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Nigeria 's Emerging Insurance Industry
 DESPITE far from smooth sailing and more than its own fair share of unforeseen events, Nigeria 's insurance sector is emerging as an industry to be reckoned with. Out of 104 reinsurance and insurance companies pre recapitalisation 49 met the capital requirements and are certified to continue writing insurance business. Already 27 of these are listed on the Nigerian Stock Exchange with a combined market value in excess of N400b. Some of the larger companies have been catapulted into key players on the capital markets. Confidence is strong amongst investors at home and abroad and for the first time in Nigeria 's financial history, insurance is centre stage, in the driving seat and changing the face of the balance sheet.
 ‘Growth' is the buzz word in the global industry and Nigeria is no exception. Less than 1% of the 140m population is alleged to have any insurance so the penetration is low and there is huge growth potential not just on the domestic front, but the continent and globally too. These are exciting times for the industry which now has the financial strength to expand its existing markets and create new ones, invest in appropriate infrastructure such as IT, attract the right personnel and increase local retention of oil and gas risks. More importantly it can now improve its brand image by combating consumer apathy and improving the culture of customer service and claims settlement, which has always been a major factor affecting the industry in the past.
 The restructuring and reform which was instigated by former Finance Minister Ngozi Okonjo-Iweala in September 2005 has been beset with one scandal after another including the sacking of former Insurance Commissioner Emmanuel Chukwulozie amidst allegations of financial impropriety and freezing of the recapitalisation funds raised by the successful companies. The funds were placed in an escrow account at Central bank pending the outcome of an investigation into the recapitalisation, and the inordinate delay threatened to ambush the industry's well laid plans for the future as well as upsetting its investors who will want to see big returns on their investment; more recently the saga over National Insurance Commission (“NAICOM”) taking over the running of Nigeria –Re and NICON is what the finance world is talking about and it remains to be seen whether NAICOM will emerge with the industry's confidence in it restored , or if Mr Fola Daniel, Chukwulozie's successor will emerge as a ‘White Knight' or a ‘Villain!”
Sovereign Trust Insurance
SOVEREIGN Trust Insurance (“ STI ”) was established in 1995 as a limited liability company, but today it is one of Nigeria's top 10 insurance companies quoted on the Stock Exchange.
In the wake of the restructuring and reform, STI is now an amalgamation of the original company, Confidence Insurance, Coral International and Prime Trust Insurance. The company's capital base has increased from 800m before recapitalisation in 2004 over N3bn in 2007 and its premium income increased from N1.4b in 2006 to N2.4b in 2007. It currently employs over 200 members of staff.
The company writes fire and property, motor, general accident, liability, oil and energy, construction, bond and engineering business and corporate customers include Celtel, MTN Nigeria, Shell, First Bank Nigeria PLC and the Nigerian Civil Aviation Authority.
Last year STI was the official sponsor and insurer for the Nigerian team at the All African Games in Algeria . It also sponsors the DAME Journalist of the year Awards, more recently it sponsored the Lagos International Jazz Festival in April 2008.
Earlier this year, Wale Onaolapo, former Executive Director was promoted to Managing Director and Oluseun Ajayi is now Executive Vice Chairman.
Konnections caught up with Segun Bankole, the AGM Corporate Communications and Brand Management for his own insight on the industry and STI :
Konnections: “Growth” is the key word today. What area of growth potential do you see in the Nigerian insurance industry and what benefits do you see for the economy?
STI : The Insurance Industry is very pivotal to the economy. It's one business that guarantees the protection of huge human capital and material resources in any economy. It cuts across every other sector in terms of risk management giving succour when the unexpected happens. There are a lot of untapped markets that are yet to be explored. The industry has the potential to go well beyond the core function of protecting assets and human life to becoming an enviable vehicle for enhancing assets, spurring economic growth and developments. STI is trying to address some of these and in the near future, a great deal more Nigerians will come to understand the importance of Insurance in our everyday lives.
Konnections: What is the fastest growing line of business in the market?
STI : Motor Insurance Cover still seems to be the fastest growing line of business. The volume of premium income that accrues to insurers from this class of business cannot be compared with any other class of businesses in the industry. I think one major factor responsible for this is the fact that Motor insurance is compulsory. However, it is imperative that individual companies get more creative in developing new lines of products and services that will add even more value to customers.
Konections : How has technology such as IT and telecommunications impacted on the industry in terms of broking, underwriting and claims?
STI : The role of IT and Telecommunications is crucial in the industry and like any other sector we do not want to be left behind. It is very important that processes and procedures are simplified and this can be achieved quite easily with technology. Here at Sovereign, we are at the point of restructuring our IT base to give a contemporary outlook to our business and the organization as a whole. We are doing this bearing in mind that our customers are the focal point of our daily operations. We have almost concluded the process and our customers will soon have new qualitative insurance products and services at the touch of a button.
Konnections: What are the major benefits of recapitalisation now that the funds have been released and the cash is available to invest?
