Stakeholders worry over domination of insurance sector by 12 underwriters

The recent disclosure by the Nigeria’s Insurers Association (NIA) that only 12 out of over 50 insurance companies dominate the industry is a source of concern, if insurance sector is to move forward and occupy its pride of place in the country, reports MESHACK IDEHEN.

The lack of depth that some analysts say pervades the insurance industry in Nigeria may be more obvious with the disclosure by the Nigeria Insurers Association (NIA), that only 12 underwriting companies are presently controlling the largest chunk of the insurance market in the country.

This disclosure, some industry observers noted, is coming at a time the insurance sector is striving to improve on its overall performance, and effectively compete with the banking sector in the provision of financial and other related services.

Following that revelation by the NIA, stakeholders told National Mirror it was important to correct the now glaring lopsidedness in the industry if the sector is to move forward in a wholistic manner.

A former member of the Governing Council of the NIA, Chief Robert Ossai, told our correspondent that all policy interventions by industry regulators, the National Insurance Commission (NAICOM), would fail, if concrete efforts are not made to even out the spread of insurance business amongst underwriters in the industry.

According to him, “A time will sooner than later arrive when some operators will believe rightly or wrongly that the playing field is not level enough. Such underwriters will want to do something that will jeopardise or even reverse whatever gains that have so far being recorded in order to position their own firms for a fresh start”.

Describing the situation where only few underwriters control over 90 per cent of the industry as an anomaly and a sign of irregular growth, insurer and economist, Mr. Nelson Masingbe, said the development has to be quickly corrected if the insurance industry is not to fall into the hands of cartels and cabals the way other sectors like banking and oil and gas fell at some point.

Masingbe, who is also a risk expert explained that it was obvious many of the operators listed as part of the few controlling the industry were not happy with the disclosure by the NIA, saying the reason is because greater attention will now be focused on them by both their shareholders and the regulators.

He also noted out that allowing the trend to continue will not only discourage new entrants from going into the industry, but that foreign direct investments into the sector will become frozen, while the potential for job loss in the industry will become higher, due to the slim chances of survival that the smaller operators have.

It would be recalled that in the NIA report, which was released less than a week ago, the market positions of the firms were determined by their gross premium income written in 2011.

Insurance analyst, Mr. John Idokpa, pointed out that if no significant changes have occurred in a sector for a gross premium income report based on 2011 indices, that it was obvious such sector is grappling with inherent challenges.

He said if something was not done urgently by NAICOM that the distribution pattern of gross premium income for a lot of years to come will not change, as the big players will continue to dominate the market at the expense of the smaller operators and the overall economy.

According to the NIA report, Leadway Assurance Company Limited tops the list of big players with 12.01 per cent of the Nigerian insurance market with a premium of N19.60 billion, followed by Custodian and Allied Insurance Plc, which has 6.17 per cent or N10.06 billion of the sector’s premium.

The report identified AIICO Insurance Plc (Life) as coming next with N10.01 billion of the industry income, while AIICO General Insurance Company Limited has 5.16 per cent or N8.42 billion. Nigeria Employees Mutual (NEM) Insurance Plc has 5.14 per cent or N8.34 billion of the country’s insurance market.

Others companies listed by the NIA as part of the dominant player in the sector are Mansard Insurance Plc, with 4.68 per cent or N7.63 billion, Industrial and General Insurance (IGI) Plc with 4.09 per cent or N6.67 billion; STACO Insurance Plc, 3.97 per cent or N6.48 billion) while Sovereign Trust Insurance Plc has 3.93 per cent or N6.40 billion gross premium from the industry..

Royal Exchange General Insurance Company Limited with 3.61 per cent or N5.88 billion; Zenith General Insurance Company Limited with 3.46 per cent or N5.64 billion; and Mutual Benefits Assurance Plc with 3.35 per cent or N5.47 billion of the industry are some of the insurance firms that also appeared on the list.

Other operators that make up the number of companies in the industry, according to the association, are contending with the left-over left by the big operators

Explaining the cause of such lopsided business activities in the industry, Reinsurance expert, Mr.Obasi Ngwuta, attributed the situation to how many operators go about securing their business.

He said, “While many big underwriters cut corners, drop rates and exploit relationships, the smaller operators are left in the lurch largely because they lack the capacity of the bigger players”. Ngwuta said the situation could also have been made possible because many policy holders receive coverage through their employers.

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