Leveraging micro-insurance to impact people’s lives

In this report, JOSEPH INOKOTONG writes that if Nigeria could find a way to make micro-insurance more affordable,this will have a huge impact on people’s lives as it is not just about providing financial protection for individuals and families, but promoting financial inclusion and empowering people to be in control of their own lives.

Micro-insurance is a genre of insurance that is designed for low-income individuals and families. It typically provides coverage for things like health care, life insurance, and property insurance.

Micro insurance has the potential of helping to grow a country’s economy by providing financial protection for those who would otherwise be excluded from the formal insurance market. This can lead to increased savings, investment, and consumption, which in turn can spur economic growth.

However, in Nigeria, the micro-insurance sector is still in its early stages, but it is growing rapidly. There are a number of challenges facing the sector, including low awareness and a lack of adequate regulation. Interestingly, there is also a lot of potential for growth, with a large and underserved population.

Experts say there are a few things that could be done to help the micro-insurance sector in Nigeria grow. First, in their opinion, there is a need to create a greater awareness of the products available and the benefits they offer. This could be done through education campaigns and working with local communities. Second, the need to put more regulation in place to protect consumers and ensure the sector is operating in a fair and transparent way. Also, and of utmost importance is the need for more investment to develop the infrastructure and technology needed to support the sector.

In trying to grow the sector, education and awareness should be the top priority. Without a good understanding of what micro-insurance is and how it can help, it will be difficult to get people to sign up for policies. It is also important to make sure that people understand the risks and benefits of micro-insurance so that they can make an informed decision about whether or not it is right for them.

In a clime like Nigeria where literacy is a big issue, it becomes imperative for the authourities to recognise that it is definitely something that needs to be addressed. But an important point to reckon with is the fact that even people who cannot read can still benefit from education about micro-insurance. For example, there could be either radio or TV campaigns that explain the basics of micro-insurance in a simple and easy way to understand. Better still, there could be community outreach programmes that use pictures or drawings to explain the concept.

In addition to education, this writer also thinks regulation is important. Right now, there are a lot of different companies offering micro insurance in Nigeria, but it is possible that not all of them are operating in a fair or transparent way. Without proper regulation, people could be taken advantage of or even scammed.

One way to develop the sector is to create a centralised database of micro-insurance providers so that people can easily find information about the different companies and the products they offer. This database may also include customer reviews and ratings, so people can make an informed decision about which company to go with.

It could turn out a daunting task in trying to appraise efforts so far made to develop micro-insurance in the country. Nigeria has made some progress in developing micro-insurance. For example, the National Insurance Commission (NAICOM) has been working to create a regulatory framework for micro-insurance, and there are now a number of private sector companies offering micro-insurance products. However, there are still a lot of challenges, such as low levels of financial literacy, lack of trust in the insurance industry, and high costs of distribution. Overall, it can be said that more needs to be done to develop micro-insurance in Nigeria, but there is progress being made.

The Commissioner for Insurance (CFI)/CE National Insurance Commission (NAICOM), Mr. Olorundare Sunday Thomas, in a recent seminar for journalists spoke on the state of micro insurance business in Nigeria. He said from available records, the performance of Micro-insurance is increasing including the supply side. “From the micro-insurance companies, what we have seen is an increase in patronage of low-income earners and other informal organisations to join the market.

“Recently, the key players who are main insurers are now also interested in micro-insurance as we have received applications for window operations from insurance companies, although there are no new products. There are a few challenges but the main challenge is networking as the infrastructure is not there due to the security situation to meet the rural areas so the investors will prefer to work in the urban areas.

“We are doing everything possible to make insurance available and we have licensed additional micro-insurance companies and products and we have seen a lot of improvements, especially in terms of numbers. We have a dedicated unit whose primary responsibility is to promote micro insurance and Takaful institutions”.

One thing that could be done to up the game is to increase financial literacy so that people have a better understanding of how micro-insurance works and how it can benefit them. This could be done through public education campaigns, financial literacy classes, and other initiatives. Another thing that could be done is to find ways to make micro-insurance more affordable for low-income families. This could involve reducing distribution costs, simplifying products, or subsidising premiums.

More worrisome is the fact that Nigeria is presently on a journey to do away with subsidies. In this regard, why would anyone suggest that the government should embark on another voyage of subsidy?

It is pertinent here to note that the key difference as it pertains to micro-insurance is that a subsidy for micro-insurance premiums would be targeted at a specific group of people – low-income families – who would otherwise not be able to afford insurance. Whereas a subsidy for either fuel or food, for example, will benefit everyone regardless of the people’s income level. Worthy of note also, is that it is important to avoid creating a culture of dependence on subsidies, but there is a strong case to be made for micro insurance subsidies.

In the same vein, a potential drawback to subsidising micro-insurance premiums is that it could create a moral hazard, meaning that people might be less careful about taking care of their health or property if they know that their insurance premiums are being subsidised. This could lead to increased costs for the insurance company which would ultimately be passed on to the taxpayers. Analysts say another potential drawback is that it could create a “welfare trap”, where people become dependent on the subsidy and find it difficult to get out of poverty.

In making a decisive decision likely to affect the majority of the populace, it is always important to consider the potential drawbacks of any policy, even if the benefits seem clear. For the development of the sector, micro-insurance subsidies are worth considering, despite these potential drawbacks.

In all these, it is important to remember that micro-insurance is not just about providing financial protection for individuals and families. It is also about promoting financial inclusion and empowering people to take control of their own lives.

If the country can find a way to make micro-insurance more affordable, it could have a huge impact on people’s lives.

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