While life insurance constitutes the larger portion of premium earned in developed economies, the sectors contribution in Nigeria is still very low.NIKE POPOOLAwrites on its challenges and benefits.According to experts, insurance thrives better in a country with a huge population. The rationale behind this aggregate opinion is that in such a large population the sector is able to set premium from different angles to build its pool of funds from the residents of such country.Out of this pool of funds, insurers are able to settle claims that occur, as it is not all insured policies that suffer losses. Also, these life funds are used to provide long-term funds for key economic and development projects in a country.However, this scenario is not the case in Nigeria. Despite the fact that the country has the highest population in Africa, it is ranked 15th in terms of positioning in insurance penetration on the continent.According to the latest statistics by the Secretary-General, African Insurers Organisation, Ms. Prisca Soares, South Africa has the highest insurance premium of $37bn and penetration of 13.2 per cent, respectively, in 2009.Namibia, Mauritius, Botswana and Morocco have insurance penetration of 8.4 per cent, 4.6 per cent, 3.9 per cent and 2.9 per cent, in that order.Kenya and Zimbabwe recorded penetration rates of 2.8 per cent and 1.9 per cent, while Tunisia and Cote DIvoire had 1.8 per cent and 1.7 per cent figures, respectively.According to the statistics, Ghana has 1.6 per cent penetration, while Zambia and Gabon both have 1.5 per cent insurance penetration each.These were followed by Senegal and Cameroon with insurance penetration of 1.4 per cent and 1.1 per cent penetration, while Nigeria was rated as having 0.7 per cent penetration.Experts have noted that the local insurance companies have often concentrated on underwriting corporate businesses for a long time, thereby giving little attention to the development of individual life policies. According to them, this has been the reason why the life business aspect of insurance has been suffering some setbacks.Also, statistics from the Nigerian Insurers Association for the year 2010 revealed that of the entire premium earned in the industry, premium from life business only accounted for just 16 per cent of the entire figure. However, experts have said that without coordinated development in this segment of the industry, the insurance sector cannot have any meaningful development.Life insurance can be explained as a contract between the insurance company and the policyholder to provide compensation to the holder or his beneficiary in the event of death, sickness or other situations covered in the contract.Life insurance is also structured to meet different needs, ranging from savings to investments, which can earn the policyholder some interest.According to the Managing Director and Actuary Serving Middle East, Africa and South Asia, Milliman, Mr. Debo Ajayi, an insurance industry cannot have any significant penetration, irrespective of its population size, without developing its life insurance segment.He says, Records have shown that in developed insurance sectors worldwide, life insurance usually contributes more to the total premium. No insurance industry can have any meaningful penetration without a deeper life insurance patronage.For this reason, he stresses the need for the country to grow more actuaries in its insurance sector, as they are the specialists in the development of life insurance products and strategies for growth. Currently, he says, Nigeria is deficient in the number of available actuaries.He notes that the 2011 guideline released by the National Insurance Commission requires all life underwriting companies to have actuarial professionals.Stressing the relevance of life insurance, Ajayi says if the companies are able to develop this segment, it will take insurance to the grass roots, boost premium and reduce the high incidence of rate cutting, which is experienced in corporate businesses.The Managing Director, FBN Life Assurance Limited, Mr. Val Ojumah, says life insurance can be marketed better by adopting the bancassurance strategy.He observes that this concept encourages the selling of banking and insurance products together, as insurance can be embedded in banking products and sold together.Ojumah says, You can utilise the network or branches of banks to sell insurance products, either doing that online or using the banking halls. For instance, when banks give out mortgage loans and customers come to the banks, they can also buy insurance because most people have bank accounts and insurance products can be embedded in the banks products.The Group Managing Director, Capital Express Assurance Limited, Mr. Tony Aletor, says life insurance policies are designed to proffer solution to individuals particular needs.For instance, he says, If a person buys a house and the loan has to be paid over a period of time, if he has a mortgage insurance policy and anything happens to him, it creates an immediate estate to pay off that loan, instead of the dependants looking for how to pay off.According to him, if a person takes life insurance, he will be paying a relatively cheap premium for a period, which will also earn some interests.If anything happens to the policyholder, Aletor explains that the dependants will be able to take his claims. For this reason, he enjoins members of the public to take life insurance because it is just the appropriate way to solve extended family problems.He notes that with civilisation changing the face of different societies, more people are concentrating on their nuclear family set up, which is making it less easy for the extended family members to get assistance.Aletor says, In Nigeria, we are fond of proffering curative methods, rather than adopting preventive method. Most children, who are supposed to be in school, are not. They take to crime because of the loss of the breadwinner, he says.If their breadwinners had taken insurance to protect such childrens education, he said, the situation could have been different, and crime would have been tackled from the root.The Managing Director, Niger Insurance Plc, Dr. Justus Uranta, stresses the need for breadwinners to protect the future of their families and dependants by having life insurance policies.He says, A parent should provide an enabling environment for his family, whether he is there or not. This can only be done by taking a life insurance cover. This will help to alleviate the suffering the dependants would have been subjected to.Uranta, who notes that many parents do not expect that any bad thing will happen to them, advises them to always make provision for tomorrow and unknown circumstances.The Managing Director, Crystalife Assurance Company Limited, Mrs. Seyi Ifaturoti, observes that many a time when life insurance is mentioned, people quickly reject death.For this reason, she explains, Insurance is not only about death. Insurance is about planning for your future, ensuring that if you are there or not, your children will still have the level of education that you want them to have.Most of the life insurance policies available, she says, surround all aspects of a persons life.There is the educational policy, which in the event of death ensures continuity in education for dependants, especially the children. There are investment policies in which you save and when they mature, there would be a lump sum, which may come in handy at the time you may need it. Again, maybe you want to start a business, your child wants to marry and the rest. Life insurance is all about planning for your future.There are policies you contribute to for a period of time, which earns interest. Your policy will carry a minimum sum assured, no matter what happens, Ifaturoti explains.
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