Nigeria: How Mutual Benefits Created a Micro-Insurance Platform
Mutual Benefits Assurance is synonymous with micro-insurance in the Nigerian market. The Group Managing Director of the company, Mr. Akin Ogunbiyi tells the story of how his group became the champion of micro-insurance in the country. He spoke with
The renewed focus on micro-insurance, a specialised platform for the provision of insurance services, particularly to the poor, low income and non-salary earners, has truly pushed it above other issues in the insurance market globally.
Before micro-insurance became prominent in Nigeria, a few innovative operators in the country, ventured into retail insurance, designing and selling low priced insurance products, or better still “scaled down version of regular insurances”, with a view to shoring up their bottom lines.
With micro-insurance gaining ground in the Nigerian insurance market, operators and stakeholders agree that this is the way forward but many operators are confused and do not know where to start.
In the Nigerian insurance market, there were a few fore-runners and a champion of micro-insurance and review of their exploits would serve as a guide to some other operators to get their strategies right.
Fore-runners of Micro Insurance
In the last 10 years, some innovative operators developed various products and distribution channels in order to increase their market share. This propped up banassurance and retail insurance which many equated to micro-insurance before now.
When the International Labour Organisation (ILO) highlighted the necessary ingredients in products and distribution channels that could pass the test of micro-insurance, it then became clear that what many operators prided selves of having were retail insurance products and channels and micro-insurance.
Mansard Insurance Plc, formerly Guaranty Trust Assurance was among the first to launch retail life assurance products, particularly the one which highlighted the fact that in return for N6 premium daily, the insurer would provide life cover worth N500,000 for any individual.
Mansard then leveraged its wide bancassurance distribution platform and technology-driven operational system to deliver innovative products to the growing middle class in the country.
Sovereign Trust Insurance
In 2008, Sovereign Trust Insurance Plc (STI) introduced the Sovereign Wellbeing Insurance Scheme for the Family (SWIS-F) to ensure adequate coverage of the generality of Nigerians, whether rich or poor. The product, which premium is in the range of a few hundred Naira is still selling fast, particularly to people who would like to protect their household workers including drivers and maids, against unforeseen occurrences.
Micro-insurance and Alleviation of Poverty
The needs of the poor and low income earners differ in many ways from those of the middle class, rich and affluent in the society. Most importantly, they need protection for their work tools, unemployment protection, sickness cover and funeral insurance.
The Group Managing Director of Mutual Benefits Assurance Plc (Mutual), Mr. Akin Ogunbiyi reasoned that micro-insurance was the only way insurers could alleviate poverty, empower low income earners and give them a decent level of living. “Insurance is offering protection for both lives and properties against unforeseen incidents that put you back to the post you were before the loss. Micro-insurance is the insurances of the poor,” he said.
Putting micro-insurance in a proper perspective, the Team Leader of the ILO Micro-insurance Innovation Facility, Mr. Craig Churchill said: “Micro-insurance is not just a scaled down version of regular insurance… the products and processes need to be completely reengineered to meet the characteristics and preferences of the low-income market. It is not a specific product or product line. It is also not limited to a specific provider type. Micro-insurance is the provision of cover to a specific market segment, i.e. low income persons.”
The Mutual Group, led by its Group Managing Director of the company, Mr. Akin Ogunbiyi was the pioneer of micro-insurance and still remains the leading company if not the only operator doing micro-insurance in the true sense of it in Nigeria. Before then, Mutual had a retail insurance product, personal accident cover which goes for N1,000 for N100,000 sum insured.
On how the money spinning venture started, Ogunbiyi said after reading the book, “Wealth at the Bottom of the Pyramid”, he started thinking about how to deliver insurance services that actually meet the needs of people at the lower end of the pyramid, the poor and low income earners.
He recalled that the wherewithal including the product mix and the necessary skills to deliver this were not available and therefore, he consulted the International Cooperative Mutual Insurance Federation (ICMIF), the umbrella insurance company worldwide for micro-insurance services and you have over 66 countries.
“We sent our people ICMIF for specialised training and with its support we were able to come up with the necessary products and services that meet the needs of the common people. There was a product mix that brings out empowerment with which we were able to achieve the objectives of micro-insurance,” he said.
According to him, the group set aside funds to reach these people, sector by sector and set up cooperative movements for them. It also came up with a structure that made the groups manageable and homogenous, created a common insurable risk and designed common insurance products to meet their needs.
According to him, Mutual targeted poverty alleviation with micro-insurance by empowering the people, many of which were poor and not bankable.
“We brought them into homogenous groups, made them bankable and empowered them with access to little credits to increase their sales. We also educated them on how to make their sales better before providing them micro-insurance,” he explained.
