‘Why Nigerians lack trust in insurers’

‘Why Nigerians lack trust in insurers’

A lot is happening in the insurance industry despite the COVID-19 pandemic. The President/CEO, Standard Insurance Consultants Limited, Dr. Ahmed Olaniyi Salawudeen, speaks on why the public does not trust insurance firms, brokers’ role, recapitalisation, among others, in this interview with OMOBOLA TOLU-KUSIMO.

What is the attitude of Nigerians toward insurance in the last 40 years?

This question is very important judging by the attitude of the insuring public over the last 40 years that our company, Standard Insurance Consultants Limited (SICL), has been involved in insurance placements. My honest assessment and opinion as an independent gladiator is that there is not much improvement in the acceptability of insurance in Nigeria. The reason is very glaring. The public perception towards the way insurance business is being conducted in the country is such that Nigerians do not have confidence in taking an insurance cover. The perception of Nigerians with due respect is that insurance business in this country is a “legalised robbery”. Incidentally, this is not so. Insurance business is an intangible product based on trust.Therefore, when a client who has paid his or her legitimate premium and is unable to be compensated claims wise, such a person will be dejected and disgruntled. From my point of view, insurance image generally has not helped matters in the development of insurance particularly with the life policies. From my experience over the last 40 years, the public appears not to trust the companies because of the happenings in the marketplace. I believe many are perceptions, and some are real. However, this can be avoided by going through the channel of a professional insurance broker that can read the “small print” of the policies so that it can be interpreted logically in the best interest of the assured.


In addition, if effort is geared to improve the image of the Nigerian insurer, I strongly believe that there will be a lot of Nigerians who will agree that insurance is a better solution to the inherent risks that abound everywhere. My advice as always is that all the arms of the industry in the country, starting from the regulator, the risk carrier, the intermediary fraternity, the education sector, and others should come together as a block to put in place a blueprint that will ensure the improvement of insurance image in Nigeria.

How would you assess insurance brokerage business?

Generally, to my assessment, the provision of using insurance brokers as intermediaries by the public in Nigeria is still very far behind. The services being provided by the brokers are still not well known probably because of perception or misinformation. Therefore, I believe that the 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, brokers will not take fees from their clients, rather brokerage commission is paid by the risk carriers or underwriters with whom insurance business is placed. This doctrine has been in practice over centuries and I feel the brokers fraternity need to make this well known to the generality of the public. We should let them know that the insured is not losing anything by going through the medium of an insurance broker.

In reality, the benefits to be derived by the public in arranging their insurance requirements through a qualified professional insurance broker is 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 broker. In the circumstances, I think the Nigerian Council of Registered Insurance Brokers (NCRIB), the umbrella of insurance brokers association, should continue on a positive note to explain this to the public, particularly moving forward in the area of life insurance cover, which is very important to the economy of Nigeria. Brokers are friends of the insuring public and their role should be seen as a symbiotic relationship between the insured and the intermediary.

What is your view on NAICOM’s recapitalisation agenda?

This is a very topical issue in the insurance marketplace and surely anybody in the insurance business must be highly capitalised. Therefore, the idea of recapitalisation will help the industry. As at the moment, some of the companies are not adequately capitalised and in the circumstances, there is a need for many insurance companies to be thinking of mergers. That is to say, all the small-sized companies should come together and form a united front to be highly capitalised. For your information, in the early days of insurance in Nigeria, the companies were at the forefront of investing their insurance funds with the banks. So, the banks rely so much on the investment being provided by the insurance companies.

First and foremost, the premium being generated on a countrywide need to be invested in one form of investment or the other, and this is done through the banks. The idea is if the fund is provided to the banks, the bank will be able to lend the fund at a reasonable interest rate to the public. They will be able to lend to those who are in the communication, housing, industries, and other various infrastructural developments. The government and others have been talking about the “Housing for All” scheme since 2000. The idea is that if the insurance companies provide funds to the bank, the bank will provide these funds with reasonable interest, particularly to the mortgage banks. I remembered there was a special mortgage bank put in place by the government for this purpose long before the year 2000. However, it appears like any other thing in Nigeria, everything is now history.Therefore, the recapitalisation of insurance companies appears to be very important and in the right direction. It will be beneficial if the companies and the banks play their role as it is being done in other civilised societies around the globe. Nigerians will be better off if things are done properly.

The Commission has also been talking of recapitalisation of insurance brokerage companies.

For your information, brokers’ fraternity provides insurance professional services and they do not require high capitalisation as they are not carrying any risks. What is very important in brokerage business is the employment of qualified professional insurance personnel that will be a good technician 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 (Error and Omission). This means that we have sufficient insurance cover in place so that in case we provide wrongful advice to our mutual client whereby they suffer losses and they are unable to collect their legitimate claims, we can be sued for professional negligence. As far as Standard Insurance Consultants Limited (SICL) is concerned, we are having over a N1 billion insurance protection from a very strong, reliable, and highly capitalised financial risk carrier/underwriter. That is all we need as a professional broker.

