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?Govt Spending Will Spur Insurance Sector?s Growth?
« on: January 15, 2018, 07:37:37 AM »
For the insurance industry, 2018 may be the year to celebrate bigger feats. The Federal Government?s plan to bridge infrastructural gap and the recent positive projection for the country by the World Bank are enough a springboard to greater heights for the industry. The Managing Director, Law Union Insurance Plc, Mr. Jide Orimolade, in this interview with OMOBOLA TOLU-KUSIMO, sheds more light on this and other sundry issues in the industry.

The Federal Government budgeted huge sum for infrastructure in 2018. What impact will this have on the insurance industry?

It is clear that the government has been trying to rejig the economy. In looking at the 2018 budget, I would say that in terms development in the economy, there has been a recovery from recession. Things may not be rosy now in terms of the economic trend, but things will get positive soon for the country. I believe that the 2018 budget will assist the insurance industry. Government has been spending in the areas of infrastructure, creating jobs and putting food on the table for the masses. I recall that some of the policies made by this administration is that they want to feed most of the children in the public schools. For us in the industry, we believe that this will provide a lot of income.  It has boosted public and private partnership that is going on right now and I think going forward it will continue to happen. If you look at our rail system, the Chinese banks are providing the funding and because of the local content  in the country, they are not allowed to do insurance in their country. They are mandated to do their insurance here and this has created a lot of opportunities for the industry. For us at Law Union and Rock, part of the area we want to focus on this year is the public sector because we know that there will be a lot of demand for insurance. We are doing very well in engineering and in fact, leading in that area. We have been able to insure up to eight power plants in the Nigerian economy. Also, there is a gap in the power sector and government is looking at how to fill the gap this year. Government has already signed an agreement of about ?5.5 billion with Chinese government on Mambilla power plant project. This is an area that we believe will bring a lot of income in 2018.

How are you preparing to key into this window of opportunity government spending is opening up?


 
We want to do our retail business aggressively. In terms of technology, we want to acquire new software that will enable people to sit in the comfort of their offices or their homes to start and finish an insurance transaction. It will also fast track our claims settlement. We want our customers to sit in their homes and offices and send their claims. For instance, if a customer has an accident, he or she can take the pictures and send them; our in-house people can quickly adjust the claim, pay and before you know it, the vehicle is back on the road. We believe that the customer will be happy and even recommend us to families and friends. The only way insurance companies can advertise themselves in the market is  in the ability to settle claims, not just settling the claims but settling the claims on time.

Are you convinced  that such initiatives will change the perception of the public about the industry?

There has been record of some ills pertaining to the industry in the past. We are trying to correct it. The industry as a whole has embarked on a rebranding project. The Insurers Committee which comprises of chief executive officers in the industry are in charge of the project. At the last meeting of the committee, we agreed that we are starting the first quarter of this year by kick-starting the project. We are spending a lot of money just to send a positive signal to the market so that people can believe in insurance. It is only in Nigeria that insurance does not contribute much to the nation?s GDP, unlike in developed countries where insurance contributes a lot to the growth of the GDP. But it is a good thing that the government has been able to embrace insurance. I believe that the 2018 budget is tailored in the direction that it can support the industry to grow. Like I mentioned, for us at Law Union And Rock, we have identified the gaps as contained in the budget in various sectors. We plan to key into them to be able to achieve our top line and at the same time our bottom line for 2018.  There are two things in terms of investment that can make an insurance company to report a good bottom line. This is the underwriting profit and investment income. These two items, for us are very key. Underwriting profits is the core business profit and so we want to do our business in such a way that we offer professional advice to our various clients, settle their claims on time and also ensure that our rates are very competitive in the market. With this, our underwriting profit will rise while we continue to grow our investment to be able to make an appreciable income in our bottom line.

The World Bank has projected  2.5per cent growth for Nigeria this year. What does this means to your organisation and the insurance industry?

First of all I am hopeful that 2018 will be a better year for the country. The World Bank has been able to project this in terms of growth of the economy. I think it is positive and something that will reflect deeply on the industry. Presently, the oil price within the region is at $70 per barrel. And with the calmness from the Niger Delta, things can only get better. Interest rate has been low so manufacturing companies will be able to have access to loans from banks and this will definitely add positively to the sector.President Muhammadu Buhari,  in his first address, spoke on how he intends to close the infrastructural gap that exists in the country.  He mentioned roads, rail system, power sector as  areas of focus for his administration. I believe that by the time all of these are fulfilled, it will make the industry grow. Other sectors will also witness growth and will in turn impact on insurance arm of the business.

