The Chairman, Nigerian Insurers Association, Mr Ganiyu Musa, who is also the group managing director of Cornerstone Insurance Plc, speaks with NIKE POPOOLA on major developments in the industry, among other issues.
Following the collapse of a high-rise in Ikoyi, Lagos State, recently, which led to the death of scores of people including the owner, were insurance operators able to confirm if the building was insured?
We did not get confirmation from any of our members that an insurance cover was provided. We wrote letters to them and so far, we have not got any response indicating that any of our members indeed provided cover for the building. From the responses, we did not get any indication from any of our NIA member companies. It’s a national catastrophe, if we can put it that way so clearly. We had an interest in following up on the impacts (of the building collapse) on our members and the industry. Of course, we don’t have any doubt (that our members will pay) if covers were provided; you know that insurance is a contract that is based on utmost good faith provided the client has complied with all the requirements and warranties in the contract. If they (requirements) had all been complied it, then clearly, there is no doubt that our members will pay. But like I said, it is something that will be fully examined if at all there was a cover; we will then need to examine all the conditions of the contract and ensure that the conditions have been fully met.
It is obvious that many buildings are not insured. What is the insurance industry doing to ensure builders take up insurance cover?
We are engaging with the authorities in a number of states especially Lagos, and the National Insurance Commission is also leading the charge. A few times, they have gone to meet with specific state governments or the Nigeria Governors Forum. Also, at the recent Chartered Insurance Institute of Nigeria’s professionals’ forum, where the Governor of Ogun State, Prince Dapo Abiodun, graced the opening ceremony, the issue was discussed and the governor promised full cooperation of the state in terms of the enforcement of all the compulsory insurances, and even pledging to put in place the technology and infrastructure that will ease that. The regulator and the operators are actively engaging the government, not just in Lagos, but across the country.
The insurance industry has been trying to attract governments’ attention and patronage. Recently, the sector made the Federal Government its patron. What impact do you envisage from this?
Conferring the title of Grand Patron on President Muhammadu Buhari is a good and welcome development which the industry will continue to cherish for a long time to come. Having the President of the Federal Republic of Nigeria is no mean feat and it attests to the highest level of recognition and approval or endorsement as the case may be. I believe same (the development) will have a positive impact on insurance business as it will encourage more government patronage and recognition, strengthen regulatory and capital requirements to ensure solvency and sustainability, and introduce reforms that will help deepen insurance penetration. It is very crucial to building consumer trust and public awareness, even as it will challenge the operators to act more ethically, among others.
The industry has introduced some initiatives to boost its development. How do you intend to implement these initiatives?
Several initiatives introduced by the industry and the regulator, the National Insurance Commission, are ongoing and they will be further strengthened to sustain the current momentum, including those brought by the recent African Insurance Organization conference that held in the country in Lagos, recently. These initiatives include development policy implications; a stronger and more cohesive policy and regulatory response, capital adequacy and solvency for successful operation of insurance businesses, supervisory cooperation, cross-sectoral issues, reporting timeliness and relevance, risk-based supervision and effective tools, and reinsurance supervision and mechanism to ensure that standards and guidelines are fully implemented.
How does insurance impact the economy and the various stakeholders?
The insurance sector makes an important contribution to the economic development and welfare of a nation by enabling risk transformation. In this way, the insurance sector supports investment, innovation and economic growth, thereby, ensuring a healthy and well-functioning insurance sector.
Insurance transforms accumulated capital into productive investments, mitigates losses, and promotes financial stability and trade/commerce which results in sustainable economic growth and development. Insurance provides safety and security to individuals and businesses. Insurance also provides an ideal risk mitigation mechanism against events that can potentially cause financial distress to individuals and businesses. Insurance generates long-term financial resources. The sector generates funds by way of premium from millions of policyholders. Due to the long-term nature of these funds, they are invested in building long-term infrastructure assets such as roads, ports, power plants, dams, and so on. They are significant to nation-building and employment opportunities are also created as a result. Equally, insurance provides support to families during medical emergencies. The well-being of the family is important, and the health of family members is the biggest concern for most. From elderly parents to newborn children, medication and hospitalisation play an important role in ensuring the well-being of families. Rising cost of medical treatment and soaring cost of over the-counter drugs are enough to deplete an individual’s savings. Anyone can fall victim to critical illnesses (such as heart attack, stroke, cancer, and so on) unexpectedly. Medical insurance is a policy that protects individuals financially against different types of health risks and with a health insurance policy, an insured can get financial support in case of a medical emergency. Insurance facilitates moving of risk of loss from the insured to the insurer. The basic principle of insurance is to spread risk among many people. Whenever a loss occurs, it is compensated out of corpus of funds collected from the numerous policyholders.
Nigeria recently hosted the annual conference of the African Insurance Organization. What impact do you see this making on the Nigerian market?
First, the conference was an opportunity for manpower development for participants via learning from paper presenters. It also afforded regulators across the continent the opportunity to review the regulatory frameworks across different regions and take some learning there. It was a marketing opportunity for companies and brands as well as an opportunity for peer review and standardising of processes. Additionally, it provided ample opportunity for foreign delegates to experience the warmth, hospitality, splendour, and rich culture of our country, thus changing some negative perceptions about Nigeria.
Insurance companies have so far paid over N9bn on #EndSARS claims? What impact is this having on the industry’s operations?
As an industry that was seriously impacted by the protest, the first year after the protests was an opportunity for us to take stock and flaunt our scorecard in the area of claims payment. What started as a protest against the Special Anti-Robbery Squad Police unit later snowballed into a crisis of unprecedented dimension with resultant loss of lives and properties. Following the huge losses suffered by businesses in the aftermath of the #EndSARS violence, the insurance industry, in line with its role of providing financial intermediation and restoring businesses quickly, moved in to provide the necessary cushion for those that have insurance cover and others who suffered losses to their businesses. The report shows that insurance companies settled 718 claims on vandalisation; 93 cases on looting; 113 on theft; and 136 on loss of cash. Also, three death claims were paid while claims were paid on other property losses; 99 claims were settled on malicious damage; eight claims on business interruption; 455 claims on burglary attack and 912 claims on fire and burnt site. We will keep updating our records as they come and when the process is brought to conclusion, we will inform Nigerians about it. Let me assure you that the insurance industry, in line with its role of providing financial intermediation and restoring businesses, will continue to provide the necessary cushion for those that have insurance cover and others who suffered losses to their businesses.
How can product innovation boost insurance sector’s patronage?
What has become clear is that product development can no longer occur in silos, with one function creating products for another function to sell. Insurers are determined to make every moving part of their business serve the customer, and what this means in concrete terms is that every division of the business has a contribution to make towards the creation of customer-centric products. Insurers are only just beginning to tap the opportunities for technology-driven product creation. However, the biggest problem these days is that the underlying products are not yet ‘digital ready’; although everybody is talking about digitisation and disruption and are modernising their core systems with huge investments in order to support these new trends, including even new ones. The biggest risk the insurance industry faces when it comes to innovation is not taking enough risk. True innovation requires experimentation, which most of the time results in failure. Insurance organisations are built to eliminate failure from their culture. Without failure, you can have no innovation. The CEOs demand a positive return on investment, they now need to seek out and understand what it means to have a positive return on risk. You don’t really have to invent new products in my eyes, you just have to make the existing ones easier and more ‘digital native’. Today’s products have been and are still created for non-digitals. And this situation not only makes new customer-facing digital processes complicated, it also makes core replacements and automation more complicated and expensive than necessary. Most of the innovation in product development will happen where smart connected devices drive new business models based on behavioural data. I particularly expect improvements in pricing.
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