AXA Mansard: Nigerian insurers face ‘regulatory chokehold’

In a country where 80% of the population live on less than $2 a day according to the African Development Bank, micro-insurance should be a way to pull in many more customers – and to mitigate the risks for people who do not have savings to fall back on. But, as with other areas of insurance, policy-makers have not supported the sector. Regulations have “dragged us back”, says Rashidat Adebisi, head of retail solutions at AXA Mansard in Lagos.

• To offer micro-insurance, AXA Mansard was told by the regulator that it needs to set up a new entity to operate. This is not cost effective, Adebisi argues, as a new, paid board would be needed as well as a deposit with the central bank. “I don’t see how to do it.”
• She describes the regulatory stance on micro-insurance as a “regulatory chokehold” that is holding back penetration. “Regulators need to be a bit more flexible, to test and to learn.”

Since 2014, AXA Mansard has pursued the aim of becoming the market leader in Nigeria’s retail insurance, and has not yet managed to make it into the top five. The company’s gross premiums rose 26.5% in 2018, though its full-year profit, reported this week, was down 7%, hurt by the one-off ending of a tax exemption. Adebisi says she is “quite positive” about the outlook for the business.

Insurers need to build trust

The commonly held belief that the resistance is religious or cultural is not backed up by data:

• According to research by Idris Yahaya Adamu, an academic at the Federal University of Kashere in Gombe State, religious values and subjective norms do not explain the reluctance of northern Nigerians to buy insurance.
• Poor marketing strategies and a lack of awareness of insurance are key factors, his work shows.
• Likewise, a survey conducted by Fatai Adesina Badru and Tajudeen Olalekan Yusuf at the University of Lagos found that most respondents did not believe that signing insurance policies is a waste of money, a sign of evil or an anticipation of disaster.

Adebisi agrees that religious beliefs are not the main impediment. A basic issue, she says, is a “lack of trust” among the population and “lack of enforcement” of existing compulsory forms of insurance. “There is a mentality that insurance companies don’t pay claims.”

• Insurance companies need to create awareness, she says, but this is expensive to do.
• Insurers need to set up local branches and to provide their own water and power supplies: “You are your own local government.”

Technology and outreach

AXA Mansard has been trying to make the benefits of insurance more visible and immediate.

• In 2018, the company introduced its First Responder Service, meant to provide immediate assistance to motor insurance customers at the scene of an accident.
• First Responder Officers on power bikes are expected to arrive at the scene of the accident within 30 minutes of the customer’s call. The officers assess damage to customers’ vehicles and start the claims settlement process.

The market is more developed on the commercial side, Adebisi says, while pointing out that the industry needs to do more to find solutions for SMEs. The low overall penetration rate also conceals the fact that pensions and annuities are not included in the overall insurance statistics, and these areas are growing rapidly, Adebisi argues.

Insurance in Nigeria, she says, is “reaching a tipping point” with the advent of new technologies that can make distribution much cheaper.  That leaves regulation as a major remaining stumbling block. If attitudes evolve, she says, “we have a fighting chance.”

Bottom line:

The obstacles facing Nigerian insurance are regulatory rather than cultural. A shift in the regulatory mentality could trigger rapid take-up as new technology eases distribution.