Boosting Nigeria’s Financial Inclusion Rate through Insurance Penetration

Feb 2020
Nigeria, February, 13 2020 - In a recent survey, the Enhancing Financial Innovation and Access (EFInA) revealed that only 1.7 per cent of Nigerians have any form of insurance policy.

It also noted that this slim margin is linked to the fact that the number of those financially excluded in Nigeria is over 50 per cent of the 99 million adult population. This means that only 38 per cent of adult Nigerians are operating one or more accounts in financial institutions.

It was further disclosed that the financial inclusion rates in Kenya improved to 81.6 percent in 2017 from 74.7 per cent in 2014, and Ivory Coast rose to 41.3 per cent from 34.3 per cent while Ghana reported 58 per cent in 2017, or a 17 percentage points increase from its 2014 figures.

This report which emerged amidst efforts by the Federal Government to boost the inclusion rate definitely throws up more challenges for operators in the financial sector to endeavour to capture all Nigerians into the financial inclusion circle.

It is glaring that more efforts needs to be put into certain policies and sectors like the financial services to fast track the inclusion rate as the exclusion rate is high when comparing Nigeria’s rate to the other African countries listed above.

Basically, financial inclusion according to economists is achieved when all adult citizens have easy access to a broad range of formal financial services such as; savings, payments, credit, insurance, pension and capital market products that meet their needs at a reasonable and affordable cost.

In the light of this, experts have stressed that financial exclusion is a burden that must be lifted in Nigeria, noting though it might not be achieved immediately, but with adequate financial planning through insurance it could be realised.

In fact, industry experts have affirmed that insurance serves as a critical tool for not only reducing poverty but also for assisting those who have emerged from poverty to manage their risk and avoid sliding back into poverty.  Hence, the financial uncertainties that provoke poverty could be better managed through insurance.

Speaking at a recent financial inclusion seminar in Enugu through insurance: challenges and prospects,’ the Vice-Chancellor of Enugu State University, ESUT, Professor Anike Okechukwu, said that with insurance many Nigerians will be lifted out of poverty.

Okechukwu stated that insurance is critical in every country because it reduces the burden of the risk associated with everyday life and through insurance individuals or entities are protected against losses and are supported to maintain financial stability.

While explaining financial inclusion as a deliberate strategy towards ensuring that every adult has easy access to a wide range of financial services, he stressed that negative impacts of financial exclusion are frustrating access to insurance policy of any kind by the nation’s adult population.

Okechukwu emphasised that appropriate financial services can help vulnerable households reduce risk, build resilience, smoothen consumption, safeguard savings, better manage the consequences of unforeseen events and invest in assets and grow businesses and to achieve this, insurance remains strategic.

Going further, he listed numerous ways through which insurance could ensure financial inclusion in Nigeria saying; “Increased health insurance can ensure adequate healthcare for many families and reduce out-of-pocket expenditure. In fact, health insurance is linked to economic growth, and reduction in poverty. The former Minister of Health, Prof. Isaac Adewole, in 2018 stated that 95 per cent of the Nigeria’s 190 million people are not enrolled in any health insurance plan, despite availability of National Health Insurance Scheme.”

He added that another vital area that insurance could cover is education as this could ensure that parents and guardians save up enough money to ensure stability in the education of their wards.

“If education insurance is taken up, the stability in providing quality education is guaranteed even in the event of the death of parents and guardians. Data from CBN, 2018 indicate that less than 1 per cent of Nigerians have access to education insurance despite repeated campaigns.

“Housing or property insurance is fundamental in ensuring that a great majority of Nigerians have access to affordable shelter and protection against natural or man-made disasters. Effectively, if one is covered by housing insurance, it will ensure easy access to funds in any event. As you know, many families are homeless today because they are financially excluded,” he added.

He gave some of the reasons for financial exclusion to include; rural-urban gap, dwindling income, low awareness and weak government policy.

“One of the major reasons for financial exclusion is the number of rural population that do not have access to financial services.  Majority of the estimated 40 million financially excluded Nigerians lack knowledge of the services and benefits derivable from accessing financial services.

“Another major challenge, is the inability of the populace to save as a result of double-digit inflation in the economy. Most families in Nigeria do not have enough to take care of their basic needs let alone save or engage in insurance.

“The extent and frequency of media campaign on insurance is very poor. Most Nigerians have limited knowledge level on the need to take up an insurance cover. This has no doubt affected their perception of insurance and several policies initiated by the Central Bank of Nigeria in the past to ensure financial inclusion are weak and unstable,” he pointed out.

Suggesting ways forward, he said “Aggressive media campaigns should be launched to educate Nigerians on the importance of insurance. Such campaigns will enrich the knowledge level of both rural and urban populace on the need for insurance.

“Effort must be put in place to create jobs for the teeming youth. More jobs, no doubt, will increase financial access. This is because reduction in formal employment will lead to reduced in disposable income and savings. This will ultimately affect insurance.

“Finally, all should embrace insurance, as that is the key to sustainable financial inclusion. There is no future without insurance,” he stated.

On his part, the Managing Director/CEO, Achor Actuarial Services Limited, Pius Apere, advised that microinsurance; a form of  insurance designed for the low-income earners, market, low valued policies, micro and small-scale enterprises in relation to cost, terms, coverage, and delivery mechanism, should be increased in Nigeria; specifically targeted at the informal sector which is yet to be keyed into financial inclusion.

According to Pius, the opportunities arising from microinsurance is not limited to increased insurance penetration but also includes; provision of social benefits, reduction of poverty, ease of securing small business loans and generally financial inclusion.

He said “The local population who purchase the micro-insurance will benefit from having insurance at a lower cost than a traditional/conventional insurance product. Micro-insurance enables individuals who would not otherwise be able to afford it to purchase some degree of financial protection. Those on low incomes are more vulnerable to adverse events, having fewer savings to support themselves in times of need. They need to be financially included to avoid long age poverty”.

Source : The Sun

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