Foremost insurance consultant, Chief Yemi Soladoye has faulted the capitalisation hurdle that the National Insurance Commission (NAICOM) has set before individuals and corporations seeking to venture into micro-insurance business saying, it is too high.
He also advocated an alternative capitalisation model, whereby individual micro-insurance operators will choose their respective capitalisation based on the levels at which they want to operate, ranging from the unit to national.
Soladoye, who is Managing Director of Riskguard-Africa Limited, canvassed this position during the Nigeria Insurance and Pension Award organised by Inspen, an online medium with bias for insurance in Lagos recently.
Reflecting on the topic, â€œUnlocking Micro-insurance Business in Nigeriaâ€ Soladoye noted that the minimum capital requirement (MCR) to operate an insurance company in Nigeria is still the highest in the continent.
He observed that successive increases in statutory capitalisation for insurer have not yielded a commensurate increase in productivity saying â€œwhereas, the industry MCR had increased by 6,250 per cent between 1976 and 2011, the gross premium income had only increased by 1,230 per cent.
â€œThe net result is always the death of old players and birth of new players who will later become old players. This is what puts a question mark on the huge amount of N350 million specified as the MCR for micro-insurance,â€ he stressed.
He wondered what a micro-insurer who wants to operate only in his local community or Local Government would need N350 million for, adding that a national micro-insurance goals and strategy statement together with national business plan and regulatory framework should immediately be designed by NAICOM.
â€œHow many offices does the regulator expect an operator to open with N350 million. Are we expecting Ajose Adeogun style micro-insurance companies, Prado jeep and Ipad managers and is micro-insurance going to be the landing pad, for weak commercial underwriters,â€ he queried.
According to him, the unit and regional approach will reduce cost of doing business.
â€œ Lean structure, modest office, appropriate location must all be specified per unit of office outlet by the regulator. Since the existing insurance operators do not need any new capital requirement to operate micro-insurance, the Indian model of forced-familiarity and the China model of conditional expansion must be explored,â€ he suggested.
Soladoye recommended a five-tier operational model based on capital requirement to secure widest coverage of micro-insurance in the country, saying while N350 million would be adequate for a micro-insurer operating nationally, N90 million, N40 million, N10 million and N5 million would be adequate for those operating regionally, within a State, Local Government and a local unit respectively.
According to him, any foreign insurer willing to operate in Nigeria should be given a mandate on the number and percentage of micro-insurance policies that must form its portfolio over a period of time as well as existing insurance companies in the country.
He also suggested the bulk of small-sized insurance brokers, weak Micro Finance Banks (MFBs) and experienced agents of the existing insurers should be allowed to venture into micro-insurance to give room for consolidation and appropriate learning time.
The expert also advised NAICOM to ensure uniformity of operation, guaranty of relevant and minimum coverage and ease of regulation by developing a prototype application, agreement and claim forms for micro-insurers.
He also stressed the need to save the Nigerian insurance industry from itself through self-appraisal and internal re-engineering if group life assurance and micro-insurance is not to be stripped from its line of businesses.