Could you give us a brief historical background of AIICO since its inception in 1963 as a collection center ?
There was a strategy in the early sixties to enter markets that had opportunities for growth in life insurance. Nigeria was one of the first markets entered in Africa. We developed life insurance business at that time and then as the oil boomed and the economy grew we consolidated our business. Later, we entered into the pension employee benefit area as a logical extension to the group life insurance. Then several years ago we expand into property insurance or general insurance ; we have several lines that we pursue in that regard .We have about 1,5 billion N revenues, assets over 2 billion N and we are still the largest individual life insurance organization in the country. So this is a fairly good parameter about the economic situation in the country, which has been stagnant over the last few years. Democracy being reborn with the new dispensation, there is a "Renaissance" of that process. We are hopefully confident that the democratic process will solidify and that the rule of law will again be in effect, that the constitution will be amended according to the majority of the wishes and that the economy can start to attract foreign investment.
We just concluded a couple of weeks ago a Nigerian-American Trade and Investment seminar in Abuja and it attracted primarily American investors interested in four areas: energy ,telecommunications, solid minerals and agriculture.
What message would you relay to foreign investors looking at investing in the insurance sector in Nigeria?
I think that for foreign insurance companies to move in they would want to look five to ten years in the future - which is a difficult exercise to do. You have to look at the economic growth ; right now, I hope with the new government and as a result of the Nigerian economic summit that recently took place, that they would be certain measures adopted to enable the middle class to grow. There has been a shrinking middle class over the decades - may be over the last generation - and that has to be reversed . There are so many disadvantaged people and very little advantaged people and in between there is hardly anyone. So, for an insurance company to grow and to survive in this environment there has to be some measures to foster the economy. I therefore imagine a foreign insurance company would have to look long and hard at the growth prospects.
But the potential is there and moreover, by the year 2050 Nigeria should be the sixth largest population on earth.
That is fifty years away, two generations away but that is a good attitude to have. Life insurance has a thirty year horizon and more. As we have been in the business for 36 years, we have people who bought policies 35 years ago and are maturing ; so they are collecting the benefits. Today we are marketing policies throughout the country with our 550 agents who are selling thirty to thirty five years policies. So, we expect to be around and the economy to grow.
Life insurance portfolio has taken a plunge while non life policies have soared. This contrasts with the picture of life assurance in other African countries where life insurance constitute a sizeable portion of the market. How do you explain this situation ?
That is perfectly likely and understandable given the economic situations in those countries and their recent economic history. I refer back to my earlier statement that the economy has been stagnant for five years. When people bought insurance policies five or six years ago, they entered into the economic recession having to make decisions about paying an insurance premium for something in the future or putting bread on the table today and paying school fees for their children when the education system is operating. So, we have seen a decline on the renewal activity of policy holders for the last few years. But again, we have to look at the long term arising and we are confident that the economy will turn. We are actually noticing some rays of light pointing toward a brighter future.
Such as ?
Inflation: reasonable ; disposable income in some sectors increasing slightly - private sector primarily. We have seen some "unusually high earnings" from certain financial institutions ; as compared to the previous years, their profits might be up to 40,50,60% ; and we hope those type of earnings are being passed to the employees in that sector via their wages. And there is also a little bit of foreign investment coming in - mainly in telecommunications.
The disposable income is marginally increasing but if the economy wants to grow, savings would have to be generated.
Absolutely. There has to be fiscal and monetary legislation passed to enable the economy to create personal savings. You have to meet your regular obligations in order to save which means the net disposable income has to increase without changing the tax structure.
NAICOM has recently set up a committee to look at taxation. What are the issues surrounding this question ?
You have so many taxes in the private sector as well as for the individual that it is a mountain into itself almost un-scalable because of the complexity and the difficult operating environment . I think the government has recognized there are some issues to be resolved including the simplification of the tax code. | Among all the issues affecting the performance of the insurance sector what would be the ones to be addressed in priority ?
First and foremost, the rule of law has to exist which will lead to political stability, and then economic well being, so that such economic policies adopted remain for the long term.
How do you explain the lack of confidence of the public towards insurance ?
That is a poor assumption. We are selling thousands of new assurance policies every year; we are getting the message out to the people. Those are the people in the upper economic sector, but also through group insurance, we get the message out to employers and to their employees which are in far greater numbers than individual policy owners in the country. There has been some concern within the industry that the public has picked up in terms of some regulation issues; there is always going to be the private sector kicking against regulation, the public control factor and vice versa.
Let's talk about AIICO. What are the guidelines of your strategy for the future ?
Our strategy is to penetrate every conceivable market niche where there is an opportunity to bring insurance to people at a reasonable profit level. I am concerned for the industry by the fact that there are well known competitors who have a habit of artificially lowering the rates to get the business below acceptable normal underwriting levels. They are gambling that the claims won't happen. That is a bad gamble. The basic underwriting golden rule is: you write at a rate appropriate to the risk involved and a 10 to 12% profit margin is acceptable. Sometimes you end up less, sometimes a little bit more but that is an acceptable range. So I am concerned with the complications in the industry in that regard. We have also seen constructive efforts from NAICOM to cut back the number of insurance companies that really should not be in the business. In line with that, you have the Nigerian Insurance Association ( N.I.A ) who has a very powerful spokesperson for the industry to get issues that affect the majority of its members to the public and for NAICOM to act accordingly. NAICOM and the NIA are working together to review the insurance decree which was passed during the Abacha regime. So both groups, the private sector and the public sector are listening to each other and are moving towards resolution. As that is being done, the image that the public has, with respect to insurance companies, should improve. And that means more business for us.
AIICO is a major player providing insurance to corporate clients. How successful would you say you have been ?
We handle many multinationals and it is safe to say that we handle the majority of the multinational business in the country - over 60%. I think it is the fact that we have been here for a long time. We try to be a company that does not make extravagant claims and keep to our word. We say what we will do and we do what we say. In specific sectors we have seen an increase in economic activity. The oil price per barrel has increased substantially over the last twelve months ; telecommunication opportunities are awaiting for foreign investments..
Where would you like to take AIICO in the next millenium ?
Further than we already are. And that is going to be through a lot of teamwork and again recognizing opportunities and entering particular market niches as we see them. And by introducing new products and being a leader in that regard. We try to see what the customer wants . Right now most consumers are looking at their individual lifestyle, economic needs, looking at something which will guarantee a certain savings accumulation which they can receive periodically.
What has been your most challenging and rewarding experience ?
I think the most challenging and rewarding experience has been working with the Nigerian people. I have never seen such faith in day to day living from any nation I have been in before, as I have seen it here. The faith that tomorrow will bring a better day, and if not tomorrow, the next day. It is reflected certainly in our staff, our management team, and work ethic but it is also reflected when we go out, meet and service our clients. It has been very challenging to understand this environment and yet rewarding to live in it and work with them.
What final message would you address to our readers ?
Nigeria should still be perceived as a country with great potential and as the democratic process solidifies into the appropriate foundations and grows as any evolving democratic society should, there would be economic growth and opportunities for investment gain. Now is a good time to coming in. Think about !
Thank you very much Mr. Hansen for your comments |
