Insurance as an Engine of Insurance as an Engine of Growth and National Growth and National

Development – Development – Challenges of the Present Challenges of the Present

and Futureand Future byby Rotimi OkpaiseRotimi Okpaise

Source: Nigerian Insurers Source: Nigerian Insurers AssociationAssociation

Trend in Insurance Net Premiums

-

10,000,000

20,000,000

30,000,000

40,000,000

2000 2001 2002 2003

Life Non-Life

N’000N’000

Page Page 22

Growth Rate in Growth Rate in Insurance Insurance

Net PremiumsNet PremiumsYearYear LifeLife Non-LifeNon-Life TotalTotal InflatiInflati

onon

20012001 37.0%37.0% 37.8%37.8% 37.6%37.6% 18.9%18.9%

20022002 41.0%41.0% 20.4%20.4% 25.4%25.4% 12.9%12.9%

20032003 18.0%18.0% 35.9%35.9% 31.0%31.0% 14.0%14.0%

Source: 1. Nigerian Insurers AssociationSource: 1. Nigerian Insurers Association 2. Central Bank of Nigeria2. Central Bank of Nigeria Page 3Page 3

Source: 1. Nigerian Insurers AssociationSource: 1. Nigerian Insurers Association 2. Central Bank of Nigeria2. Central Bank of Nigeria

Page 4Page 4

Growth Rate in Insurance Net Premiums

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

2001 2002 2003

Life Non-Life Total Inflation

`

Insurance Premiums as a Insurance Premiums as a Percentage of GDP in 2004Percentage of GDP in 2004

%% World World 7.99 7.99 Industrialised NationsIndustrialised Nations 9.02 9.02 Emerging MarketsEmerging Markets 3.94 3.94 AfricaAfrica 4.89 4.89 South Africa South Africa 14.00 14.00 ChileChile 3.50 3.50 KenyaKenya 3.00 3.00 NigeriaNigeria 1.0 (approx) 1.0 (approx)

Source: Swiss Re Economic Research and ConsultingSource: Swiss Re Economic Research and Consulting Page 5Page 5

Common Feature Amongst Common Feature Amongst Nations/Regions with High Nations/Regions with High Penetration Levels are:Penetration Levels are:

Strong Social and Economic Strong Social and Economic Policies. Policies.

Presence of Strong InstitutionsPresence of Strong Institutions

Relatively High (Disposable) Relatively High (Disposable) IncomeIncome

Page 6Page 6

Nigeria – Current Nigeria – Current ChangesChanges

Pensions Reform ActPensions Reform Act Investible Funds @ 01.01.06 plus Investible Funds @ 01.01.06 plus

contributions thereaftercontributions thereafter Effects on economyEffects on economy Non Life opportunitiesNon Life opportunities

Compulsory Group LifeCompulsory Group Life

Introduction of Annuity BusinessIntroduction of Annuity Business

Page 7Page 7

Current Changes Current Changes …contd (i)…contd (i)

Privatisation Privatisation Leading to the revamping of ailing Leading to the revamping of ailing

critical industries and\or enterprisescritical industries and\or enterprises New employmentsNew employments Insurance opportunities/needs (e.g. Insurance opportunities/needs (e.g.

Steel Industry, NA vis-à-vis Virgin, Steel Industry, NA vis-à-vis Virgin, Conoil etc).Conoil etc).

Other ‘Reforms’Other ‘Reforms’ e.g. e.g. Banking Capitalisation may lead to Banking Capitalisation may lead to

increased consumer banking which will increased consumer banking which will translate to increased personal lines translate to increased personal lines insurance (Credit Life, Motor, insurance (Credit Life, Motor, Mortgage, Household etc)Mortgage, Household etc)

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Current Changes Current Changes ……contd (ii)contd (ii)

Other Reforms (cont)Other Reforms (cont) Anti-corruption/Money Laundering Anti-corruption/Money Laundering

laws – may assist in developing the laws – may assist in developing the ‘mind set’ for good ethics in ‘mind set’ for good ethics in institutional financial management.institutional financial management.

