The Managing Director of Mutual Benefits Assurance Plc, Mr. Akin Ogunbiyi, speaks with Nike Popoola on the Nigerian insurance industry’s preparedness to handle development challenges in the post consolidation era. This year, NAICOM announced a Federal Government directive on the increase in the oil and gas local content policy from 45 to 100 per cent. How prepared is the industry to utilise this opportunity?
The increase from 45 to 100 per cent is a thing that is desirable. But the 45 per cent local content policy has not yet been achieved. We don’t have the expertise. NAICOM should let the NNPC bring its assets, let all the consortiums come together, let them make efforts to come up with the underwriting of risk. Where we don’t have adequate knowledge or expertise, let the industry bring in one or two consultants to come and put us through. We need not just go and sign slips. Insurance is different from banking or any other thing. The local content policy is not just increasing the capacity. Let us fully involve, develop the congruent expertise like risk analysis. It is not just increasing the percentage; all of us can jump abroad to get treaties. The issue is that who does the real job? Nigerian insurance companies today do not have the required expertise to underwrite oil and gas. Let NAICOM develop the local expertise. Most managing directors do not know what is oil and gas insurance. NAICOM should provide a comprehensive package that will empower the industry to underwrite the sector.
In the last few months, there has been a high interest in insurance stocks. What is responsible for this?
It is due to the present development that the sector is experiencing. The present development in the sector, we owe to the last civilian administration and the economic policies. A lot of aspects of the national economy were opened up by their policy thrust. The main focus of the policy thrust then was to have a private sector-driven growth within the national economy, that is, empower the private sector because they are more efficient, more profit-oriented. They are service oriented more than the government. So through privatisation and consolidation, they opened up the economy with a lot of activities. If you look at Central Bank’s record, it says that over 75 to 80bn dollars came in as direct investment in telecoms, oil and gas, and I can equally confirm it to you today that over $600m has come into insurance as direct investment through the Nigerian Stock Exchange. Every aspect of the economy has been opened up for consolidation, reforms here and there and the insurance sector was the one that was done last. The insurance sector now has been able to complete the look of the economic reforms. This has opened up the economy and we have a lot of activities that require insurance services. With recapitalisation concluded in the past 15 months, that has completed the financial service outlook. People now realise that insurance is an emerging market. The reason why the Nigeria Stock Exchange is doing well, constantly in the past five years, is that the NSE has been rated as the best in terms of returns on investment. They have averaged 50 to 60 per cent in the last six years consistently because virtually every sector within the Nigerian economy that was held down operating less than 30 to 40 capacity, now has the financial muscle to grow. These are the fundamentals that have made it possible for insurance to do well.
How is Mutual Benefits reacting to this high interest in terms of adding value and business operation?
Immediately we concluded our recapitalisation, we had a new bond with our stakeholders. We came out with what we want to do in the next years, our strategic plan, our strategic vision and growth pattern. To have circulated this, it means there is a challenge on our target, so that people can see the genuineness. We said we want to move from a company to a conglomerate. I can tell you now, Mutual Benefits has seven groups: Mutual Benefits Group; Mutual Benefits Plc, which is the parent company; Mutual Benefits Life Assurance; Mutual Assets; Mutual Properties and Homes; Mutual Benefits Liberia Incorporated with $5m paid up in Liberia. We have strategic investments in other fields. We are into oil and gas proper. These are things that we are doing. We are working hard, committed to the targets that we have set and people can see the result. We are doing great things, which people are hearing and must just have direct impact on the pricing of Mutual stock. And for our 2007 account, we are planning to pay a very attractive dividend to our customers. We are also touching lives; we are extending our services to the less privileged in the society.
In spite of the transformation that has occurred in the industry, people’s perception of the sector as a claim defaulter has not changed. As a practitioner, what is the industry doing to change this perception?
