Slow Adoption Of Digital Technology Cripples Insurance Industry Growth
By Ngozi Onyeakusi—The National Insurance Commission, NAICOM, has urged Nigeria’s insurance industry to brace up to new challenges posed by digital technology to sustain its operations and contribute to national development.
Speaking at the 2019 National Insurance Conference in Abuja, Commissioner for Insurance, Mohammed Kari, regretted that slow pace adopting digital technology has been bane to growth of the sector.
He sought the understanding of the industry to the wave of new reforms which he explained is a direct response of the disruptive impact on the insurance industry by a series of digital innovations in areas such as online sales technologies, machine learning, the Internet of things, advanced analytics and virtual reality, among others.
The Commissioner’s appeal was also supported by the call from president Muhammadu Buhari, who through his address at the conference urged operators not to work against the present recapitalisation introduced by NAICOM which is aimed at taking the industry to lofty heights.
The President, who was represented by the Permanent Secretary, Federal Ministry of Finance, Dr. Mahmoud Isa-Dutse, said at the ongoing programme with the theme: Disruption, Innovation and Business Growth, that the government will continue to support the industry to enable it contribute effectively to the growth of the nation.
He urged the operators not to fight the recapitalisation just because they could not raise the expected capital, stressing that the act to deepen insurance penetrations remains a responsibility to be carried out by all stakeholders.
Meanwhile, the Commissioner added that while the new technologies are already making it easier for consumers/policyholders to benefit from superior service and more choice as well as lower prices, there are corresponding challenges.
“Therefore, in order to remain relevant and become a critical contributor to the national economy, the industry must consciously be proactive and organized so as to take advantage of the opportunities provided by these disruptive developments while at the same time curbing their corresponding negative impacts.
“It is important to note that firms will only benefit from digital technology only if they embrace its potentials along the entire insurance value chain, including underwriting and claims management.
“This would therefore entail a rethink of the industry’s business strategy and alignment of its operational practices to contemporary economic context such as the Economic Recovery Growth Programme (ERGP) of the Federal Government, sustainable and inclusive insurance as well as exploiting the benefits of the implementation of the 2nd Phase of Market Development and Restructuring Initiative (MDRI), among others,” he posited.
Kari noted that from the regulatory standpoint, the need to exploit the opportunities of digitalization and to tame the cumulative consequence of inflation and devaluation of the Naira heightens the necessity for the ongoing reforms of the insurance industry such as, expansion of the insurance distribution channels, financial inclusion, corporate governance enforcement, market discipline, professionalism and the recapitalization exercise aimed at strengthening insurance institutions and increasing the spread of insurance in the country.
“Let me hasten to add that these reforms are in furtherance of the President Muhammadu Buhari’s administration’s determination to revamp the economy as encapsulated in the ERGP in order to ensure that the insurance industry becomes a significant contributor to economy of Nigeria,” he added.
IICC Highlights Gains of Recapitalization
From Ngozi Onyeakusi, Lagos
The Chairman of the Insurance Industry Consultative Council (IICC), Mr. Eddie Efekoha, has assured the recapitalization exercise presently going on in the insurance industry will bring adequate capital to the industry.
Efekoha gave the assurance at the 2019 IICC Media Retreat in Ijebu Ode.
He noted that some insurance firms over some years were unable pay dividend, adding that after the recapitalization companies will be strong enough to meet up such statutory obligation.
Efekoha, who is also the Chairman, Chartered Insurance Institute of Nigeria (CIIN) and Managing Director, Consolidated Hallmark Insurance Plc, applauded NAICOM for setting a new pace of recapitalization in the financial sector, he assured that operators will not go against the regulator because the consequences are too grievous.
He said shareholders seem not happy with the recapitalization requirement, but there is a limit at which operators can control other stakeholders like the shareholders and investors.
He said that while they cannot stop them from speaking their minds, whatever they have said do not represent the operators’/managers’ decision.
He said:“The wind of recapitalization is blowing. We recently heard that Ghana insurance industry has commenced recapitalization and the Central Bank of Nigeria (CBN) just last week also came up with its own plan. I think the NAICOM should be commended for setting the pace.
“I can assure you that as operators, we will not go against our regulator because the consequences of that are too grievous. However, there is a limit to which operators can control other stakeholders like the shareholders and investors. We cannot stop them from speaking their minds, but whatever they have said do not represent the operators’/managers’ decision.
“The reasons NAICOM gave for the recapitalization exercise are the same reasons CBN is giving which are the issues of exchange rate and capacity. If these are the main reasons for the recapitalization exercise, the truth of the matter is that the exchange rate that applied in 2005 to 2007 is not the same in 2018 and 2019. Secondly, if the exchange rate has changed, our ability to retain businesses has weakened. Should we enhance it? The answer is yes.”
In the same vein, the president, Institute of Loss Adjuster of Nigeria (ILAN), Alhaji Femi Hassan, said ILAN is excited about the recapitalization to take place.
“We are eagerly waiting for it to take place, because it will enable the operators to put some structures in place that will help to grow the industry. I know the operators want this recapitalisation to take place, but the investors who have put their money into the insurance companies are the ones kicking against it, but nevertheless, I am optimistic that in the long run, every party will see reason”, he added.