What is the effect of COVID-19 on insurance business?

Unfortunately, the emergence of COVID-19 has affected insurance businesses dramatically around the globe, including Nigeria to which you referred. The COVID-19 epidemic has opened a lot of Pandora boxes that are going to affect the insurance businesses generally not only in Nigeria but globally. However, with what is in place at the moment, the 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 coronavirus. For example, companies are known to provide medical checkups for their teeming clients when they are taking life cover or some other contingencies. By these tests, it is apparent that the virus can be detected to save the lives of billions of people in the world. Again, the cover can be provided either for an individual, group, professional basis, or otherwise, and if this could be done proactively, it means a lot of business generation for the 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 the insurance to cover death, burial, medical expenses, and others.

What is the future of insurance business post-covid-19?

The way I see it, the future of insurance business post-COVID-19 in Nigeria and globally looks brighter. The issue at stake is that the companies are providing cover for the contingencies known and unknown and for the future. Therefore, with Covid-19, a lot of insurance covers are being developed to cater for virus and other viruses’ unknown to ensure that adequate cover is provided. For example, if there is an Insurance cover in place against COVID-19 and the breadwinner of a family dies due to coronavirus, if the deceased is having an insurance cover in place, the insurance company will be able to provide financial backing to the family left behind to ensure that the family will not disintegrate even though the breadwinner of the family is no more.

Another example of this can be drawn from mortgage protection insurance cover. In this case, insurance protection can be arranged for an individual or group of people through a bank, a mortgage organisation, or from his employer for building or purchasing a private dwelling by using the medium of a loan from these sources. In case of his or her untimely death, the mortgage protection insurance cover will be made available to liquidate the loan so that the family is not put in a precarious situation.Therefore, for companies providing cover, they are getting more businesses. So, as I said earlier, the future of the industry is still brighter post-COVID-19. The most important thing is for the industry to be proactive and let the public put trust in the business.

People are requesting for insurers to reduce premium because of covid-19. Is it the right thing to do?

Insurance has to do with issues of exposure of risk. The fact that there is Covid-19 makes the risk to become higher. Look at what is happening in United States of America with houses and shops being burnt. The insurance industry will be responsible and what is the contributing factor. So, I do not think it is right to reduce premium at this time.

What has it been like running a business for 40 years?

What has kept the company going is like a slogan of a bank: I keep to my word. My ‘A’ is A and won’t come back later and say it has changed to B. And because of that when people are coming to me, they know that they are going to hear the truth from me. Again, modesty and humility too has helped over the years in this business. So, I try to live above board and maintain integrity. I try not to be selfish. With that, things will come to you easily without struggling for it. Finally, if I have the means, I try to help my fellow human beings. Running a successful business in Nigeria is an arduous task but at SICL, we started 40 years ago on a very sound foundation. The basis of the foundation is Trust, Integrity; Selection of Underwriter/Risk Carrier; Remittance of Premium to Risk Carriers/Underwriter.

Trust in business is very important and is a key to success, particularly in the insurance industry because insurance is an intangible product. Therefore, trust is very essential. As a matter of fact, the foundation of the insurance business is based on the principle of utmost good faith (Uberrimae Fidei). Also as a matter of interest, our foundation is based on proper selection of underwriter or risk carrier, assuring that any risks passed to us to provide cover is arranged with a reputable company that in case of an insured event, claims are promptly settled. Therefore, the selection of a financially sound underwriter or risk carrier who will be able to pay claims as at when due is very essential. We also ensure that premiums paid to us by our clients are remitted to the companies as soon as same is collected notwithstanding the 30 days of grace stipulated by the Insurance Act. With the above criteria, we have been able to run our business effectively, and happily our business retention as of today is about 95 per cent.

What is the role of a broker when people can walk into an insurance company and buy any product?

Insurance business is a three legged race. You have the client on one side, you have insurance company and then the insurance broker who will look into whatever policy insurance companies have all over the world. Insurance companies have small prints which is used to replicate claims and that is why broker look at it and they can now see what claim is to be paid. This duty is free of charge to you because by tradition the broker gains their commission from the insurance industry. So the service of a broker decreases your premium and doesn’t add to it.

If you check our company record, the business retention is over 95 percent because we have a very robust claims collecting department. And this is also one of the reason why recapitalization of the insurance companies is very important. Any risk carrier must be financially sound. They must have enough capital. It will be good for small insurance companies in the industry to come together and merge and form a very good viable company that can weather the storm.

But insurance brokers don’t need recapitalization because we do not carry any risk. All we do is advise our client and if a client loses money because he is not properly advised, we call it error and omission. So clients are unable to get their claim, they can sue the broker for error and omission and that is where professional indemnity cover comes in to protect the insurance broker.

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