The effect of this should not be The effect of this should not be underestimated as it could lead to the underestimated as it could lead to the retention of a significant amount of retention of a significant amount of funds on our shores which will help funds on our shores which will help depress borrowing costs and assist depress borrowing costs and assist industry and SME expand – bringing industry and SME expand – bringing along insurance opportunities. along insurance opportunities. Page Page

99

Current Changes Current Changes …contd (iii)…contd (iii)

Our current low business Our current low business penetration level, coupled with penetration level, coupled with potential upturn\expansion of the potential upturn\expansion of the economyeconomy

– – makes one believe that the makes one believe that the Insurance Industry is poised to Insurance Industry is poised to significantly expand its business significantly expand its business volume and, consequently its volume and, consequently its sphere of influence in our sphere of influence in our financial community.financial community.

– – but CHANGE is needed. but CHANGE is needed. Page 10Page 10

CHANGE is a comprehensive CHANGE is a comprehensive concept and I will only highlight concept and I will only highlight a few on the next slide.a few on the next slide.

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Current, differential, scientific pricing Current, differential, scientific pricing is is needed on ALL our products (be it needed on ALL our products (be it aviation, aviation, professional indemnity, professional indemnity, motor etc)motor etc)

Clients will increasingly want to know Clients will increasingly want to know why and why and the basis for pricing. It is the basis for pricing. It is inevitable.inevitable.

Products – have to be relevant to needs Products – have to be relevant to needs and user and user friendly. We have to friendly. We have to increasingly directly (for increasingly directly (for own account) own account) participate in Oil,participate in Oil, Gas, Aviation, Gas, Aviation, Marine business. Marine business. Page 12Page 12

We have to be professionally IT We have to be professionally IT driven e.g. driven e.g. underwriting.underwriting.

We have to imbibe We have to imbibe (and be seen to (and be seen to imbibe)imbibe) a a fresh Professional Ethics fresh Professional Ethics and Good Governance and Good Governance and ALMand ALM

We have to invest in practical We have to invest in practical professional staff professional staff training and training and possibly hire hands from abroad.possibly hire hands from abroad.

We have, as an industry DESIRE to be We have, as an industry DESIRE to be BIG and BIG and a DRIVER to this economy. a DRIVER to this economy. Page 13Page 13

The above are basic ingredients to The above are basic ingredients to make the industry attractive to: make the industry attractive to:

Investors, andInvestors, and PolicyholdersPolicyholders

and lead to the pooling\availability and lead to the pooling\availability of Funds to the Industry’s disposal.of Funds to the Industry’s disposal.

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Funds\Money will enable the Funds\Money will enable the industry to expand i.e.industry to expand i.e.

- create (i) employment- create (i) employment

(ii) wealth for owners(ii) wealth for owners

- invest – especially in other - invest – especially in other enterprisesenterprises

- and hence be an active player\- and hence be an active player\contributor contributor

in the growth of our economy. in the growth of our economy.

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In summary: In summary:

I see a SIGNIFICANT increasing I see a SIGNIFICANT increasing demand for Insurance coverage:demand for Insurance coverage:

AnnuityAnnuity RiskRisk

LifeLife

Group LifeGroup Life

HealthHealth- Post Retr. HealthPost Retr. Health- Pre Retr. StructuredPre Retr. Structured Health CostHealth Cost

Non-LifeNon-LifeAlmost ALL areasAlmost ALL areasin response to in response to economic growtheconomic growth

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……Summary ContdSummary Contd

In my view, Industry Premiums can In my view, Industry Premiums can readily increase from under 1% GDP to readily increase from under 1% GDP to 2.5% GDP – N206.6Billion (in current 2.5% GDP – N206.6Billion (in current terms) within the next 2-3 years - terms) within the next 2-3 years - because of both increased actual because of both increased actual demand and latent demand that can demand and latent demand that can be sensitised through marketing. be sensitised through marketing. Many are genuinely ignorant of Many are genuinely ignorant of insurance services. insurance services.

This increased growth will lead to the This increased growth will lead to the industry being a more visible industry being a more visible economic participator - employer, economic participator - employer, owner, wealth creator.owner, wealth creator.

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To achieve these, the industry To achieve these, the industry will need to will need to undergo some undergo some changes (as highlighted changes (as highlighted above) above) and possibly pool resources and possibly pool resources together – consolidations. together – consolidations.

These are interesting These are interesting times/opportunitiestimes/opportunities

- presenting us with - presenting us with challenges.challenges.

……Summary ContdSummary Contd

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IT CAN BE DONEIT CAN BE DONE

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Thank you ladies and Thank you ladies and gentlemengentlemen

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