It is saddening that only 1.5 million out of 180 million Nigerians are insured. Do you see more people taking up insurance this year?


 
This situation is worrisome. But I believe that with the economy that is presently looking good, the number of people that are insured will increase. What we are doing on our part which I believe other companies are also doing is to provide tailor-made products that the consumers can embrace willingly. Some of us just look at the premiums written and number of policy holders that we have in our books. But part of the things that we need to do as insurance operators is to do a lot of publicity on insurance and its advantages to the people. We need to show how much progress we have made in the industry in terms of prompt payment of claims.

The issue of rate cutting has continued unabated and is slowing down the growth of the industry. Why has it remained so and what is the way out?

Rate cutting has been an issue in the market and it has been affecting our underwriting profit. We have not been making enough underwriting profit which is very key in the sustenance of our business. It is time as an industry for us to look at our underwriting profit that is going down as a result of the rate we charge on our various line of business. The rates are not profitable and when you are doing what is not profitable, I think the right thing to do is to adjust. For us at Law Union and Rock, our underwriting profit last year was about N1.27 billion, but it has taken a downward trend by almost 30 per cent this year. So we have asked ourself if we are charging adequate rate on the business that we take. Meanwhile, claims are really going up. The question is will I still be charging the same rate? The industry is facing a bigger problem on a global perspective. For instance, hurricane does not happen in Nigeria, but insurance companies abroad are charging us the same rate they would charge other countries in other part of the world. Once claims expense goes up, the reinsurers increase the rates charged and apply same to us. It does not concern them whether the company is in Africa or Nigeria. Presently, the reinsurers are complaining that they are not making profit from businesses that we place with them and they are putting a lot of pressure on us. They are saying that we want to kill ourselves in the market with the rates that we are charging and they are not ready to go through that path with us. For the various businesses that we have to put in our books, we have to be able to seek the consent of reinsurers. So for me, I think it is high time underwriters did something about charging the right rate. We have to adopt a rate that is competitive and profitable to move us forward in the market.

The National Insurance Commission (NAICOM) is trying to migrate the industry towards Risk Based Supervision (RBS). It has foreseen voluntary mergers and acquisitions as part of the change that will occur in the industry. Are we likely to see that coming from your firm?

I know that one item on the agenda of the regulator is Risk Based Supervision (RBS). Although they are still at the  the foundation level, they have not told us when the implementation will start. But I believe that once the implementation starts, everybody will look for capital that will sustain their business. We have to be proactive and not wait for NAICOM. As underwriters, we have to know if the capital we have is adequate for our business or not. I must know if I need to bring in investors or merge with another company. But for us, I think we want to grow organically. We don?t want a situation whereby we look at another company and say come and let?s merge. We will prefer a situation whereby we will get fresh capital into the organisation and then with that fresh capital, we can say that in general business we are solid. The area that we are looking at right now is how we can have a life business to complement whatever we are doing so that we can become a composite insurance company.

In 2012, your company?s retain earnings was negative. What strategies did you deploy to make your results positive?

When I came in 2012 as the MD, the company had a negative retain earning. That happened as a result of over N1 billion loss position. Currently the company has been growing consistently and progressively. As you know, if a company has a negative retain earning, as it makes profit in subsequent years, it begins to write off 15 percent of the company profit to the retained earnings. As at the end of 2016, we wrote a marginal figure into 2017 and as at March last year the negative retain earning has turned positive and as we speak now it is still positive. This is as a result of the efficiency that has been coming into the operation of the company since 2013 and we hope to continue in this regard. In 2012, things were also really difficult in terms of shareholders? funds. The company had about N4 billion shareholders? fund but  within the space of four years, we have been able to grow the shareholders? funds to about N6.3 billion. Our negative retain earning was at a loss position of about N2 billion in 2012 which made our retain earnings negative. But right now we are in positive position. We have been able to clean our books in terms of solvency margin. We have 200 per cent solvency compared to the paid up capital for general business. All these things were made possible because of the kind of board of directors that we have. We have guided our corporate governance carefully in the organisation. We also have a focused and hardworking management. So these are things that have been done. Our share price that has been trading at par of 50 kobo at the stock exchange for a long time has now grown to about 80 kobo. Our shareholders will be able to smile at the end of the year when they get dividend.

