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Insurance market is largely untapped in rural communities – Omo

Insurance market is largely untapped in rural communities – Omo

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In this interview with NIKE POPOOLA, the Managing Director, African Alliance Insurance Plc, Mrs. Funmi Omo, speaks on the need to take insurance education to the rural areas

How did the temporary suspension of annuity by the National Pension Commission in 2017 affect annuity business?

The suspension at that time of annuity gave the Pension Fund Administrators a lot of room to gain some dominance in the market. Initially, the suspension had some impact on us as an organisation because we were not selling annuity during the period as we used to be one of the leaders in the market. The suspension affected our premium income.

What we have done as a company is to downplay the sale of annuity so that we can grow the traditional insurance line and take our rightful place in that line of business. At the time we started selling annuity; we de-emphasised or ignored other lines of business. Following the suspension of annuity, we were badly hit and we had to redirect the minds of our marketing force to traditional business.

So what we have done now is to deliberately downplay annuity such that we are able to now revive and reposition ourselves along the traditional product lines. We don’t want to be affected by such regulation again.

Our focus right now is on our traditional lines of business. We want to develop other lines of business and market them. But in developing other channels, we need to ensure that our agency network remains intact.

What are the benefits of annuity to a retiree?

A lot of people don’t understand the benefits of annuity. Both annuity and programmed withdrawal have their benefits. But I will tell you that the benefits of annuity far surpass that of programmed withdrawal. Annuity pays in perpetuity for as long as the annuitant (retiree) is alive.

Going by the recent trend of improved mortality experience even in Nigeria where we have a lot of issues, you will discover that retirees are living longer, and for that reason, many people are likely to outlive their benefits when it comes to programmed withdrawal.

With annuity, there is nothing like outliving because as long as you are alive, you will continue to enjoy your pension and that is what gives it superiority and an edge over programmed withdrawal. Annuity ensures that the retiree continues to earn income for life.

Why is it that insurance services are not easily available in the rural areas?

It is something that is being addressed at industry level because it is one of the fallouts we had at the industry retreat recently which is about financial inclusion or insurance inclusion in this case. Part of what we discussed is how to take insurance to the rural areas.

There is a lot of work that is to be done in terms of enlightenment and a lot of work that also needs to be done in terms of educating the rural populace because there is a largely untapped market that we need to do a lot of work on.

On our part in African Alliance, we have started to do our bit in getting information and doing some research on how we can deepen rural penetration. We are hoping that shortly, those branches that we have that are not strictly in cities, we can upgrade them and reinforce the marketing team to do some form of rural enlightenment, marketing and getting people to insure and do life assurance.

What is the role of the agents in insurance growth?

The role of the marketing executives is very significant. This is because a lot of people are not aware of insurance and there is a lot of technicalities involved which necessitate the need to have an intermediary that would be able to explain, advise and make recommendations on the needs of either individuals or organisations in terms of insurance.

They will also be able to advise in terms of pricing and how to combine policies and that is what makes the role of an intermediary very peculiar. We have brokers; we have different types of intermediaries. We also have agents and financial advisers. The requirements and degree of specialisation is what makes the difference.

Brokers are a lot more professional. The requirements are also a lot more stringent and the level of responsibility is higher. And in the case of brokers, they are actually a corporate organisation; they are corporate intermediaries. That is one unique and peculiar way of distributing insurance.

However, we have the individual who also has the capacity and is interested in giving insurance or financial advice.

These days, the agents are able to advise on insurance needs and also able to make recommendations in terms of other financial services. And that is the reason why the role of the insurance agent is very important and very significant.

What are you doing to grow insurance through the agency system?

Life assurance is very peculiar in nature because they say insurance is sold, it is not bought; insurance is intangible. However, insurance is necessary because it gives peace of mind. In our case, especially life office, our kind of business is quite specialised, it is just life insurance. We therefore need intermediaries that will be able to give advice and also act on our behalf.

In this part of the world, a lot of people don’t pay attention to it because it is capital intensive. We require funds to be able to manage the agency system very well. In addition to being capital intensive, it takes time to build a very strong and formidable agency network. However, that happens to be our strength in African Alliance because it is a major channel of distributing our products and so we pay a lot of emphasis.

We try to encourage them; we also try to do capacity building. In terms of capacity building, we organise trainings, seminars, we also send them out to seminars not just on insurance but to expose them to other financial services.

We also expose them to the financial sector so as to build capacity and make them better equipped to give advice to customers, either prospects or those already in our books. That is the reason why we are placing a lot of emphasis on them and we are ensuring their continuous development.

In order to encourage them, we recognise the best producers. This is to serve as an incentive and as a way of motivating the agency force.

What are the things you put in place to motivate the agents?

At our recent award night, we recognised the most productive agents and the most productive agencies. We recognised the most productive agents and agencies because there are groups of agencies and there are agents under agencies. We recognised the best producers in terms of policy counts. The whole idea is that we want to increase penetration and awareness.

The strength of a life office is as good as the number of policies they have in the portfolio. So, we need to be able to encourage deeper penetration, increase awareness and growth in policy count.

We also recognised premium income because we are all in this business to make money and the higher the premium we are able to generate, the lower the expense level that we have the better for the office and the more efficient we are likely to be able to run the system.

We gave awards in different categories. Also, giving out cars has not been abolished. What we do is that we set targets. Once we set targets, we attach the incentives that is ambitious enough, and that will motive you to want to achieve the target.

The National Insurance Commission recently introduced guidelines for companies that want to do micro insurance. Are you considering applying for micro insurance licence?

I think it is too early to talk about that but we are also giving it consideration. We have the line of business which is the retail marketing that is developed to a large extent and one of the things we are considering is probably upgrading it to a fully-fledged micro insurance company in which case we could apply for the licence. However, that is still at the conception stage. No decision has been reached so far.

 How prepared are you for Risk Based Supervision?

We are getting ready for that and we are putting a lot of structures in place internally because we know that it is inevitable; that is where we are going. Even if the National Insurance Commission hasn’t implemented that initiative, we know it is something that is coming. We are putting structures in place to ensure that we are able to write the lines of business that our shareholders funds can carry.

 What advice do you have for insurance consumers?

Insurance is key; insurance is necessary. Insurance is important for planning purposes, and for the development of the economy. So I will advise that we pay more attention to insurance and that everybody gets insured.

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