I don’t agree with that. The fact that people have been investing billions in the sector is a sign that the perception has changed. Before now, we were paying claims. Now that we are even more liquid, we are doing more. Insurance companies pay claims. In 2006, we paid one single claim of N103m. I won’t go to the high heavens and start shouting it. The premium that I collected on that transaction was N900,000. People should choose right, buy right. If you want to buy a thing, buy in the right place were you will get good guaranty. If you now say that because of N1 or N2 difference, you go to somewhere that has no guaranty, if you return their good, they will send you back that they cannot take it from you. If you buy right you will get the benefit from it. In fact, insurance companies now pay claims within 48 hours. Some people think that we are foolish, there are so many fraudulent claims that people make and they do not realise that we have to cross-check. For instance, someone insured his car. He sold it and said that the car was stolen. We invited the police to investigate it and we discovered that the car was actually sold. We are not going to take issues with thieves. Legitimate claims in the insurance industry in Nigeria are settled.
What are the differences in insurance practice before consolidation and now?
The first thing is the quality of management. Before now, insurance companies did not have the wherewithal in terms of the financial muscle to compete for the best hands that are available within Nigerian economy. Today, we have been empowered. We can pay well. We can employ anybody who is good enough to work in banks, telecoms, oil and gas. That is one fundamental change; we are able to attract quality people. Secondly, investment in IT. In Mutual, we invested heavily in IT and we came out with our portal. Today, you can buy our products on the internet. The perception of insurance, the mushroom outlook, the branding has changed positively. I attended a programme at the Lagos Business School and the question came that why is it that we don’t do advertisement? We did not have the money to do it. But now we do advertisements very well. You can see that everything has changed. We are competing with the banks, telecoms and everything to get a good market share. To be able to get part of the disposable income of every employee. A lot has changed and also with the international involvement, you have a lot of stakeholders to enhance business growth. So corporate governance is more pronounced within the industry. We used to have mushroom companies because of the entry requirement, now the surviving companies are what you can call mega professional ethical companies, efficiently run. So this is what has become of the industry.
Where do you see the Nigerian insurance industry in the next five years?
We are going to take over Nigeria’s economy with the way we are going. In fact, where the fundamentals are right, insurance is the father and mother of all other sectors. And this is where we are going. The banks may have so much liquidity; without insurance, they know they cannot cope. The telecoms, oil and gas, virtually, everybody needs the services of insurance. And even for the common man, who thinks he cannot afford even insurance, Mutual has been smart enough to create value for them by coming up with products as low as N100. Everybody will have the benefits and value of insurance.
Many of you have started exploring foreign markets, most especially the West African market. How profitable are these markets, considering their population and level of development?
Today in Sub-Saharan Africa, the insurance industry in Nigeria is the most developed, the most sophisticated. Nothing is happening in other countries (sub-Sahara Africa). If we are able to take our expertise in every facet of insurance, in underwriting, claims management, marketing, production, in product development, in service delivery, investment management, we are going to have a major impact on the economy. I just came back from Liberia; I know the experience. We had meetings with all the major operators in every sector, oil and gas, plantations, all the stakeholders in that economy; we know we are in for big business.
The Minister of State for Finance and the Commissioner for Insurance have said that soon the insurance sector will overtake banking sector, and it will be contributing up to five per cent to the GDP, against the below one per cent it contributes now. How do you plan to achieve this?
That is exactly what I said. I said it is going to be the father and mother of all other sectors. To achieve that, we are strategising our plans in Mutual Benefits, and I know that my other colleagues are not sleeping. They too are strategising, coming up with innovations, coming up with new ways of getting things done; we will get there. Today, if you do the analysis of the paid up capital of most of these banks, you will find out that some insurance companies today are well positioned in terms of funding than the banks. You have a bank that has N3bn paid up, but is able to raise share holders funds to N25bn. But we have a Mutual Benefits that is made up of a paid up fund of N4bn. So if you look at it critically, if I put N5bn down today, chances are that I will buy good stake in any blue chip venture. So this is how we intend to achieve it. We are growing gradually. And, remember, the consolidation was concluded just about a year ago. If we are able to make this remarkable impact for the national life within the first 12 months, project the next five years, we will see what is going to happen. That is why I told you that we are going to be the father and mother of every sector of the economy.—-Punch
