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More Nigerians embrace insurance as marketers woo artisans

By on March 28, 2011

Many artisans are currently buying insurance policies as a result of the aggressive marketing strategies adopted by insurance companies to increase awareness among low income earners. NIKE POPOOLA analyses the effect of the trend on insurance business in Nigeria

Unlike before, when only the rich and enlightened in the society bought insurance policies, low income earners, who ordinarily would have spent all their incomes on food and other basic needs, have started to buy various policies in line with their purchasing power.

This is as a result of the aggressive marketing strategies adopted by some insurance companies to attract the low income group to the industry by making them understand, in simple words, the benefits of insurance. To achieve this, the companies have employed professional marketers, whose jobs are mainly to compel unwilling targets to explore the benefits of insurance.

The renewed marketing drive is necessary at this point in time because, according to experts, companies that are able to deepen insurance penetration stand to gain more from the compulsory insurance policies, which are being enforced by the National Insurance Commission.

Statistics from NAICOM show that 94 per cent of Nigerians do not have insurance policies. The commission, however, says it plans to reduce the figure to 70 per cent by 2012.

Though gross earnings have been increasing yearly in the sector, operators are worried that the bulk of the premium recorded are usually on credit and may never be paid.

Over the years, the companies had concentrated on earnings from corporate businesses, but, unfortunately, global financial challenges, coupled with unhealthy competition, are making it difficult for corporate organisations to increase their investment in policies. Profit earned from this sector has, therefore, continued to fall.

However, operators have said that an effective marketing system, which ensures that the majority of Nigerians embrace insurance, will help to deepen its penetration and also maximise the immense potential in the compulsory insurance policies that are already being enforced by NAICOM.

For instance, Mutual Benefits Assurance Plc is one of the companies currently driving insurance penetration through micro insurance. Micro insurance is the creation of insurance policies with affordable and low premium for low income earners. It is aimed at helping them to reduce the pains associated with losses.

Having discovered that majority of the country’s population engage in micro activities, the company said that it decided to target this segment of the population by using what it described as “the empowerment of the masses and preaching of insurance.”

According to the Group Managing Director, Mr. Akin Ogunbiyi, out of 150million Nigerians, the total insurance services that are sold by all insurance companies in the country are just about 750,000.

“We decided years ago that retail marketing was the strength of Mutual Benefits. We also sell policies with premium as low as N50,” he said.

While emphasising the need for the industry to maximise the immense benefits in the micro insurance segment, he noted that this segment involved cash business unlike credit transactions, which took place in corporate business.

He said, “Statistics reveal that the Nigerian insurance industry earned N200bn in 2009. I can confirm that over 50 per cent is on credit, which means that the insurance industry generated N100bn. And I can confirm to you that management expenses and business acquisition expenses take about 40 per cent. So, what are we left with?”

He noted that if the insurance penetration remained low in the country, it might not be easy to achieve the N1.1tn premium target of the industry.

“In the last three years, we have come up realising that we need to deepen insurance penetration to make impact. We are using retail insurance marketing for growth. We took the initiative about four years ago, even before the compulsory insurance was introduced,” he said.

He explained that the company, after observing that some market women who struggled to sell products such as tomatoes in the market were not being funded, organised the traders into several cooperative units. This, he said, was to empower them with capital to enable them to make profit and take insurance cover.

Today, he said, the company had many Mutual Model Cooperative units, which had not more than 50 individuals per group.

He added, “We find out how much tomatoes they sell in a day. By the time you see the total, it may not be more than N100, 000. We give them the money to buy their tomatoes in bulk and when they buy, we empower them. But we then introduce the safeguard insurance policy to them, so that if anything happens to them or their tomatoes while trading, they will be covered.”

This approach, he added, had been extended to several other micro traders, whose businesses were growing. He said the more the businesses grew, the greater their ability to take insurance policies.

During a recent training programme in Lagos, some insurance marketers, who were preparing to register with the Association of Registered Insurance Agents of Nigeria, spoke about their experiences in marketing insurance, compared to marketing in other financial sectors.

After working with Wema Bank Plc as a credit analyst for some years, Mr. Adebowale Adebisi brought his marketing experience in the banking sector to the insurance industry.

“Marketing in banking and insurance is almost the same thing because we are talking of financial services. However, in banking, you look at the profit before the risk while in insurance, you look at the risk before the profit,” he said.

According to him, insurance is not difficult to market because when the agent enlightens people about the immense benefits in insurance; they are usually willing to buy the policies.

“For instance, if you have an accident, you need to pay for your treatment or compensation for loss of life, which is what insurance will do for you,” he said.

An associate member of the Nigerian Institute of Marketing of Nigeria, Mr. Olusegun Ojo, also has a good marketing experience, which he has brought into insurance marketing.

He identified low insurance awareness as a major problem of the insurance sector, adding that the industry only needed to employ effective marketing strategies to reverse the low-awareness scenario.

“I see opportunities. I went to some okada association members in Lagos on one of their meeting days to introduce insurance to them and I saw mass acceptance. Even though their literacy level was so low, most of them responded to it very well,” he noted.

He, therefore, said ignorance, which was a factor that had been working against insurance, could be improved with proper enlightenment.

Ms. Chinonye Okafor, who also has marketing experience from the private sector and the banking industry, now markets insurance policies. She said that insurance marketing was easier and more flexible compared with marketing in the banking sector because the insurance industry had attractive products to offer.

“If you are comparing the interest rates the banks are offering, they fluctuate depending on the Central Bank of Nigeria’s regulation. So, if you are giving a customer 1.5 per cent this month, it does not guarantee the customer the same interest rate the next month. But in the insurance industry, it is going to remain like that,” she explained.

However, while explaining her experience in insurance marketing, she recalled that while some had readily accepted some policies, others had still turned them down.

She added that the huge targets, which banks usually gave to their marketers were not being given in the insurance sector.

Mr. Kayode Afolayan is another banker turned insurance marketer. He said that the principle of marketing in the financial system was the same, adding that all that was needed was the right customer, in addition to enlightenment.

He said, “One of the things that insurance has been helping to promote in the last decade is for people to cultivate savings habit. People can save in the banks or in the capital market in form of investment in stocks. I can also save my money in insurance by buying a five-year policy. They all have their merits and demerits. Finally, however, the insurance product is the only one that has a life cover attached to it.”

While comparing marketing in the banking and insurance sectors, he said, “I have worked with five different banks before. Targets in insurance are such that if you are given a N50m target, the benefits will come back to you.”

The President, ARIAN, Mr. Kingsley Obuvie, said that the association’s focus for 2011 and beyond was for the members to service insurance in their communities.

Source : Punch