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SHAPING THE FUTURE OF INSURANCE
BUSINESS IN NIGERIA.
2013 C.I.I.N PROFESSIONAL FORUM PAPER.
THEME:
THE INSURANCE INDUSTRY IN MOTION-EMERGING
ISSUES FOR THE PROFESSIONALS.
4TH-7TH SEPTEMBER 2013
M.O. OYEGUNLE (BSC., MBA, F.C.I.I.N.)
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Distinguished professional colleagues…
It is indeed a privilege to lead this discussion and I want to thank the organizers
for the opportunity.
Let us pay tribute to the people who offered us today; from the humble beginning
of Insurance in 1921 when Nigeria had the first insurance agency in Lagos, our
doyens/fathers/elders who have contributed their own quota to give us the industry
we have today.
We salute them all.
We Salute Them All.
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The only way to control the future is to participate in shaping it.
We are here therefore to challenge each and everyone of us to start dreaming
and taking actions that will create a predictable positive future for us.
The topic is therefore not only a positive confession that there is a future but that
we have the priviledge to make or mar the future.
My job is to engage our thoughts on accepting that shaping the future of this
industry lies with each and every one of us and that however unacceptable things
may be today; our making conscious efforts to improve on the spot we are privileged
to occupy at the moment in the Industry, is the panacea for a better tomorrow.
THE FUTURE STARTS TODAY.
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As professionals, our calling requires that we continually acquire new
skills, knowledge and know-how, to keep up with the pace of growth in all
fields of human endeavors and meet up with the expectations of the society
from our profession.
We profess that we know Insurance, and with the speed at which
knowledge is expanding, we owe ourselves a duty to go beyond Mandatory
Continuous Professional Development (M.C.P.D) to remain relevant to our
callings. Challenging Chartered Insurance Institute of Nigeria to keep on
improving content and delivery and Self development activities are duties
we owe our generation.
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OUTLINE:
1.
What is the role / relevance of insurance in a society?
2.
How does the practical structural organization of our operations support our
service delivery?
3.
How relevant are we as an industry to the society?
4.
What are the critical factors that will shape the future of our industry?
5.
What does the future have in stock for each of us?
6.
Conclusion.
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WHAT IS THE ROLE/RELEVANCE OF INSURANCE IN A SOCIETY?
Insurance was invented by man to average out losses.
By bringing a group of people together, the larger the group the better, and making them
contribute a token amount of money regularly into a pool, each and everyone of them can
buy the psychological satisfaction and peace of mind insurance offers knowing well that
they will be compensated if the unknown actually happens.
While religion offers spiritual peace of mind, insurance is designed to give material peace
of mind.
A biblical example of what insurance is all about was what God designed for the
Israelites by instituting YEAR OF JUBILEE -Year of returning everyone to his possession.
(Leviticus 25:8-10).
After distributing the promised land to the 12 tribes of Israel, God instructed them that
every 50 years:
•
•
•
Debts must be forgiven
Slaves must be set free
Land must be returned to their original owners.
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The design therefore is to ensure that people keep their original possession and are
encouraged to create more wealth.
For professionals ,the challenge of the business is how to ensure that:
1.
Our operations indeed offer the peace of mind we profess. That, indeed compensations
are paid promptly, fairly and with little stress.
2.
Ability to manage people’s money prudently and invest wisely. The pool of other peoples’
money we manage is a sacred trust, to ensure compensation, expenses are met and
adequate reserves maintained for the future.
3.
Having the necessary pool to reduce the cost of operation per head. Insurance is based
on the law of large numbers with few exceptions. The larger the pool, the higher the
chances of achieving the predictable statistical ratios. The ideal is to have all insurable
citizens in the pool.
4.
If indeed Insurance is for the benefit of the citizens, then until all insurable individuals are
insured, we are not yet there.
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HOW DOES THE PRACTICAL STRUCTURAL ORGANIZATION OF OUR OPERATIONS
SUPPORT OUR SERVICE DELIVERY?
Industry Quadrants
A
Marketing and Sales
B
Management
C
Technical
D
Payment and
Receivable
Management
In the Insurance equation, the most
important person is the Customer, who pays
the bill. All the quadrants must work together
to deliver to the Customer; achieving this is
the only business management has and the
level of success in this translates to
profitability and survival of the organization.
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QUADRANT A
1.
2.
3.
4.
Marketing and Sales
Developing strategies
and outlets to reach the
Customers. These
include promotional
activities.
Developing skilled field
officers and support
structure for service
delivery.
Developing effective
customer relationship
management.
Developing review
system that captures
ideas, innovation and
growth opportunities.
QUADRANT B
Management:
1. Manpower
Recruitment/Developme
nt and Retention.
2. Technology acquisition,
deployment and regular
review to ensure
minimal disruptions,
maximal utilization and
productivity.
3. Constant review of
process to ensure
efficiency and
effectiveness.
