By Nike Popoola, Punch

A major area where awareness is rising in the underwriting business is the development of micro insurance. NIKE POPOOLA writes on efforts geared towards developing micro-insurance products.

Innovative insurance products, which can help to solve some of the major problems that the low- income earners are facing , is a basic area where underwriters are asked to look into.

These products, which attract little premium but allow the policyholder to get claims of significant amounts, are described as micro insurance.

While these types of insurance products have been largely developed in foreign countries, local underwriters are currently looking at the possibility of bringing insurance closer to the low and average income earners through those means.

By developing the micro insurance segment of the industry, it is believed that the taking of policies by the public will be impressive.

The Commissioner for Insurance, Mr. Fola Daniel, has said that the commission is putting initiatives together to make insurance more appreciable at all levels.

According to him, the development of the micro insurance market is one of the objectives of the Market Development and Restructuring Initiative of the commission.

For this reason, he said that NAICOM was taking keen interest in its development.

To further underscore its commitment to the development of micro insurance in the country, Daniel said that NAICOM conducted a nationwide diagnostic study on micro insurance in collaboration with some organisations like GIZ, a German agency for sustainable development:, Access to Insurance Initiative and local consultants.

He noted that the group was divided into smaller teams with each team assigned to a specific region of the country.

The various teams, he added, had turned in their reports and NAICOM had already started the process of reviewing and analysing those reports in order to do the needful.

He said, “We have put in place a draft guideline for micro insurance business in Nigeria. The draft is being exposed to the industry, experts and other stakeholders for their inputs and contribution before the final draft will be drawn consequently and released to the market. We also intend to collaborate with other relevant regulatory agencies in this drive.”

The commissioner said that this was part of NAICOM’s drive to open up and develop the insurance market at the grass roots and by extension, increase the sector’s contribution to the Gross Domestic Product.

The Group Managing Director, Lasaco Assurance Plc, Mr. Olusola Ladipo-Ajayi, observed that the insurance penetration in the country, which is a measure of the relationship between premium earned and the nation’s Gross Domestic Product, remained at an unacceptable low level of 0.5 per cent.

He added that insurance density, which is the measure of per capital consumption of insurance services, was at less than $10 per citizen, one of the lowest among emerging markets.

Ladipo-Ajayi emphasised the commitment of stakeholders towards deepening insurance penetration in the country through awareness creation, and public enlightenment.

The Managing Director, Mutual Life, a subsidiary of Mutual Benefits Assurance Plc, Mr. Femi Asenuga, explained that micro insurance product, especially the life policies, generally had protection and investment features that guaranteed the policy owner or his dependants an assured sum of money at maturity date or if death occurred.

“For protection products, you pay a small premium for an agreed benefit over an occurrence mostly death. But most times, people don’t want to die before they get benefits. Because people also look for what they can get while still alive, life insurance also introduces investment policies,” he said.

For this reason, he added that insurers introduced many life policies that provided protection and investment plans combined.

The insurer advised that a person who was working and had assets but did not have insurance cover, needed to know that it was important that he should protect what he had.

The President, Queen and Kennedy Consulting Limited, who is also the immediate past Director General, Nigerian Insurers Association, Mr. Ezekiel Chiejina, observed that a major threat to the development of insurance in Nigeria was lack of awareness by the insuring public.

Chiejina said, “Creating the awareness and demand for micro insurance would involve a huge amount of funds and adoption of unconventional but effective communication method.”

He, however, added that this was something that required joint effort of the industry as no single insurance company could individually grow the market.

Chiejina said that micro insurance was the protection of low- income people against specific perils in exchange for regular payment of premiums proportionate to the likelihood and cost of the risk involved.

Chiejina said that micro insurance could cover different risks which included illness, death and property loss.

He observed that the poor and the low income people in the country lived in more risky environment and were exposed to numerous perils.

He noted that they needed insurance to protect them, alleviate their poor conditions of living, and where possible, move them out of poverty zone.

Chiejina noted that though, the micro insurance products were targeted at low-income persons, the market was totally ignorant of the insurance policy.

He said, “There exists a dormant grass-roots insurance market of over 120 million uninsured people in Nigeria, most of whom are low-income people. This dormant market can only be explored and exploited through micro insurance.”

He pointed out that for insurance companies to provide efficient micro insurance products and services, they needed to create new vehicles, new systems, new strategies and new business model.

He added that they also required partnership with the government and associations to drive the micro insurance products.

Chiejina, who noted that micro insurance had worked successfully in other jurisdictions, said that it could also work in the country.

The Deputy Director, (Auth and Policy) NAICOM, Mr. Leo Akah, said micro insurance is a low premium approach to insurance for those at the bottom of the pyramid.

Akah noticed that the innovative part of micro insurance is that it reaches an area of the population that is still deemed unbankable or physically unreachable to the normal banking sector.

He said, “Poor people face many risks that are beyond their control. They are often unable to cope with the financial implications of the death of a family member, illness or loss of income or property, and this perpetuates poverty and undermines asset information.”

According to him, the concern about the situation of less fortunate people nowadays is a global trend, not only due to humanitarian issues involved but due to the social, economical, political and even, the ecological consequences created by the dissimilarity and misery.

He said that this issue is aggravated when considering the effects of climate change by virtue of global warming where the impacts on needy people are likely to be even more devastating.

“It is on the above premise that micro insurance as an element of financial inclusion was brought to the front burner,” he said.

While explaining some of the characteristics of micro insurance, he said that it is relevant to the risks of low income households; it is accessed by low income people; it is at affordable premiums payable in small amounts; and it is clearly defined and simple rules and restrictions.

In consideration of the fact that the insurance gap in Nigeria is about 96 per cent, he said that one can conveniently say there is abundant opportunity in Nigeria for insurance growth, particularly micro insurance.

According to him, it is however believed that partnership between insurers and social organisations like non governmental organisations, would be desirable in promoting microinsurance by drawing on their mutual strengths.