THE CHALLENGES OF ACCESS TO

INSURANCE SERVICES IN AFRICA

-THE ROLE OF

PROFESSIONALS

THE CHALLENGES OF ACCESS TO INSURANCE SERVICES IN AFRICA -

THE ROLE OF PROFESSIONALS

PART 1

INTRODUCTION:

Insurance Supports The Economy:

An Overview of the Role of Insurance- Risk Transfer: Sharing and Spreading- Risk Improvement - Employment- Investment

General Apathy of the Public - Limiting Factor

Ignorance of the role of Insurance

Image battered by practitioners (professionals)

Who is a Professional?

• Profession a term derived from Latin: “to swear (an oath)

• A Professional swears to an oath of adherence to ethnical standards:

– Practitioner/Client Confidentiality

–Truthfulness (Utmost good faith)

–Expertise in one’s calling

–Uphold the good name of the profession

Trade or occupation transforms itself through development of formal qualifications based upon education and examinations

The emergence of regulatory bodies with powers to admit and discipline members and some degree of monopoly rights.

FORMATION OF PROFESSIONS

Process by which a trade turns into a profession.

(a) Establish activity as full time occupation(b) Progress through establishment of training

institutions

(c) Formation of professional organization(d) Struggle to gain legal support for exclusion (e) Formation of code of ethics (f) Regulation by statute, with responsibility

for enforcement delegated to a professional body.

PROFESSIONALISM

Profession• Vocation founded on specialized educational

training

• Purpose - supply disinterested counsel and service to others for direct definite compensation (wikipedia).

- application of specialized knowledge of

a subject field or science to fee – paying clients

(Oxford Dictionary)

TRADE• A voluntary exchange of goods/services

and the mechanism which allows trade is called a market.

• Trade by barter, involving direct exchange of goods/services was the earliest form of trade.

IS INSURANCE A TRADE OR A PROFESSION?

PART TWO

MEETING THE CHALLENGES OF ACCESS:WHAT PROFESSIONALS SHOULD CONSIDER.

(a) Product Design (b) Distribution Channels(c) Professionalising The Industry(d) Government Intervention

PRODUCT DESIGN Relevance of traditional Lines New Products as media hype Personal lines non-existent Micro Insurance Schemes Absence of Credit System ART Schemes – Necessity is the mother of invention.

DISTRIBUTION CHANNELS

• TRADITIONAL Agents Canvassers (captive/exclusive agents) Brokers - Dual Role - Professional

Competence Companies - Composite, Life,

Non-Life, Mutuals, Friendly Societies

DISTRIBUTION CHANNELS

• BANKS - USA - From 1916 National Bank Act

- To 1999 Gramm- Leach – Bailey Act

- UK - Mainly as agents- Nigeria - No penalty stipulated

For compelling patronage.

DISTRIBUTION CHANNELS

• PARALLEL MARKET

• - Organised and well established

- Exploits ignorance of the public

- Hampers image of the industry all the

same

DISTRIBUTION CHANNELS

• ICT

• - Telegraph - Telephone – Cable – Internet

• - Advances in communication technology

enhanced transmission and exchange

of information.

- e-Commerce: Internet platforms make direct sales possible

On line Sales - Survey Reports (Source: Insurance Information Institute, New York) 2007 – Celent Forecast : - Web transactions has greatest growth potential in auto insurance, compared to life and health.

- Web influenced purchases to grow from 70% of sales in 2007 to 90% by 2011.

- 30% of auto insurance sales will take place online by 2011.

2008 – J. D. Power & Associates - (Auto Insurance) - 21% of new customers processed transactions

entirely on the web - However, buyers through local agents expressed more

satisfaction.

On line Sales - Survey Reports (Source: Insurance Information Institute, New York) 2009 – comScore - Online Auto insurance quotes declined by 1% due to weaker consumer demand

- However number of auto insurance purchased on-line rose by 7%

- 2008 figures - On line quotations : over 32 million - On line purchases : 2.4 million

Web sites are improving from consumer view point (Customer Respect Group)

2007 - 5% of survey offered on-line purchasing of policies

2008 - 23% of site surveyed did.

- More real time interactive chat sites, telephone number on every page

- More helpful email replies; faster response, Contact – Rep. buttons

PROFESSIONALISING OUR INDUSTRY- CIIN Data (More Water Yet None To Drink)

Pricing Probability Theory – Law of large Numbers Frequency and Severity of Risk Too High Rates - loss of market to competitor in an oligopolistic market. Too Low - subsidizing others with our balance sheet

- inability to meet obligation leading to more crisis of confidence

- Accurate Pricing - Theory of discrimination

ICT - Enhances data collation with speed and accuracy - Exchange of data – albeit limited but material to right pricing

Ethical Issues: “Marketing” a term abused.

• Documentation

- Contra Preferentem Rule of interpretation

- Plain language

- Print size

• Claims Administration: From one extreme to the other:

- Yesterday: Getting claims was like water out of a rock.

- Today: Camels pass through the eye of the needle

- ICT - Data Collation and Exchange of Information.

Human Resources: • A Company is like a human body with many parts – the

smallest of which is indispensable.• Competences in every area.• Effective coordination of human/material resources • The strength of a chain lies in its weakest link

Trade Group• Passing the buck• Collaboration not confrontation: Rates & Terms• Consolidation not cremation : Premium Payment• Monitoring of Business flow in and out of our region

GOVERNMENT INTERVENTION• Policy Statements: Local Contents Policy

- Sinking Fund for Government Assets

• Legislation- Tax- Pensions Reform Act

- Employees Compensation Act - Cabotage Law - Review of Insurance Laws

• Supervision/Regulation - NAICOM has become more proactive- leading marketing drive

Government Bailout:

• AIG got USD 85billion loan from FG USA

• Any hope of a bail-out in this Region?

PART THREE

• Conclusions & Recommendations

THANK YOU