FUNNEL VISION: INDUSTRIES LESSONS TO DEEPEN PENETRATION IN NIGERIA INSURANCE INDUSTRY

 

Data on the Nigeria Insurance Industry Sector reports from NBS, A.M. Best and the Nigeria Insurers Association is a mixed bag. While reports indicated that the Nigeria Insurance Industry has grown its Gross Premium Income annually since 2011 (6.1% in 2018 and 3.6% in 2019, it also showed that the sector lagged behind its peers from other countries in the critical areas of Insurance Penetration and Insurance Density.

Insurance Penetration

In terms of reach, the Nigeria insurance industry continues to lag peers with low insurance penetration (Gross Premium Written/GDP) of 0.34% in 2019 (2018: 0.33%) compared with South Africa (13.4%), Morocco (3.9%), Kenya (2.3%) and Egypt (0.6%).

 Insurance Density

Insurance density (Gross Premium Income per Capita) at $8.0 (2018:$6.2) also remains weak relative to peers such as South Africa ($803.0), Morocco ($127.0), Kenya ($43.0) and Egypt ($19.0). Moreover, an insurance industry report conducted by Swiss Re on 88 countries placed Nigeria at 63rd position with a meager contribution of 0.03% to globally written insurance premiums in 2019.

According to Nigeria’s regulatory data, there are 57 insurance companies in Nigeria. N426billion ($1.2bn) Gross Written Premium (GWP) was generated in 2018, and N490billion ($1.3bn) was generated in 2019 according to data from the Nigeria Insurers Association (NIA).

This is in sharp contrast to perceived and historical views that Nigeria’s insurance market offers great development potential. With its position as Africa’s largest economy, its substantial oil and gas reserves and its tech-savvy,  young and growing population, the Nigeria Insurance Industry has performed well below expectation given the peer reviews above. Even though the potential for growth and development in the Nigeria insurance industry is far from being overstated, the industry has fallen short on that promise due in part to the volatility of growth in the country’s real gross domestic product and the effect of
inflation on disposable income. Other reasons for the below par performance by the insurance industry include the following:

• -          Low trust with regard to claims settlement and opaque settlement processes
• -          Low understanding of the benefits of insurance by prospective customers
• -          Low awareness of products which resulted in home-grown coping strategies
• -          Weak enforcement of compulsory insurances
• -          Limiting religious and cultural beliefs
• -          Weak distribution/low penetration of retail insurance products
• -          Slow pace of innovation

Great strides from other industries despite constraints

However, it is the author’s considered view that these constraints should not have held the industry back for so long, given that companies in other industries are able to achieve phenomenal growth in the Nigerian market despite those constraints. Uber, AirBnB, Netflix,

Tesla, Flutterwave, Paystack and Tekedia are recording massive growth in customer bases. With a combination of innovative products, simplified processes, smart technologies, customer-centric approaches and smart business playbooks, these new companies are disrupting entrenched industries including traditional Taxi, Hotel accommodation, video rentals and movies industry, automobile industry, banks, and business schools in brick and mortar universities. At the last count, Tekedia has taken students for its online MBA from more than 50 countries without owning a single classroom. Amazon and Alibaba controls more than 80% of the world’s retail trade without owning a single shop

Funnel Vision versus Tunnel Vision

What are 20 other industries (apart from insurance) doing to find new prospects/new customers? What are they doing differently that made their results so startlingly different from Nigeria's insurance industry? Creative Emulation. The idea behind creative emulation is not to make an exact photocopy of what someone else did. It is to study what has worked for others, to scrutinize it, and determine what about that approach explains their success. Then, adapt that technique to your own marketing challenge. This is called Funnel Vision, rather than Tunnel Vision which hold you back to the practices of your own company and industry.  Imagine if we can have Nigerian insurance companies that are growing as rapid as Uber and AirBnB combined.

Conclusion

Are there lessons for the insurance industry to learn from the behemoths of other industries mentioned above? Obviously yes. I have summarized some of the lessons as they applied to the Nigeria insurance industry. They are: Innovation, Moving Parade, Customer-centric attitude, Effective retail distribution, alliance and business combination, Consumer Education, Fishing where the Fish swims.

I hope to discuss them in subsequent posts. Comments are welcome.