4. Deployment of
appropriate
equipment/infrastructure
for best output.
QUADRANT C
Technical:
1. Product
development/offerings.
These includes
underwriting and
processing.
2. Risk information
gathering, assessment
and decision making.
These include risk
management activities
and reinsurance.
3. Policy information
maintenance and
update for ease of
renewal and cross
selling.
4. Prompt claims
settlement.
QUADRANT D
Payment and Receivable
management:
1. Ease of Clients paying
premium.
2. Back up operations of
capturing payments and
premium requests follow
up.
3. Premium outstanding
management.
4. Cash flow management
and investment activities.
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QUADRANT - A.
Marketing and sales:
1. Developing strategies and outlets to reach the Customers. These
include promotional activities.
2. Developing skilled field officers and support structure for service
delivery.
3. Developing effective customer relationship management.
4. Developing review system that captures ideas, innovation and growth
opportunities.
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QUADRANT – B.
Management:
1. Manpower Recruitment/Development and Retention.
2. Technology acquisition, deployment and regular review to ensure minimal
disruptions, maximal utilization and productivity.
3. Constant review of process to ensure efficiency and effectiveness.
4. Deployment of appropriate equipment/infrastructure for best output.
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QUADRANT – C.
Technical:
1. Product development/offerings. These includes underwriting and
processing.
2 Risk information gathering, assessment and decision making. These
include risk management activities and reinsurance.
3. Policy information maintenance and update for ease of renewal and
cross selling.
4. Prompt claims settlement.
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QUADRANT – D.
Payment and receivable management:
1. Ease of Clients paying premium.
2. Back up operations of capturing payments and premium requests follow
up.
3. Premium outstanding management.
4. Cash flow management and investment activities.
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Distinguished professionals, the quadrants are the summary of all that we do and
it is the same across the world. What makes the difference are inputs and outputs.
For inputs:

Skill of the operators (knowledge, experience and professional standing) if adequate
and current to deliver the expected service?

How relevant and modern are the tools available to the operators?

How conducive are the Legal, Business, social environment and other exogenous
factors?
For outputs:
Is the Industry giving the peace of mind, satisfactory service, reaching the critical
mass and delivering the expected financial returns?
Delivering these outputs are the challenges, which is what the future is all about.
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HOW RELEVANT ARE WE AS AN INDUSTRY TO THE SOCIETY?
Is our relevance a function of?
1. Delivery of society’s expectation?
2. Contribution of GDP?
3. Percentage of population we have reached and premium per head?
4. Automation of our operations?
5. Wealth creation activities i.e. investment, employment generation, return
on investment etc
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HOW RELEVANT ARE WE AS AN INDUSTRY TO THE SOCIETY?.....
While making reference to available statistics in our Industry, it can
only be for historical purposes since hopefully from 2012, we shall be
having figures with better integrity now that there is a common platform
for reporting (I.F.R.S) and NAICOM endeavour’s to confirm the integrity
of the figures.
Also, the distortions brought about by outstanding premium should
be reduced because of the recent enforcement of No Premium No
Cover.
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NIGERIAN INSURANCE INDUSTRY
Net Premium Income (Composite) in Nb 2007-2011
Yr
2007
2008
2009
2010
2011
Non-life
65.19
95.50
114.10
117.13
128.90
520.82
Life
14.75
29.96
33.74
37.98
52.49
168.92
Total
79.94
125.46
147.84
115.11
181.39
689.74
Growth rate
56.93
17.84
4.92
16.95
24.16
Source: National Insurance Commission
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Gross Premium Income (Composite) in Nb 2007-2011
Yr
Non-life
Life
Total
Growth rate
2007
89.10
16.27
105.38
-
2008
126.47
30.74
157.21
49.18
2009
153.13
36.83
189.96
20.84
2010
157.34
43.04
200.38
5.48
2011
175.76
58.00
233.75
16.66
701.80
184.88
886.68
23.04
Source: National Insurance Commission
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With N233.75b gross premium income in 2011 and approximately N270b
income for 2012, it is clear that despite the consistent growing of the Industry
gross premium income (not allowing for inflation), the Market Development &
Restructuring Initiatives (M.D.R.I) by NAICOM has not achieved the target of
N1.2 trillion premium income by 2012. (I encourage all of us to be familiar
with the document).
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One obvious challenge the Industry is facing is under trading. With more
than 50% of the Insurance Companies having GPI roughly 50% of their paid
up capital; (with high operational cost in the country), making necessary
capital intensive investment in technology / infrastructure for the future is
practically impossible .Desperation for survival is expected.
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The need to develop local capacity is indeed urgent; Catastrophic events,
natural disasters and Terrorism worldwide have made Reinsurance
Counterparty Risk a real issue and purchase of Reinsurance across the globe
a delicate business..
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Despite the under performance of the Industry, we must commend
NAICOM for the initiative which is part of the Financial System Strategy 2020
programme.