STI : The benefits are just too enormous for those that have the capacity and ability. We now have increased insuring capacities to enable us to expand, develop new products, and undergo market research and marketing. Insurance companies have begun to create better corporate images for themselves, confidence is gradually building up in the industry, insurance stocks and shares are trading extremely well in the stock market and there is financial stability in the industry. However, how each company translates these benefits into “growth” will become a question of how proactive and dynamic its management is. Nevertheless, the potential is huge, I must say!
Konnections : Insurance has never been considered to be ‘sexy' and customer apathy has always been a problem. What is STI doing to increase customer awareness and attract new business?
STI : the truth of the matter is that insurance has always been very “sexy” but it is one bride that no one really wanted to court in the past. Even in some developed economies, where there is a great deal of awareness; people still shy away from it. You will observe that corporate organizations who know the worth of their investments do not trivialise the role of insurance in their business. If you consider the level of our underwriting capacities in the oil and gas sector of the Nigerian economy presently, you will be amazed at the enormous contributions of insurance to the corporate world. In time and with education I believe that things will change and people will begin to embrace insurance products and services willingly.
Konnections: New products are usually developed with the customer in mind. What products do customers in Nigeria want or need?
STI : Good retail products that will add value to their lives. Like I did say earlier, we have been researching new products that will benefit all and sundry offering attractive compensation cover at very affordable premium. We have been granted approval by NAICOM and are just reviewing the fine details. Very soon we will be hitting the market pretty good!
Konnections: What are the main challenges facing the industry today?
STI : There is a big problem of perception. People have a very vague notion of what the business is really all about. They believe they know but when you ask them, they always say “insurance companies don't like to pay claims,” but it goes beyond that. People tend not to study their policy documents properly when taking out insurance cover because they assume they know everything that they need to know. However, when claims come up and you begin to show to them the specifics of the policy wording, they get disgruntled and pass negative comments around. This would not arise if they paid adequate attention to the details of their policy document in the first place. The average Nigerian has not really embraced the importance of insurance or appreciated the benefits of it in everyday life. The regulating authorities have a key role to play in the advancement of insurance in Nigeria . There should be strict adherence to policy and procedure in the real sense of it. Our Brokers should also endeavour to see themselves as our partners in the industry and professionalism should be at the core of their operations. One thing is clear, we need to co-exist harmoniously if we are to remain in business and engender integrity and trust which are hallmarks of our industry.
Konnections : Was Nigeria affected by any of the recent catastrophes?
STI : Maybe not in physical terms, but you can be sure that there will be the ripple effect. These are catastrophes from very developed economies that Nigeria relies upon for one thing or the other. We would have had our own intangible impact from all of these. Don't forget, we live in a global village and what goes around comes around.
Konections: Are there any plans for the private sector to market Agriculture products?
STI : The Nigeria Agriculture Insurance Corporation (NAIC) is the major player providing Agriculture insurance products/services in the country. Recently, there has been a lot of Foreign Direct Investment in the agricultural sector from a lot of State governments in the Country. Kwara State readily comes to mind with the dairy factory that has just been established in conjunction with the Chinese government. With a lot of these projects in place, there is a lot of opportunity for insurers, but it remains to be seen whether the industry will see the potential and quickly move in on it.
Konnections: Tell us about the Local Content Policy for Oil and Gas business, what does this mean for domestic insurers and are they suitably equipped to handle the task?
STI : The correct target level of the Local Content Initiative is 45% by the end of 2008 and thereafter to 70% by 2010. It has made the insurance sector become alive to serious international business. I think it's a very good development for our industry and as an active player in the oil and gas sector, we are very encouraged to participate fully in this regard. Domestic insurers have taken steps to sharpen their underwriting skills and with the enhanced working capital bases of operators, I believe the market is equipped and ready to cope.
Konnections : How will the Pensions reform impact on growth potential?
STI : There is a medium to long term benefits to Life Assurance companies following the Pension reform. The compulsory Group Life assurance cover that every employer is expected to take out while complying with the provision of the Pension Reform Act will translate to increased revenue for Life Offices. Also in the long run when people attain retirement age they would be expected to purchase Annuity Cover from Life Offices and by then there will be enormous growth in the annuity class of business.
Konnections: What is STI 's vision in the short and long term?
STI : Our vision both in the short or long term is to be a leading brand, providing insurance and financial services of global standards.
Konnections: What is the current value of STI shares?
STI : currently, it's between N3.55 and N3.99. One thing is very clear; there has been a lot of trading activity around STI stocks. We are very happy about this. At least, it shows that Nigerians are interested in our organization.
Konnections: What advice do you have for individuals considering a career in insurance today?
There is no short course to success. Every individual considering a career in insurance must be ready to work hard and take up challenges as they come. It's a very dignifying profession. Humanitarian in nature, it is one profession that gives succour to all in dire situations.
For more information about STI please visit their website at www.sti.com.ng.
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