Buhari’s policies and insurance industry, a one-year assessment
A year after President Muhammadu Buhari took the oath of office, some of his policies either positively or negatively affected the insurance industry in the country. ABDUL OLALEKAN writes.
By the time President Muhammadu Buhari took the oath of office on May 29, 2015, the nation’s economy was heading towards recession. He was so unlucky that he inherited a volatile foreign exchange market, the price of crude oil, the nation’s major source of income, at its lowest ebb, dwindling foreign reserves, among others, leading to high inflation, thus, making the operating environment tough for everyone.
Being an import-dependent nation, more Naira was pursuing fewer dollars, and to address this, the Buhari-led administration, through the Central Bank of Nigeria (CBN) restricted 41 items from accessing foreign exchange.
The price of was below $50 dollar per barrel, thus, freezing revenues that ought to come from oil.
His policies put in place to address these anomalies, instead of quenching the fire, was further adding fuel into the already raging fire, the consequences of which Nigerians have to suffer for.
Of recent, the sudden increase in the price of fuel from N87 to N145, though, may yield positive fruit in the long term, but is currently milking Nigerians dry.
The prices of goods and services hit rooftop, as inflation rate reached a record 13 per cent, though salaries and wages remain stagnant. Hence, the disposable income of people shrinks, as the belt-tightening policies of the Federal Government continue.
Businesses, especially, the Small and Medium Enterprises (SMEs) are already feeling the brunt, as the operating environment becomes unbearable, leading to companies and individuals to cut spending.
This development did not leave insurance industry untouched, as insurance consumption of Nigerians drop drastically from last year to the current year, amidst cutting cost measures adopted by individuals and companies. And at a time insurance penetration ratio is at a meagre 0.7 per cent, the insurance industry is in for big trouble.
This current trend is leading to low demand for insurance products and services, a development that means, Nigerians are cutting their insurance spending while the hard times last.
The consequence of this is a light balance sheet, as insurers continue to struggle to accrue more premiums from both new and existing customers in a bead to survive in the market. The fact that insurance doesn’t enjoy good ratings in the scale of preference of the people means that insurance budget is now the sacrificial lamb for Nigerians to survive in this turbulent period.
And in a country where insurance acceptance is very low, compared to its huge population, experts said insurance firms should be prepared for the worse, although it is expected to get better as time progresses.
Already, companies like Consolidated Hallmark Insurance Plc, Mansard Insurance Plc, AIICO Insurance Plc and Custodian and Allied Insurance Plc that have conducted their 2015 Annual General Meeting (AGM), and they were complaining that the harsh economy crippled their profits while the experience of the over 50 remaining insurance firms in the country were not anything different.
Happenings in insurance industry in the last one year
Three months after Buhari took the oath of office, precisely in August 2015, he announced a new Commissioner for Insurance in Alhaji Mohammed Kari, who had been the deputy commissioner for insurance before his appointment.
The first hammer of the current administration landed on 108 insurance brokers in December, 2015, as the National Insurance Commission (NAICOM) delisted them, because their licenses had long expired and were not renewed, an action that caused uproar in the industry. Later, the commission asked each of the affected brokers to pay a sum of N2.5 million to salvage their licences.
On a negative note, the Lagos State Fire Service disclosed that 1,898 fire incidents were recorded in 2015 with billion of naira lost and 80 deaths. The records show that last year the state recorded 200 fire incidents over that of previous year, while most of these incidents were not insured.
The major landmark of Buhari’s administration in insurance industry was constituting the Consolidated Insurance guidelines review committee by the Minister of Finance, Mrs. Kemi Adeosun. The committee comprises of all arms of insurance industry, which are to come out with a harmonised insurance guideline that will be sent to National Assembly (NASS) for passage into law.
The unveiling of the Insurers’ Committee, just like Bankers’ Committee was a step seen in the right direction, as this has led to commencement of the Corporate Governance code in insurance industry, with Risk Based Supervision expected to follow.
Responses of Stakeholders
However, Nigerians are not finding it easy, as disposable income continue to drop on a daily basis. Mr. Lanre Sotunde, an insurance client said the policies of the current administration have made life difficult for the common man, while the elitists too were affected, as people have little or no disposable income, hence have little or nothing to budget for insurance.
