Lean times: Insurers to develop innovative survival strategies

Dr. Christopher Kolade
| credits: File copy

Global economic crisis and reforms have, to some extent, orchestrated the financial challenges currently faced by businesses in the different sectors of the Nigerian economy. The Chartered Insurance Institute of Nigeria is motivating the insurance sector to strategise on the way forward, NIKE POPOOLA reports

About five years ago, at the end of a consolidation exercise, the insurance sector enjoyed a season of buoyancy owing chiefly to the fact that it had just acquired huge capital, like it never did before.

Both local and foreign investors had invested heavily in insurance companies, which enabled the underwriting firms to recapitalise.

These funds from the investors helped the underwriters to get better structures, just as the funds enabled them to invest in different sectors.

Unfortunately, other global occurrences that trailed the consolidation period have not really been pleasant to the sector, as it had continued to feel the impact of such events. For instance, the global economic meltdown, which commenced in the Western economies about four years ago, soon began to take its toll on developing economies.

This was trailed by the crash of value of stock in the capital market, a sector in which the insurers had heavily invested.

 Banking reform of the Central Bank of Nigeria, which commenced in 2009, had the aim of addressing non-performing assets of the lending institution and also, the intention to drive corporate governance down the throat of bankers.

Though this operation had major impact on the banking sector, it also caused a liquidity squeeze in the economy.

As different sectors are experiencing the impact of this lean season, underwriters, under the umbrella of the Chartered Insurance Institute of Nigeria, during its recent educational conference, brainstormed on how to chart a new course on way forward.

The Minister of State for Finance, Dr. Yerima Ngama, recently noted that the global economic crisis swept across the world like wildfire. He also observed the recent development in Eurozone, especially with financial crisis in Italy, Spain and Greece, had much lesson for Nigerian businesses and their operators.

Ngama said, “What the experience in these countries has shown us is that we have the opportunity and time to rethink our strategy of doing business and ensuring maximum utilisation of scarce resources for greater economic benefits.” According to him, since the new global economy is very dynamic, businesses must continue to check their operational models to ascertain their relevance to current economic situation.

For this reason, he said that insurance practitioners, in particular, must be able to choose where exactly they want to belong.

His advice to the insurance companies centred on the need to embrace voluntary mergers and acquisition in order to build stronger capacity.

Ngama said that the emerging challenges in the economy would leave no room for fringe players as only the big ones would be able to break even.

He said, “These difficulties, rather than stalemate our matching forward, should spur opportunities for mergers and acquisition in the industry, not just as a window for survival but an avenue for significant and profitable player.”

The minister observed the disproportionate cost of doing business in the sector, which he described as too high.

According to him, this can further escalate as a result of emerging challenges, such as the International Financial Reporting Standards, automation and cost of training manpower in special risk.

He said that merger in the sector would guarantee efficiency and effectiveness, build stronger financial and technical capacity, especially the capability to underwrite larger risks, and better access to international reinsurance support.

By this, he added, the industry would be able to retain more risk locally than it currently does.

As insurers, he said the onus was on practritioners to determine what new tunes to play in the emerging scenario.

 A former Nigerian High Commissioner to the United Kingdom , Christopher Kolade, said whenever firms found themselves at low points at a particular cycle, such busineses were usually seen as going through hard times or lean times.

He observed that the main feature of such was usually a heightened degree of uncertainty and difficulty.

As insurers sought to make high returns, he said the need for the sector to have some specific approach when the economy is not booming has become more compelling.

He said, “Only by resolutely taking a strategic approach can we hope to succeed in surviving lean times to emerge strong when better times arrive.”

Kolade said it had become increasingly necessary for insurers to be sensitive to the fact that their clients are also experiencing lean times, which might affect their needs.

 For this reason, he urged insurers to gain more access to the vast population of those yet to have any form of insurance.

 According to him, with better enlightenment, insurers will be able to make the uninsured population to see how insurance can protect and add value to them during a season of down turn.

He stressed the need for underwriters to know the needs of the public and also be aware of their changing needs as such arose.

According to Kolade, insurers need to make their products and services easily accessible to the insuring public.

He also stressed the need for the underwriters to acquire new techniques to enhance their responses to clients and service delivery. He, therefore, urged insurance companies to be proactive players in the industry.

 The President, Chartered Insurance Institute of Nigeria , Dr. Wole Adetimehin, said that the insurance sector had continued to face some challenges, part of which emanated from public scepticism regarding the capabilities and capacity of the sector, to cover the emerging risks and deliver on its promises as risk bearer in the present scheme of things.

Nations, all over the world, including Nigeria , he noted, had continued to navigate through these problems in finding solutions to the myriad of challenges facing their economies.

He said that in all of the circumstances, including the pervading instances of corruption and greed in governance, the pendulum of good reasoning must continue to swing in the direction of finding lasting solutions to the avoidable wastages in the systems.

Adetimehin also said that there was a genuine quest by all men and women of good reasoning to seek ways and means of rethinking both governance and business models through fresh strategies.

He said, “We may need to ask ourselves as insurance operators how we intend to re-strategise in order to serve our clients better and more effectively.”

The CIIN boss said the institute would continue to strengthen the relevance of insurance education in Nigeria through existing platforms, such as conferences, seminars, workshops and exchange programmes.

He also said the institute would continue to sustain its international outreach programme for chief executives.

 The insurer also said that reinvigoration of the Mandatory Continuing Professional Development programme and repositioning of the institute’s secretariat, through strategic realignment of the staff organogram will be developed.

 He also said that CIIN would continue with the expansion of the institute’s revenue generation base and progressive construction work on the College of Insurance.