Stakeholders are sanguine that insurance firms can leverage on the proliferation of smartphones to ensure that financial services reach customers even in the rural areas.
Modern technologies that are user friendly means people are able to buy an insurance cover without face t0 face contact with an agent, which removes the barrier to administrative bottlenecks
In Nigeria, only 67.5 million (64%) of the 105.5 million adult population were financially included in the year 2020. This was disclosed in a report by Enhancing Financial Innovation & Access, tagged ‘New data from EFInA.‘
The reasons for the gap include: proximity to banks, lack of regular income, too much documentation involved/required, lack of trust, and too much corruption.
Of course, the majority of farmers in the rural areas are without a formal education (illiterate), and they have never heard about financial service products (insurance and banks) as they continue to starch cash in their backyards.
When more people are included in the financial ecosystem through mobile service operators, it becomes easier for the government and policymakers to plan welfare packages needed to reduce poverty and spur economic growth.
For instance, during the coronavirus pandemic that elicited a sit at home order by the government, central banks across Europe, Asia, and the United were able to pay the people stipends that helped mollify the impact of the virus.
There is light at the end of the tunnel as the Central Bank of Nigerian (CBN) and the National Insurance Commission (NAICOM) have formed a tag team to introduce products that will help bolster the number of people with access to financial services.
Both policy makers have introduced a Bancassurance initiative that stakeholders in the financial sector are optimistic will help boost insurance penetration.
Despite a population of 200 million people, the country’s insurance penetration rate of 0.5 percent is abysmally poor when compared to 0.5% compared with South Africa (12.9%), Kenya (2.8%), Angola (0.8%) and Egypt (0.6%).
Bancassurance is an arrangement between a bank and an insurance company allowing the insurance company to sell its products to the bank’s client base. This partnership arrangement can be profitable for both companies. Banks earn additional revenue by selling insurance products, and insurance companies expand their customer bases without increasing their sales force or paying agent and broker commissions.
Veritas Kapital Insurance is leveraging 0n Unity Bank’s asset base and the knowledge of its existing customer base to provide insurance services easily through their various channels.
The insurer said Bancassurance will be featured prominently as part of the bank’s digital banking offering, in both mobile and internet banking, and because of the financial inclusion drive, it will be offered at its agent banking location.
Analysts at Afrinvest Securities believe less restrictive Bancassurance guidelines and the removal of the ban on partnership with Mobile Network Operators (MNOs) would allow for low-cost distribution of insurance products and deepen insurance penetration, especially at the low-income segment of the Nigerian market.
“We see recent developments in the form of the partnership between Axa Mansard & Carbon and agri-business insurance boosting premiums and awareness for the sector, although there are inherent risks,” said analysts at Afrinvest Securities.
To boost insurance penetration and take advantage of the country’s burgeoning population, NAICOM has designed micro policies for the low income and small-scale enterprises.
It recently licensed two full-fledged micro-insurance companies, GOXI and Cassava Micro-insurance companies, to offer life and general micro-insurance services in Lagos state.
It is worthy to note that the coronavirus pandemic took a significant toll on the Nigerian economy and people were not able to have a bank account, which undermined the pace of financial inclusion.
“The pandemic has had a negative impact on our lives and disrupted business activities. A lot of people lost their savings. If you do not have savings, how do you survive in a country where most live below the poverty line?” said Former Director General, LASPEC, Folashade Onanuga.