Insurance re-capitalisation may result in mergers —Standard Insurance boss

Standard Insurance Consultants Limited, an insurance broking firm, turned 40 last Monday. In this interview, its Chief Executive Officer, Dr Ahmed Olaniyi Salawudeen, speaks on the company’s strides over the years as well as critical issues affecting the insurance industry. Sulaimon Olanrewaju presents excerpts.

WHAT’S your assessment of insurance brokerage business in Nigeria?

Using insurance brokers as intermediaries by the public in Nigeria is still not popular. The services being provided by the brokers are still not well known probably because of perception or misinformation. Therefore, I believe that the Insurance brokerage fraternity will have to do a lot more with the present awareness of the benefits associated with the usage of professional brokers’ services in the industry.

Simply put, by practice, insurance brokers will not take fees from their clients; rather brokerage commission is paid by the underwriters with whom insurance business is placed. The brokers fraternity needs to make this well known to the generality of the public in Nigeria. We should let them know that the insured is not losing anything by going through an insurance broker.

In reality, the benefits to be derived by the public in arranging their insurance requirements through a qualified professional insurance broker are enormous. For example, the public will benefit from paying equitable premiums for the risks being carried by underwriters, and not only that, the responsibility of collecting claims from the underwriters lies largely with a professional insurance broker. The brokers are friends of the insuring public and their role should be seen as a symbiotic relationship between the insured and the intermediary.

NAICOM has asked insurance companies to recapitalize. How do you see this?

Ideally, any company in the insurance business must be highly capitalised. Therefore, the idea of recapitalization will help Nigerian insurance industry. At the moment, some of the insurance companies are not adequately capitalized and in the circumstance, there is a need for many insurance companies to be thinking of mergers. That is to say, some of the small-sized companies should come together and form a united front to be highly capitalized. Well-capitalised insurance firms are better positioned to mobilise funds which would be helpful for the economy.

The premium generated by insurance companies is invested in one form or the other through the banks. The fund provided to the banks enables them to lend to the public at a reasonable interest rate. With the fund, investment in communication, housing, industries, and other various infrastructure becomes possible.

Therefore, recapitalization of insurance companies is very important and in the right direction. It will be beneficial if the insurance companies and the banks play their role as it is being done in other civilized societies around the globe. Nigerians will be better off if things are done properly.

How does the recapitalization plan affect Standard Insurance Consultants?

Brokers provide professional insurance services and do not require high capitalization as they do not carry any risks. What is very important in brokerage business is the employment of qualified professional insurance personnel that will be good in the interpretation of policy terms and conditions. From our company’s point of view, what we have put in place is adequate professional insurance indemnity. This means that we have sufficient insurance cover in place so that in case we provide wrong advice to our clients whereby they suffer losses and they are unable to collect their legitimate claims, we can be sued for professional negligence. As far as SICL is concerned, we have over N1 billiion insurance protection from a very strong, reliable, and highly capitalized financial underwriter. That is all we need as a professional broker.

Why do many Nigerians refuse to take insurance policies unless they are compelled?

Two things: Ignorance of benefits of insurance and image of insurance. But it is only in Nigeria that people refuse to take insurance policies. Anything you do anywhere in the world you must have an insurance policy otherwise nobody will come near you. There was a tsunami in the United States the other time, insurance companies didn’t wait for people to come, they went to their clients to pay them claims. It is important to obtain insurance policies in case of any disaster.

For instance, if a person takes life insurance and dies prematurely, the insurance claim will cushion the effect on the dependants. But what happens if there is no insurance policy? For instance, if you go to the bank to take a mortgage loan, this also requires an insurance because if you take a N100 million loan and just paid N5 million. If you die who will pay the balance? Of course, the bank will take over the house from the family. In order to avert this, insurance would intervene. So insurance is very important in all facets of life.

What is the potential of the insurance industry in the country?

The potential is very great. Insurance thrives very well when the economy is good. This present government under President Muhammadu Buhari, to me personally, is doing very well because it is striving to diversify the economy. It is looking at other areas such as agriculture. A country that can feed itself like China would live in abundance. So, agriculture is very key and the Central Bank of Nigeria’s intervention in creating a department within the bank to look at this is commendable. For instance, if farmers are given loans, you have to look at the crop; it may do well or otherwise and insurance company would come in. Or if you have a poultry farm and there is a bird flu, the insurance will come in. Now, we are talking about mining which is new. Oil and gas has been there over the years. So, there is a great potential with the new focus on agriculture and mining. If properly done, insurance companies will generate a lot of premium from these sectors.

How do you see the attitude of Nigerians to insurance?

I can say from my experience as a practitioner of over 40 years that there is not much improvement in the acceptance of insurance in Nigeria. The reason is very glaring; the public perception towards the way insurance business is being conducted in Nigeria is such that Nigerians do not have confidence in taking insurance cover. The perception of many Nigerians is that insurance business is a “legalized robbery”. But this is not so.

Insurance business is an intangible product based on trust. Therefore, when a client who has paid his legitimate premium is unable to be compensated when he has claims, such a person will be dejected and disgruntled. From my point of view, the image of insurance generally has not helped matters in the development of insurance, particularly with the life insurance policies. However, this can be avoided by going through the channel of a professional insurance broker that can read the “small prints” of the insurance policies so that they can be interpreted logically in the best interest of the insured.

What are the effects of COVID-19 on insurance business in Nigeria?

Unfortunately, the emergence of COVID-19 has affected all insurance businesses dramatically around the globe, including Nigeria. The epidemic has opened a lot of Pandora boxes that are going to affect insurance businesses generally.

However, with what is in place at the moment, the insurance industry needs to be proactive and take decisive actions to ensure that financially, insurance cover is provided for those affected or will be affected by the novel corona virus. For example, insurance companies are known to provide medical checkups for their teeming clients when they are taking life insurance cover or some other contingencies. By these tests, it is apparent that the virus can be detected to save the lives of many people.

Again, insurance cover can be provided for individuals, groups and professional bodies. If this is done proactively, it will mean a lot of business for the insurance industry as a whole. The most important thing is to be proactive, think positively, and determine how this will be done to ensure that lives are protected and that financial benefits are provided in time for those who have taken insurance to cover death, burial, medical expenses and others by providing adequate insurance cover. Finally, technology has assisted in no small measure. Insurance business transactions can be done online, through video conferencing and others. Therefore business-wise, I believe the insurance industry will not be affected seriously because insurance cover needs to be provided on a worldwide basis. For every stage of our life, we need insurance.

How has your experience in the industry been over the past 40 years?

The good experience I have had and which is very important is packaging insurance products for individuals, corporate bodies, etc and that claims are paid as and when due. This is very good and I am so happy about this that Standard Insurance Consultants Limited ab-initio made this as a foundation and we pay attention to the administration of claims settlement from time to time. This aspect of honoring our obligations has been very good and productive and I am happy about that. This is where SICL is different from her competitors.

The bad and ugly side of it is the issue of the image of the insurance industry which as of now is at a low ebb. I believe with proactive actions within the arms of the industry, this image will be improved as we go along.

How do you see SICL in the next 40 years?

The future of SICL in the next 40 years appears to be excellent. Most importantly, our foundation of business conduct is based on trust, integrity, honesty of purpose, and we strongly believe in teamwork. We are disciplined professionals who follow the ethics and practice of insurance business to the core and we rely majorly on our clients as well as the underwriters. We hope to continue based on this foundation and this will take us to the next level over the next 40 years.

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