How To Grow Micro Insurance

Micro insurance has been identified as a major plank to upscale the insurance industry business by creating more opportunities for operators and to cover the length and breadth of the country.
The industry regulator, the National Insurance Commission (NAICOM), also sees the huge potentials offered by this class of insurance. Experts believe this will help drive growth and put Nigeria ahead of South Africa.
Since the presentation of the Market Development Restructuring Initiative (MDRI) report in 2009, which identified micro insurance as a new market to be explored, the NAICOM has made remarkable progress in the area of introducing it into Nigeria’s big market which has huge opportunities.
The German Development Corporation and NAICOM embarked on a diagnostic study of micro insurance in Nigeria in 2012. The study sought evidence-based report on the position of micro insurance in Nigeria and further identified the capacity of the low-income people in Nigeria to use financial products and make the report a public resource in itself.
To capture this focused group, discussions were held for the demand side in nine states and five regions of Nigeria with 207 family units made up of over 2,000 family members. 54 public and private sector organisations were also met in the two states on the supplier and enabler side during the six months of the study.
The nine demand side states were made up of two urban communities, three semi-urban and four rural communities. All the communities identified their major risk exposure as sickness, accident, flood, drought, fire, political violence, religious violence, unforgiving quarrels and death. Some other risks were water borne diseases, hazardous jobs, snake bite and falling from tree top. They also had social expenses like weddings, funerals, extended family members, and absence of medical facilities to diagnose and to treat.
Experts maintain that  a national micro insurance goal and strategy statement together with a national business plan and regulatory framework should have to be put in place by the regulator to kick-start this new phase of insurance and sustain it.
Speaking on the subject recently, a consultant to the NAICOM and the managing director of Riskguard Africa Nigeria Limited, Chief Yemi Sholadoye,  disclosed that the insurance industry’s minimum capital requirement (MCR) has been increased by 6,250 per cent over a period of 40 years. Sholadoye shares the belief that Nigeria has the potential to surpass South Africa or any other country in micro insurance record, if not in penetration at least in absolute figure, within five years.
Out of the 1,079,000 micro insurance insured in Nigeria in 2012, 70 per cent had credit life policy; 7.5 per cent personal accident; 2.5 perc ent property insurance; 10 per cent savings life; and 10 per cent health insurance. In essence, only 20 per cent of the people were voluntary insured. Usually, those under compulsory insurance always do not know that they have bought insurance.
But he said that for micro insurance to be relevant to the low income people in Nigeria, it must be made simple. There must be staple bundled products, ankle risks embedded into many other trusted and every day use products like telephone, banking, fertiliser, mass transit and so on. The products have to be developed in local languages of Nigeria, at least in four languages – pidgin English, Yoruba, Hausa and Igbo.
The contract or application form which is the basis of an insurance contract, must be a simple, maximum of one page document extracting simple pieces of information about the applicant. The agreement (policy) document is the evidence of an insurance contract. It must also be a simple, maximum of one page document, and possibly in the local language. It must not contain long list of exclusions, clauses, technical and legal jargons or be separated into headings like operative clause, recital clause and so on.
Claims administration must not be cumbersome. Claims notification may be made on phone and there may be no completion of forms. With the experience in the microfinance, business, fraud is not commonly perpetrated by the low income people, except by or with the connivance of the loan officer. There is no long process of claim investigation and adjustment or excess and deductibles.