Insurance business critical for diversification agenda
The Federal Government has identified insurance as a veritable sector that could promote the administration’s economic diversification agenda.
The Minister of Finance, Mrs. Kemi Adeosun stated this while delivering her keynote address at the recent West African Insurance Companies Association (WAICA) educational conference held in Lagos. She described insurance as a strategic venture to the society but lamented that the general awareness of the underwriting business is low.
“Policymakers, policyholders and the general public typically only value insurance once a loss has been incurred and compensation is expected. We must address this perception to enable positive and progressive development of the industry”, she said.
Represented by Director of Efficiency in the Ministry of Finance, Mrs. Patience Oniha, she pointed out that in more advanced economies, insurance companies are a major sources of long-term capital and have a dominant share in total financial assets. They provide funding for end-of-service indemnity, life insurance benefits, annuity and gratuity. They also increase the depth and liquidity in stock markets and bond markets. Insurance sectors of West African countries should be supported to replicate this and deepen their respective roles within the broader financial services sector.
“Indeed, there is a strong link between insurance market development and economic development. The commonly used index of measuring the development of insurance in an economy is market penetration which is the ratio of total insurance premiums to the Gross Domestic Product. Sadly, this is less than one per cent in Nigeria. As a government, we are committed to identifying the challenges and taking steps to address the current poor performance of insurance in the country”, the minister said.
She explained that It is on this premise that in February, earlier this year, I inaugurated the Consolidated Insurance Bill Review Committee in a move that seeks to make the bill conform to the ideals of contemporary insurance practice as well as facilitate public awareness and consumer protection. We are optimistic that the work on the bill and its eventual passage to law would positively change the face of insurance regulation and practice in our country, Nigeria.
The Minister called on the Nigerian Insurance Industry to take this opportunity to fully cooperate with the committee to come up with a draft that would be the impetus for rapid growth not only for their sector but the Nation and in particular all consumers of insurance services alike.
According to her, “you should always endeavour to reflect on the ideals of the founding fathers of this association and consistently assess performance to identify where remedial action may be required. A cursory review of the objectives would indicate success as far as regional collaboration is concerned. The achievement of the West African Insurance Institute (WAII) is a great example of this. The Institute has survived war, insurrection and uncertainty to continue to exist” Another notable achievement, she said, is the establishment of the WAICA Reinsurance Corporation Plc.
The resilience and tenacity displayed toward the formation of this company is commendable. I learnt the company has significantly boosted Reinsurance capacity in the sub-region. Despite this achievement, it is common knowledge that there is still a reinsurance capacity gap in our countries and the sub-region generally. I challenge you, especially our various regulators, to create the appropriate regulatory framework and incentives to attract the desired capacity to this sub-region. It is actions like this that would ensure success in a “challenged economy”