Question: My son has bluntly refused to continue with a job of marketing insurance policies, after two years of post NYSC stint. Now retired, this is an industry I worked in for almost 30 years. I am yet to really understand his persistence in this decision, going by my experience. Is marketing of insurance policies in Nigeria really an uphill task presently? Please enlighten me further, to facilitate convincing him – Obafemi F.
As a father of young adults myself, I understand your concern. The truth is that your son may likely have very strong points, going by current trend in Nigeria. As this column is aimed at ‘oiling the hinges of marketing to keep it alive, from a Nigerian perspective’, providing few points here on effective parenting (between you and son) will be out of place. My written perspective on parenting is reserved for a medium elsewhere. However, what I have highlighted here will enable you understand your son’s stance, and maybe advice him more effectively as a father.
Without getting into the technicalities or workings of insurance (e.g. promise of indemnification, financial loss, portfolios, underwriting, policy, agent, compensation, etc), other readers should know that insurance is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss. It can be deemed to be the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment.
With the massive industry’s recapitalization directives (completed in 2010), to strengthen the financial capacity of insurance companies in Nigeria, under the watchful eyes of the industry’s regulator, the National Insurance Commission (NAICOM), players in the insurance landscape have been pruned to 71, from 114. Insurance is ranked next to banking in terms of years of operation in Nigeria (more than 90 years, while banks have existed here for upward of 118 years).
Obafemi, a major disadvantage in the patronage of insurance companies presently, has bearing on the obvious wariness of Nigerians towards insurance – Fallout of some activities of insurers in your days in the business.
As regards marketing insurance products, the basic principles of marketing (just like for marketing banking and other financial services) also apply. Even the well-known 4Ps as elements of marketing – product, price, place, and promotion – are relevant here. Components of marketing promotion (advertising, public relations & publicity, personal selling, sales promotion, direct marketing, and online marketing) also come into play for insurance.
Despite these, some of the problems of the insurance industry in Nigeria are as follows:
Delayed settlement of genuine claims; low level of regulatory compliance; absence of new products; delayed remittance of premium by intermediaries; inroad of banks into the industry; moral hazards and sharp practices; government’s policy inconsistency; weak regulatory measures; illegal commissions and rebates; and poor image of the industry. This last problem has made for shallowness of the market for insurance.
Considering that so much have changed between the socio-economic environment of your days in insurance business and now – The average Nigerian is considering the pressing needs of food and shelter, before giving any thought to insurance (Man never chop to keep money for insurance). Without even taking cognizance of prevalent general insufficiency of income among Nigerians to patronize insurance, what about the well-known conception that a typical Nigerian insurance company is never ready to pay in any event of sad occurrence? When compulsory, many Nigerians now prefer cheaper premium ‘to fulfill all righteousness’. Some are of the view that even with the government (the biggest consumer of insurance in the land), incidents of debts remain very high. It is alleged that government officials often prefer to divert funds meant for insurance to other uses. In a nutshell, there is high apathy towards insurance in Nigeria.
While researching for this piece, an insurance expert summarized the following as other problems of insurance in Nigeria:
- The industries which feed the short term insurance underwriting business are affected by adverse market situation (e.g. manufacturers).
- Long term insurance contracts, which are more rewarding are not really there. The industry is merely making do with short term insurance market (e.g. property insurance; compulsory life insurance; individual and other life insurance). These come at a time when even many marginally insured refrain from paying premium.
- Those long term business which typical insurance companies should rely upon (e.g. group life insurance, annuity insurance, investment related insurance) are far fetched. Who does not know that the rates of returns on short term insurance (often affected by commercial rate inflation index) are not quite profitable?
For ways forwards, I hope these will help:
- Through insurance education, the Nigerian public has to be enlightened to understand insurance. This must be tied to conviction that the insurance companies must meet their obligations to the client, through living up to billing in claims to mitigate whatever loss.
- The recent moves by NAICOM to enforce compulsory insurance products will likely stimulate the market, benefit insurance and the economy generally. These insurance policies – group life, healthcare professional liability insurance, builders’ liability insurance, occupiers’ liability insurance, and motor vehicle third-party insurance – will make Nigerians ‘remember’ insurance and subsequently patronize insurance firms.
- Insurers which sell policies directly (not using agents) can embark on marketing campaigns that highlight offers of lower prices. This should not dilute the relevance of insurance agents, with their improved and personalized service delivery.
- Insurance companies should pull resources together for joint advertising and other forms of enlightenment, to boost insurance awareness. Through campaigns of this type, promoters will save costs from joint efforts.
- Nigerians require to be encouraged (by NAICOM) to recognize and patronize the compulsory insurance schemes stated above. This can be achieved through various related programmes. If merely imposed on the people, many will seek likely short-cut measures.
- Underwriters should improve on their business practices, and spend more time on educating insurance consumers, on the significance of purchasing insurance products.
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