Mutual Model Cooperatives (Tomato Sellers)
He recalled that the group organised tomato and pepper sellers at Oyingbo market into called Mutual Model Cooperative Society, adding that there were about 200 of such cell groups in the market with each cell having not more than 50 members.
On how this works, he said: “We give N500,000 or more to a group of 50 tomato sellers in any location to buy stock. If Mrs. A takes N20,000 worth of tomato and Mrs. B takes N10,000 worth of tomato, they sell according to their respective capacities. They return the capital to the common purse and keep their profit. We also let them know that for this empowerment, there is another aspect, insurance.”
Airport Taxi Drivers’ Cooperative
Seeking ways to alleviate poverty without endangering investments, the group in aligned itself with the worries of the Federal Airports Authority of Nigeria (FAAN) on the state of airport taxis. It partnered airport taxi operators by extending soft loans to them to enable them purchase new cars and repay over an agreed period of time.
The group invested about N630 million in this venture and the operators were able to acquire new cars for their business. In addition to making investment returns on the money invested, premium income is earned on the life and non-life insurances for the vehicles and their drivers.
Mutual Transport Cooperative (BRT)
With group partnered with relevant public transportation stakeholders in Lagos State to establish Mutual Model Transport Limited, a LAGBUS sub-operator which currently operating a fleet of 110 buses at the last count and invested N2.5 billion in this venture.
“We grouped the over 400,000 members of the National Union of Road Transport Workers (NURTW) across various garages in Lagos into cooperatives. Each member was to save certain amount daily and we empower them to buy BRT buses and repay both principal and interest over a period of time. All insurances on the vehicles come to the group.
Mutual Micro Finance Bank
The credits extended to all the Mutual cooperatives and daily savings of members of the groups is carried out through the Mutual Micro Finance Bank (MFB) Limited. The group acquired 80 per cent stake in an existing MFB with paid-up capital of N20 million and injected N680 million into it. Currently, the MFB has about 40,000 accountholders and all of them insured by Mutual.
“We have about 35,000 policyholders from that institution, which means we have created 35,000 new policyholders for Mutual Benefits Assurance,” Ogunbiyi said.
Safe Guard Insurance
Now to how the company achieves the original purpose of providing micro-insurance services to the low income earners, Ogunbiyi explained that the micro-insurance specialist offers petty traders a disability cover, Mutual Safe Guard Insurance, an all-risk policy that covers the tomato sellers for death and permanent disability for N100,000 arising from accidents and it covers the tomato they are selling on a reducing balance basis.
We did not only them bankable, we also introduced record keeping to them and for N100,000 insurance cover, we charge only N50 premium for three days cover, he said.
The Mutual boss also spoke on the claims experience on micro-insurance products saying “these N50 we have been taking are almost for free, in fact, we are the ones telling them when claims situations arise.”
“We have only paid one claim on this Safe Guard to a woman selling tomato that had malaria and collapsed in the market. We paid N4,500 for the remnants of her wares and N10,500 for the hospital bill t and if she had died, we would have paid a death benefit to her family for the N50 premium she paid” he said.
The Mutual Group
Mutual Benefits Assurance Plc is a composite risk underwriting group with 9 local subsidiaries and a subsidiary company in Liberia and Cameroun respectively. The subsidiaries include Mutual Benefits Life and General Companies, Mutual Benefits Assets Management Limited, Mutual Homes and Properties Limited, Mutual Micro Finance bank Limited, Mutual Model Transport Limited and TSF Securities and Investment Limited and Charks Investment Limited, Ogunbiyi, who clocked 50 today, is an Economist, consultant and insurance professional per excellence. He is a graduate of Agricultural Economics from the University of Ife, an alumnus of the Lagos Business School and the International Graduate School of Management, University of Navarra (IESE) Barcelona, Spain.
An Associate of the Chartered Insurance Institute, London, and the Mutual boss had his insurance training in NICON from where he moved to start the Finance and Insurance Experts Limited, a multi-disciplinary consultancy firm, as pioneer Associate Director/Chief Executive Officer. He also serves on the board of many other companies.
Meanwhile, the greatest strength of the Mutual group truly lies in micro-insurance, alleviation of poverty, empowering low income earners and insuring their financial risks.
Micro Insurance Potential Today, it covers over 500 million population today
Courtesy: Munich Re.
Mutual’s Micro-insurance Initiatives
|S/No||Details||Amount Invested||Policies Taken|
|1.||Airport Taxi||N630 million||NA|
|2||Mutual Model Transport (BRT)||N2.50 billion||NA|
|3||Mutual Cooperatives (Oyingbo Tomato Sellers)||N680 million||10,000|
|4||Mutual Micro Finance Bank||NA||35,000|