, adverts are made on behalf of all insurers for the benefit of the industry.

In spite of these achievements, the statistics above do not give reasons for us to cheer. I therefore recommend the following measures.

Innovative Insurance products for Town/Village/Club
The industry should strive to develop micro-insurance products that will meet the needs of rural folks. For instance, there are cooperative societies, town unions and clubs in the rural areas and even in the cities. Many of these associations were formed to support members who may have one distress or the other. Micro-insurance, is different from insurance in general, as it is a low value product, which requires different design and distribution strategies such as premium based on community risk rating (as opposed to individual risk rating), active involvement of an intermediate agency representing the excluded communities and so forth. In line with this reasoning, these community associations will provide the guarantees for the benefits of its members.

Engagement of foot soldiers
While it is fashionable to use information technology to reach mass and youthful audience in urban centres, such strategies may not achieve the same results in the rural areas where people may want to put a face to a message. It would be expedient to recruit, in various societies, foot soldiers that can help create the desired awareness in the rural areas. Such persons will be trained and posted to their areas of origin so that members of the community can relate to him.

Incentives to Companies with Rural outlets
As part of the strategies to encourage insurance companies to locate in rural areas, fiscal incentives in the form of tax holidays can be given to such companies for a period of say, 3-5years. This would afford them the opportunity to recoup their investments in such environments and also compensate for revenue/profit loss.

Impact of Technology
On a daily basis, technology is defining what we do and how we carry out our businesses. The impact of technology will continue to be felt. Financial technology and Artificial intelligence will continue to influence the number of people engaged in the sector as well as their skill set. The roadmap, going forward, must incorporate these developments and the industry’s expected strategic response.

Language of Insurance Policy
The industry must begin to simplify the language of insurance policies to make them more friendly and unambiguous. In addition, the documentation processes should be short.

How can the Industry Re-position for Financial Inclusion?
The Defunct Diamond Bank through their “Beta proposition savings account” by just pressing a code on your phone, one could open an account and transfer money. They were able to open account for 10 million customers within one year through the use of telephone, agency network, technology, financial literacy programs, etc.

Also, in partnership with MTN telecom, they had Diamond yellow account that was delivering value. Once you had MTN SIM, you just dialled and you open an account. Opening bank account without leaving your home. Insurance Industry can also do the same and even better.

CONCLUSION

Let me end this contribution by noting, in the words of Prahlad (2016) that, “the future belongs to companies who treat the poor well as their customers”. The poor, weak and vulnerable are the focus of financial inclusion. We must as an industry develop products that will meet their needs and reverse the loss of productivity to the economy. Their prosperity is the industry’s gain.