Managing Director/CEO, Legacy Insurance Brokers Limited, and visiting lecturer at West African Insurance Institute (WAII), The Gambia, Babatunde Thomas, in this interview, speaks on the economy, government’s plan to borrow unclaimed dividends and issues on the insurance sector. Sunday Ojeme reports
What in your opinion is actually responsible for the slow pace of insurance penetration in the country even with a population of about 200 million?
How can we use the total population as a base? Are the 200 million people working? Let’s look at those that are engaged and they have earnings. It is when you have earning that you can buy insurance.
Let’s look at the statistics of those who have earnings and the percentage of those buying insurance and that will help us to create what we really desire and to have the right data so that we can drive that and expand the penetration. Yes, we can expand it, awareness is one of it, two, is our culture, three is our faith attachment.
The Christian would say in the name of Jesus nothing will do me but it’s happening everywhere. Churches are being attacked these days. So we need to do serious orientation with the people of Nigeria to believe in insurance.
What is the industry doing to change the narrative?
Education trust and integrity, which is what is required. Let our promise be our bond and that will … some Nigerians are not educated. For the fact that you have gone to school does not mean that you are educated, that’s what we need, education. Compare the penetration now and ten years ago, of course there is an improvement, but it could be very slow but we’ll get there.
I have the belief that we will get there. We don’t have an educated population that is one. Two, we need to make people to trust us and for them to trust us our words must be our bond and claims schedule must be handled within a reasonable time.
The man you pay his claims within a reasonable time will educate people that insurance is real and then you begin to have that reputation and gradual penetration. Overtime, just a drop of water can make a mighty ocean; that is all we need.
Can we look at the industry outlook in 2021?
Yeah, the insurance industry outlook in 2021 is very important but before that we have to look at the pre-2021 events. The early 2021 events will have a serious impact on the insurance market and insurance industry as a whole.
You know in the pre-event we have three factors that really impacted on this industry in 2020. Talking about the COVID- 19, which affected the industry, but good enough it was affected the industry positively in the sense that we saw government agencies buying life policies and health insurance scheme in order to make provision for the front line workers in the health market most especially medical practitioners.
We saw over N5billion life policies last year. Equally, the effect on import and export; we know the mainstay of Nigerian economy is crude oil and since crude oil was not positively active in terms of revenue generation last year it affected the premium income insurance industry ought to generate from the movement of crude from one point to another in terms of marine insurance provision, that has its own side effect.
The same thing on marine at the period we learnt the vessels were stopped at their particular locations, they were not moving because of this COVID-19 effect because countries were afraid that any vessel could bring in their crews who are infected with the COVID-19 and nobody would want his citizenry to be so affected because of the financial impact on that particular economy.
So, it took sometimes and that e q u a l l y a f f e c t e d insurance business in that year. Because of that marine b u s i n e s s was not fully functional during that period. So, t h e r e was a stop in international trade during that period. But luckily enough here no insurance company, so to speak, had the financial loss in terms of the effect of COVID-19 on businesses.
Because if we had had a financial loss which we call pecuniary loss where insurance company was paying for loss of profit then there would be a problem. Pecuniary loss is when loss of profit is incurred as a result of loss in business.
We shut down for four months at home in Nigeria, and businesses were all shut down. Insurance companies were losing businesses and these were the negative impact. Now 2021, at the beginning of 2021 there was another wave of COVID-19 in 2020 rolled over to 2021 and it’s deadlier, so to speak. In fact, so many countries have shut down their airspace which m e a n s again that m o v e – m e n t o f goods and services by air is stopped.
Marine and aviation are affected. Premiums that are supposed to be generated by those markets will equally not be there. But there will be rise in demand for health insurance and life insurance. With that there will be revenue coming into the insurance market. Let’s look at what the government itself deserves to do.
The government of the day is borrowing to run the economy. And of recent they are equally borrowing monies from unclaimed dividends and equally they are going to borrow money from the proceeds of accounts that were not serviced and we know the implication about all these things….
Talking about borrowing, what is the implication of borrowing from unclaimed dividends?
Borrowing from unclaimed dividends means that people are going to suffer. The first question is why are people not claiming that dividends? Some people who bought shares years back have died. For the next-of-kin to access it he must have a letter of administration and letter of administration comes with a cost.
If you have about a N100,000 to claim and you are going to spend about a n150,000 to get it out, simple arithmetic, what do you do? You forget it. The system does not assist the people to access their funds when the owner of the fund dies interstate, that’s without a Will.
The government saw that window, it’s a form of borrowing without interest, give us the money and once you need it just call on us we give you back, but we know government process and for you to recover your money you know the process, it is not as easy as said.
How would the insurance industry benefit from this arrangement?
It is the government that will benefit from this arrangement. As far as this unclaimed dividends money from dormant accounts are concerned, insurance industry is not benefitting from it. But from the operation of the economy, if the government now uses this money for capital projects then the insurance industry will benefit from it. If the money is put into construction, for example, it will require insurance services for the construction.
There are compulsory aspects of insurance policies and the ones that are not compulsory but business requires that you do it, so insurance companies will benefit from that indirectly.
And that is what the government is trying do, let’s use this money to reflate the economy so that everybody in the community called Nigeria will benefit. You are not benefiting from it directly but indirectly.
So, indirectly the insurance industry will equally benefit. I see a brighter future that in the next one year insurance companies will do better in Nigerian market. One, there is that gap. So since there is a gap it means there is room for expansion. If you know how to do it rightly then you can tap into that expansion.
You mentioned three factors that really affected the industry pre-2021, but did not mention #EndSARS, what were those factors?
I mentioned the COVID-19, crude oil, the last one I did not mention is the foreign exchange. Yes, did the #EndSARS affect the insurance? #EndSARS affected the insurance positively. Before now did one ever think there would be an uncontrolled or unled people that have no leader that would create that kind of scenario in the Nigerian state?
And that happened and we lost a lot of properties, we had a large number of dead, who is paying for it? But if your property is affected be sure that you have benefit moving from insurance to your account and with this everyone is contemplating riot and civic commotion insurance.
The National Insurance Commission is recommending that we have a standalone policy to cover such risks. But again, they are going to come up with a guideline because we need to encourage our customers now that riot and civic commotion risks are very, very important and key.
What’s your view on the 2021 budget?
To be honest with you I have not read that document, Finance Act 2020, until I read it I won’t be able to take a position. But then, what the government is trying to say is believe us.
What we need to have with the government is trust. We are going to raise or borrow this money to provide these services, if you can trust them that they will provide it then we have a change. But if you trust them that they were going to provide it and they did not, then we have a challenge.
What is your take on the industry recapitalisation?
We have had recapitalisation for about two or three times and the purpose of that recapitalisation was to have a strong insurance industry that they will be there in times of claims.
That is the essence of recapitalisation. So that you can build your capacity not that you will bite and consume more than what you can chew. It’s capacity building. I know recently there was a court injunction about this recapitalisation.
What they are doing now is delaying the period when the recapitalisation will take effect because the economy is not right to drive money and that is the consideration of those that went to court.
But, by the time the judgment is taken some companies are prepared because they have to do 50 per cent by last December and do the remaining 50 per cent this year. Some of them are ready but for some that are not, they are buying that time to be able to sail through.
But why the bottlenecks if most of the operators are saying they are ready to meet the 50 per cent threshold?
All the operators may not be ready. Those that are not ready constitute the voice of the minority and their voices must be heard. That is the rule of law. If you feel your right is being trampled upon you have to go to the court and seek a redress and that is what they have done and the court will take a position. Once the court takes a position we move forward.