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1. REPOSITIONING THE INSURANCE INDUSTRY FOR A PROSPEROUS FUTUREBYPRINCE LAFOR OLATERU-OLAGBEGIMANAGING DIRECTOROCEANIC INSURANCE GROUPAt TheInsurance Future Summit 2008, Transcorp Hilton Hotel AbujaApril 7, 2008

2. OUTLINE • Introduction • Adopting Effective Capital-Strategy mix • Image, Awareness, Branding • Technology • Life Insurance • Service Delivery • Marketing • Human Capital Development • Nigeria’s rating in Africa • Conclusion

3. Introduction • While insurance companies are known to play dominant roles in developed economies, the sector in Nigeria is the exact opposite – the insurance industry in Nigeria contributes less than One percent to the nation’s GDP. The level of insurance awareness in Nigeria, a factor that influences the degree of patronage, remains one of the lowest in the world. • Records sourced from the industry show that Nigeria, with a population of over 140 million people has an insurance density of about 5-10%, as against 40-50% in some developing countries, and 90-98% in most developed countries. • Today, however, all indices point to the fact that Nigeria’s insurance industry is on the precipice of a new dawn. The insurance horizon in Nigeria now features a genre of insurance operators that are determined to deploy multiple competencies, best practices, periodic recapitalisation, sound corporate governance, adequate reinsurance treaties, and viable investment management strategies to drive service delivery in the industry. • In addition, the performance of insurance stocks in the capital market in recent times shows that a new chapter has just begun for the sector: the penny stocks of yesterday are now creating wealth and empowering more Nigerians.

4. Adopting effective capital-strategy mix • The future in deed portends wonderful tidings for the sector. However, we must sustain the momentum to ensure we make Nigeria’s insurance industry a substantial contributor to the nation’s GDP and a dominant player in the financial services sector regionally and globally. • On September 5, 2005, the finance ministry announced new capital regimes for the various classes of insurance business. The minimum requirement for life insurance rose by 1,233 per cent from N150 million to N2 billion; general insurance capital increased by 1,400 per cent from N200 million to N3 billion; and reinsurance capital rose by 2,757 per cent from N350 million to N10 billion. Adequate capitalization will facilitate robust IT development, strategic branch network expansion, hiring/retention of quality staff, continuing research and product development, and undertaking insurance of specialised risks. In the new dispensation, we cannot afford to recapitalize based on compulsion from the government. • It is imperative for every player in the sector to clearly identify a business strategy, and continuously seek to attain a capitalization level required to drive the strategy with respect to changing market trends and realities. One of the greatest problems in the sector is the predilection of insurers to be all things to all customers. We need to concentrate our strengths on well thought out strategies and back them up with the right capital and competencies that will ensure impressive returns

5. Image, awareness, branding • Professional and strategic measures should be adopted to drive sustainable insurance awareness campaigns. These campaigns should address misconceptions concerning the sector’s operations, explain the relevance of insurance, and reassure the insuring public of the emergence of an insurance sector that is out to cover risks efficiently. • Operators will also have to embark on re-branding efforts to acquaint their existing and prospective clients with their focus and goals

6. Technology • Technology has changed the way business is done globally and we have to follow suit. A meaningful portion of our capital should be devoted to efforts targeted at upgrading ICT infrastructure to support inter-branch on-line services, market research/data analysis, and provide solutions to clients’ needs/enquiries speedily. • We also have to acquire software packages that can drive basic insurance processes, including documentation, claims management, stamping, endorsing, highlighting, routing and attachment of all related correspondence. • Achieving this will translate to a marked improvement in insurers’ turn around time, and a high degree of reduction in clumsiness, errors and fraud. In addition, company information both on its internal and external publics can be electronically stored with security features that are specific to the company