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While we need not discuss challenges of the Industry as at today; it is
obvious that the economic climate is changing and the recent achievements
in electricity generation infrastructure development, Tele communication and
C.B.N financial reforms are clear indications that in another 3 years, the
business climate should be more favourable. Those familiar with how the
mobile payment systems M-Pesa (launched in 2008) and Insurance version
called M-BIMA has aided Premium growth in Kenya will appreciate these
impacts.
WHAT ARE THE CRITICAL FACTORS THAT WILL SHAPE THE
FUTURE OF OUR INDUSTRY?
1.
Technology
2.
Innovation
3.
Know-How (Skill, experience, knowledge and exposure).
4.
Service Delivery
5.
Credit Economy
6.
Collaboration
7.
Legislation
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WHAT ARE THE CRITICAL FACTORS THAT WILL SHAPE THE FUTURE
OF OUR INDUSTRY?
1.
Technology:
- Processing
- Data gathering and mining
- Document management
- Flexible agency network
- Payment options and capturing
- Back end/front end activities
- Collaborative technologies
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2. Innovation:
Innovation is no longer about the periodic breakthroughs arising from research
and development efforts. Innovation itself is increasingly commoditized. Its about
harnessing ideas where they can be found and rapidly commercializing them. Its
about collaborating and co-creating solutions with colleagues and customs. Thinking
outside the box is not essentially necessary to give an edge again, collaboration and
being informed of what goes on world wide is the card to play.
3. Know-How (Skill, knowledge, experience and exposure):
The world has become a global village, not only are we competing within the
Nigerian labour market but across the world. Just like Americans woke up to see
Chinese and Indians taking over their jobs, we are prone too. With our population,
investors world wide will be interested in our market and they will hire man power
that will deliver from any where in the world. We are in the information age, what
you know, your competence and ability will determine your position.
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4. Service Delivery:
Note the influence of social media on changing behavior. Promptness,
convenience, friendly and welcoming in service delivery is the expectation.
Transparency, speed, excellent execution and personalization are now the
measuring parameters.
5. Credit Economy:
Availability of credit to individuals and business organizations with ease and
low interest rate is necessary to accelerate economic growth, particularly the
Mortgage Industry. Accurate population census and national identity card are critical
success factors. The review of the land use decree will also be an enabler.
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6. Collaboration:
In the world of technology, Cloud collaboration is the “in thing”, no one goes solo
again. We have a lot of room for collaboration on research and product
development- Microfinance, Agric Insurance, Health Insurance etc.
7. Legislation:
The impact of recent No Premium No Cover enforcement is a clear example of
what legislation can do to us. Most underwriters have reported better cash flow
position. What happens if the Third Party Insurance Act can be enforced? If
government can become a disciplined buyer and States and Local Governments
partnering with the Insurance Industry on specific products? Micro insurance,
Health insurance, Agric insurance and other products that will benefit the masses
will require government critical support for success.
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WHAT DOES THE FUTURE HAVE IN STOCK FOR
EACH OF US?
The future is always bright for the prepared. The common saying is that one is
lucky when preparation meets with opportunities. The good news is that Insurance shall
continue to develop to It’s full potential, the bad news is that what we know today may
not be relevant tomorrow. Technology will determine substantially the future of our
Industry and we all need working knowledge of it. Insurance and Brokerage as we
know it today may not survive in these forms for long, for the market is shifting to the
social webs where the Generation – Y are more at home. To be relevant even after our
formal careers, we must stay informed.
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In a study carried out by Accenture titled ‘ The high-performance Insurer of the future’, they
concluded as follows:
The insurance landscape is constantly in flux and the forces shaping the industry in the next
five years will differ from those that shaped it over the past few years.
In our analysis, we identified a set of forces which we believe will challenge the current
strategies of insurance carriers. Although these forces might not be completely new, what is
new is their intensity and the speed at which they will take effect.
These forces are:
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Shifts in growth from mature to emerging markets.
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Increases in the development and consumption of technology.
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An escalation of both risk and regulation.
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Changes in consumer behavior.
o
Changes in the competitive landscape.
These forces will create a sea of challenges in which today’s high performers and those that are
aspiring to be high performers in the future will need to navigate’.
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CONCLUSION:
Distinguished professionals, more than anytime in the history of our Industry,
action is required from each and every one of us. All aspects of the 4 quadrants of our
operations need be overhauled in all our Companies in line with current
developments. For our economic survival and that of our companies, we need to
collaborate technologically to move the Industry forward. The foreign companies are
gradually positioning themselves for the mass products. It will be unfortunate if the
current existing Companies lose out. To quote Mother Theresa, ‘Yesterday is gone,
tomorrow has not yet come, we have only today, let us begin’. We owe ourselves a
duty to shape our tomorrow, technology and service delivery are the tools.
I thank you for your attention.