He equally stressed that he was seriously considering suspending some of his insurances policies, although, he later weigh up the consequence of such decision to renew them to deny himself of so many things to be financially capacitated to do it. He disclosed that some people had suspended insurance, at least for now, until the economy is prosperous again.
While imploring government to weigh the consequences of their policies before making them, he added that the economy is currently regressing, saying nevertheless, the prophet who prophesized hunger will also be a victim of such prophesy.
President, Association of Registered Insurance Agents of Nigeria (ARIAN), Mr. Gbadebo Olameru, while speaking to Business247 said because what affects the economy affects every sector of the economy; the insurance industry is not isolated from the current financial crises.
“The little money in the economy made people have less disposable income, and this is reducing the level of insurance businesses underwriters are currently getting. People don’t have money to purchase insurance cover, while the existing customers are not finding it easy to renew their insurances. Operators, agents and all insurance stakeholders are seriously complaining of the hardship in the economy,” he said.
Since insurance is a business of integrity, he stated that the integrity of President Buhari, would in the long run, profit all sectors of the economy, including insurance industry, appealing to Nigerians to be a little bit patient with the current administration. Insurance operators, he pointed out, are optimistic that the industry will grow in leaps and bounds, because of the commitment so far displayed by the Buhari-led government.
According to him, “Nigerians should just be a little bit more patient that the change they are clamouring for will soon go round the entire sectors and the insurance industry will be more active to participate in economic growth and development.”
The set up of insurance guidelines review committee by the Minister of Finance, Mrs. Kemi Adeosun, he stressed, shows that the current administration is interested in insurance industry, hoping the ministry will ensure that the bill is passed into law, to change the landscape of insurance business in the country to the path of growth and profitability.
On her part, President, Chartered Insurance Institute of Nigeria (CIIN), Lady Isioma Chukwuma, said the industry was yet to feel the positive impacts of the Buhari-led government, because the country is passing through a tough time, and that people have no money to meet their immediate needs.
She noted that until the economy is buoyant enough, and that there is reduction in inflation rate and people have more disposable income, then, the impact of his policies would be positively felt.
“Where government should assist is in the area of awareness and sensitisation of the populace, because, it is when people are aware that they will buy insurance products and services,” she pointed out.
President, Nigerian Council of Registered Insurance Brokers (NCRIB), Mr. Kayode Okunoren, appealed to government to immediately commence the implementation of the 2016 National Budget which would definitely give succour to Nigerians. It is disheartening that up till now, at the expiration of the fifth month of the year, government has not started the implementation of the budget, he stressed.
Moreover, he said government needs to take insurance seriously in national discourse to create relevance for the industry.
Managing Director, Man-Mountain and Company Limited, Mr. Ayodapo Shoderu, called on government to embark on aggressive asset protection through public enlightenment about risk prevention and control in the country.
He challenged the President to start giving serious thoughts to strategies for growing the nation’s economy through the provision of infrastructural development and creation of jobs in order to enhance quality lives for Nigerians and by so doing increase their disposable income, so that people will have enough to budget for insurance cover.
Insurance industry in Nigeria, according to him, stands to play a catalytic role to national development if needed attention is given to it by the present administration.
According to him, “Insurance industry has the capacity to generate not less than 5,000 jobs annually, thus reducing unemployment rate greatly. I therefore suggest that General Buhari’s government should pay special attention to the insurance industry by eliminating all anti insurance practices across the strata of government. Among others, government must include insurance premiums in budgets of its agencies and encourage that all its insurances are insured against risks.”
The Managing Director, Jully & Partners Insurance Brokers Limited, Mr. Wole Adetimehin, said though the implementation of the No Premium No Cover has positively impacted the books of underwriting firms in the country, he is not too excited with the commitment of the Federal Government to abide by this provision.
He charged government to be responsible by ensuring that budget is passed on time, for underwriting of government’s businesses.
According to him, “Government, as the maker of the law, should be more pragmatic in ensuring that the provision of the law can be complied with, by themselves, setting a good pace. A situation whereby budget is usually passed late makes it difficult to appropriate certain things to the various parastatals and agencies. Is it that government agencies will not be carrying insurances until budget is implemented? The budget of the nation must be drafted at the right time, considered and passed into law such that appropriation can be done for insurance and other expenses.”
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