7. Life Insurance • Here is a goldmine that has remained unexplored by the insurance sector. With a population of over 140 million people, the insurance sector has a huge market that could make life insurance the industry’s chief premium earner. The Pension Reform Act 2004 has since made group life assurance covers mandatory for organizations with at least five employees. This portends huge benefits for the sector. According to the 2006 Sigma report anchored by Swiss Re, the life sector in South Africa raked in N4.20 trillion ($33.1 billion) premium in 2006, while Nigeria earned a paltry N14.2 billion ($112 million) within the same period. • Given the vital role of life insurance business in premium income generation and mobilization of long term funds for growth of developed economies, the insurance sector should declare something akin to a “State of emergency” to facilitate a fast paced development of this sector in the new dispensation. • The dearth of data in terms of critical performance indices in the life sector and inadequate market research and product development strategies have been the nemesis of life business in Nigeria. • Consequently, we need to embark on sundry market research campaigns to adequately assess market opportunities in life business and deploy re-positioning strategies that will involve the enhancement of personalized life products and massive awareness and insurance education campaigns.

8. Service Delivery • If the banking sector has learnt anything from the consolidation exercise, it is the fact that the average customer, in addition to desiring products tailored to his unique needs, now wants the ability to interact through multiple channels on a daily basis. • Effective customer service is globally acclaimed as one of the keys to winning new clients, retaining current customers, and increasing revenues and profits. We have to overhaul our service delivery mechanism in a manner that will enable clients conclude their transactions with ease, convenience, and at no additional costs. • Several studies and surveys have established the fact that companies fail when their products fail, and products fail when customers reject them. In fact, going by the basic nature of enterprise and the fundamental role of marketing, products must follow what the customer’s need, while the packaging and delivery must exceed their expectations. • Meeting and exceeding customer expectations: this is the level the insurance sector should aspire to. First, we should seek to know our customers’ problems, goals, aspirations, and strive to obtain feedback from their customs as regards their assessment of their product/services at point of sale, through questionnaires, phone discussions and focus groups.

9. Marketing • To ensure efficient product presentation, our marketers must have adequate knowledge of the features and benefits of the products, knowledge of the companies they represent and insurance business generally, and knowledge of macro-economic trends. • However, having the right products translates to nothing without an effective market strategy. An effective market strategy will help us assess our market share, growth estimates and potential, profitability and cash-generating power of each existing and proposed business segment. Our market strategies should also lay emphasis on effective distribution channels, pricing, and hitch-free premium collection platforms.

10. Human capital development • We have to assemble a formidable human capital profile to ensure the insurance sector is effectively repositioned. The banking sector has since realized this and every bank keeps its antennae alert to snap up new talents that can add value to its operations. In addition to sourcing and recruiting new talent, we need to institute customized training and development programmes that will keep our staff abreast with evolving trends. Remuneration should also be reviewed to enhance staff loyalty, dedication and retention. According to exerts, we need to do the following to achieve a functional human capital base: • Design a Human Capital Strategy • Assess Current Human talent for fit • Aggressively Recruit new talent • Train and develop the workforce • Engage in aggressive retention strategies. • Essentially, we all have to align our human capital needs with our strategic direction and ensure our workforce compares favourably with respect to industry standards.

11. Africa’s premium income in 2006 (US$million) • Country Nonlife Life Total Amount • Algeria 586 39 625 • Angola 624 63 687 • Egypt 487 356 843 • Kenya 406 186 592 • Morocco 1,206 469 1,675 • Namibia 151 358 509 • Nigeria 605 112 716 • S/Africa 7,624 33,106 40731 • Tunisia 550 54 604 • Source: Sigma Report

12. Conclusion • Nigeria’s insurance sector has finally taken off and is destined for greater heights. “We are being transformed even at this very moment by our extraordinary velocity and by the emergence of a newly insistent force – that is the power of NOW” by Stephen Bertman. Insurance is indeed the future of Nigeria’s economy and financial services sector. • But we have to seize the moment Carpe Manana before the future seizes you. We also have to remain committed to excellent service delivery, prompt payment of genuine claims, research and development, staff empowerment, best practices and good corporate governance.

13. Thank you for listening