Obviously, the benefits of a Trillion Naira insurance industry will be felt throughout the economy of Nigeria. The task to get this done rests with the operators of the industry and the rest of us.
The
problem of insurance penetration may not be too dissimilar to this analogy. Or
else, how can we explain insurance penetration of 0.34% (2019) in Nigeria while
South Africa records 13.4%. Nigeria’s Insurance penetration figures is derived
by dividing Gross Premium Income by Nigeria’s Gross Domestic Product. Equally,
Nigeria’s insurance density (Gross Premium Income per capita is $8 (2019) while
South Africa is $803. 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 no reason to be as
under-performing as this.
Getting
big numbers of insurance policyholders is similar to getting a huge haul of
both small and big fish. But if existing distribution network can only give the
current numbers, it shows that it might be more beneficial if the industry
evolve more ways to optimize those existing strategies, in addition to adding
new strategies. To my mind, the insurance industry has to find solutions to two
similar problems.
1. How to optimize current distribution
capabilities.
2. How to acquire new distribution capabilities.
New distribution capabilities
It's
all in the distribution network. Apple paid $3bn to gain access to Dr. Dre
Beats Electronics' distribution network. Microsoft made a similar buy-out of
both Skype ($8bn) and LinkedIn ($26bn) for unfettered access to their
distribution networks. LinkedIn then bought Linda.com and integrated it
into its own network as LinkedIn Learning. There are other gains obviously, but
getting additional distribution partners totaling hundreds of million of
customers made a particular compelling case.
Current
industry reports suggest that structurally, insurance brokers are contributing
more than 80% of the current industry density numbers. It then follows logic
that the insurance industry can at least double these numbers to a little less
than N1.00 Trillion if retail insurance is equally driven with vigor to
generate as much figure as is currently being generated from insurance brokers.
Insurance brokers are doing a great job, but it is time for insurance
underwriters to complement that job and birth a Trillion-Naira Nigeria
insurance industry. Such contribution is expected to yield great multiplier
effects on all other sectors of the Nigerian economy.
Insurtech
Today,
using current capabilities to sell to millennials, an age-group that is
becoming increasingly economically active and informed, has not yielded much
results in the past. Theirs is an age of social media, and tools to sell to
them must ride on their existing hangouts to communicate to them.
InsurTech
is an ecosystem that brings together adjacent industries to provide an improved
service of greater value to insurers and their customers. Adjacent industries
of particular relevance include agriculture, health, cybersecurity, the sharing
economy, wealth management, transportation and more. Today, more Nigerians bank
and take credit loans online than they do in brick and mortar banks. The
Insurance industry should also be encouraged to acquire such capabilities to
deepen its market.
A
note of caution though, the insurance industry should not see InsurTech as a
replacement, or a clarion call to dismantle current capabilities. Rather, the
new capabilities should help optimize existing capabilities, while the existing
capabilities should be made to help push the frontiers of the newly acquired
capabilities.
Optimizing existing distribution capabilities
Existing customers
There
is ample evidence that insurance companies can, and should derive more value
from their customer lists. I own quite a number of policies from few insurance
companies, but beyond the perfunctory greetings during national holidays and
anniversaries, I do not receive much quality communication from my insurance
companies. That ought to change to a relationship where an existing customer
willingly become brand ambassadors of their insurance company, and willingly
inform and seek advice from insurance relationship managers anytime important
changes and additions are made in their families. Such information can be used
to upsell, cross-sell or resell those customers on their existing or fresh
policies.
Insurance
companies should send targeted infomercial messages containing periodic offers
to customers on this list showing an attitude of sincerity and corporate
helpfulness. This is to earn the trust and loyalty of the customers.
Acquiring new lists of prospects
- Who are the prospects/customers of
insurance companies?
- Where does the insurance companies
go to look for high quality prospects?
- Who do the prospects buy from 'before'
and 'after' they buy from the insurance company?
It's all in the List.
And particular attention should be taken of "before" and
"after" above.
If
I am a composite insurer, who sell car insurance to a customer, why is the
customer not buying educational assurance from me? In order words, if I sell
him general business, why am I not selling him life business? Most of the
insurance companies in the top 10 category in the industry either have
investments in health insurance companies or pension fund administrators. In
order words, if someone has bought health insurance or domiciled his pension
funds with my sister company, why am I not selling him life and/or general
insurance.
It
should not be impossible to acquire customer lists of such companies who then
become active prospects for the insurance company. The insurance company can
script their message and offer in an email or surface letter. If such a letter
can proceed with an introduction from the original list owner, it is better.
Other
lists of prospects that insurance companies (though not exhaustive) should
acquire include:
- Cooperative and credit union
memberships
- Bank customers' lists
- List of online credit
organizations
- List of newspapers, magazines,
periodicals and journal subscribers
- List of Internet Service
Providers
- List of High-end hotel patrons
- List of PFA account holders
- List of HMO customers
- List of family/business club
patrons
- List of PMI customers
Great
prospects/customers' lists are the backbone of a good distribution network, and
they can be acquired for a fee, profit-sharing, direct exchange, cooperative
selling, and/or business combination.
When
the distribution network is right, then both retail insurance penetration and
insurance density will improve.
#Fishingwherefishswims #insurance #insuranceindustry #insurtech #optimizinginsurance #insurancedistribution
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