How would you rate agency system?

The agency system is a good system and if I rate it 50 or 60 percent, I might not have done right. The agency system has helped the industry to create employment for people who ordinarily could not have gotten jobs. We are providing opportunities for graduates and people alike who have competence in sales to provide such services to us for a commission. The agency system is a good system. We only need to fine tune it. We recognise the gaps that are in the agency system. We have seen situation when some few agents have tried to tarnish the image of the industry with some fraudulent activities. This is why we are not just taking people, we provide adequate training and carry out competency test and checks on them. This will ensure that the people we are taking in going forward will not be able to defraud us even when they are not working with us again. Part of the things we have done in our company to checkmate the problem is that we have put in place a proper customer service unit. This unit is to call each client the moment a sale is concluded. The unit through a customer service manager, sends messages and often speak with the client. We have put measures in place to ensure that we reach our clients ahead of their renewal. So the moment you have one Adebisi or Nkechi who is sitting on the other side of the telephone whom you know, it will be difficult for anybody with a fraudulent motive to defraud you. For instance, if the fake person calls you for a renewal of your policy, you have a place to verify. We will try and be ahead of them.

There is the belief that some underwriters still give excuses in order not to pay claims. What are you doing to ensure that people don?t get negative signals from the industry?

The issues that you seem to see among some companies in the industry are the fact that they don?t get their underwriting business process right. When you sell a product to a customer and you did not inform the customer well on the conditions attached to the contract, there is bound to be issues when it is time to pay claim. This is because he is going to tell you that he is not aware of the condition and would insist that you must pay him. There is a particular case of someone that wanted to export groundnut. There was delay while he was exporting and the groundnut didn?t arrive until six months after the due date. By the time it got to the point of destination, the groundnut was already spoilt and they didn?t even allow it enter the country of destination. It turned out to be a total loss for the owner of the groundnut. He consoled himself that he is covered. For us practitioners, delays are a standard exclusion. But the client was not aware and he was not given any policy document. So when he notified the company, he was turned down.

This is a person who was said to have borrowed money to pay for the insurance transaction. So for such a person, he will tell you that insurance does not work. If he has been informed, he would have taken informed decision on whether he should go ahead and do the contract or take additional cover elsewhere. For us at Law Union and Rock, we have identified the gap in the market and we ensure that even on third party cover, there is a bullet point summary of what is covered and what is not covered.  With this in place, when there is a claim, we will both be on the same page and there won?t be issues. This is what we do at our end and we rarely have any complaint. I believe that as an industry, we must live up to the expectation of the public in prompt claims resolution. It is better for us to practicalise what we are doing so that people can testify to it.

It helps even in the rebranding of the industry. It goes to show that we are serious. It shows that we are serious to grow our capital base. We are very liquid and we can pay a claim of N1 billion and even go to the reinsurance for recovery. We want a situation whereby our customers remain happy with us and we can get a lot of referrals from them. I believe that building the industry is in our hands, the operators. Outsiders can?t come and help us grow the industry. I also think that various bodies like the NIA, Chartered Insurance Institute of Nigeria (CIIN), Nigeria Council of Registered Insurance Brokers (NRCIB), Institute of Loss Adjusters (ILAN), Association of Registered Insurance Agents (ARIAN) need to be engaging ourselves on how to move the industry forward; how to do things in such a way that people will look at us and feel proud about the industry. This way, people won?t be forced to do insurance; they will take up a cover voluntarily. They will call to insure their gadgets, electronics, houses, cars among others. The upcoming generation will feel proud and say I want to work in an insurance firm without anyone forcing them.

There are issues of fake insurance certificates. What are you doing on your part to ensure that prospective customers are not caught in this web?

The Nigeria Insurers Association which is the umbrella body for underwriters, have done a lot with the creation of the Nigeria Insurance Industry Database (NIID). A lot of money and resources have been put into the NIID and all we ask of motorists is that they should double check that the policy is genuine on the NIID. They can also generate their certificate from there and it gives us more credibility in the market.

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?Govt Spending Will Spur Insurance Sector?s Growth?
« on: January 15, 2018, 07:37:37 AM »

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