With the recent Central Bank of Nigeria (CBN) directive that universal banking would be phased out soon, reprieve appears to be on the way of insurance companies who have been apprehensive about their capacity to excel. However while this may be good omen for the stand alone insurance companies, industry watchers opined that the best weapon available to insures is for further recapitalization and more mergers and acquisition. This, according to them, will reposition the industry for greater strength and ability to absorb the post consolidation challenges.
Mr. Wole Olajide, veteran insurance practitioner opined that the increasing foray of banks into insurance, though an indication of public confidence on the industry, an indication of the industry’s viability, the unfolding situation is a clarion call on the insurers to put their house in order.
According to him, the capital base of banks which brought the number of banks to 25, from its weedy and shaky number was what earned it the vast advantage while calling for a forceful merger by operators as a way of consolidating on on-going reforms in the industry.
Olajide warned that if this is not done, the little gains that the consolidation has achieved would be rubbished, adding that the insurance firms profile may not only dwindle but may even be swallowed by the banks which will emerge stronger in their strict adherence to core banking services.
He suggested that rather than having as many as fifty insurance companies, mmany of which are only maintaining big presence in selected cities, insurers should merge to a maximum of ten mega insurers of world ranking.
In pulling resources together, analyst believes that capacity building should be given accelerated boost. This would reposition them to compete effectively.
However, analysts believe that one corresponding area which operators need to focus on is capacity building. Their position is that given the rapid development which the industry has witnessed, enhanced capacity building, may be one of the greatest challenges facing its development.
Joseph Ako, insurance consultant and trainer stated that the rapid growth in the sector needs to be complemented by tools for improved fortunes. He therefore, tasked operators to embark on capacity building through sponsorship of seminar, conferences and other areas that would grow the industry further. He called for an All stakeholders summit with a view to fashioning out sustainable policies for the overall interest of the industry. He stated that there was a greater strength in pooling resources together than having insurance companies who cannot be among the top insurers in the world.
He commended the organizers of the Insurance Future Summit held in Abuja but cautioned that while it may be expedient to sponsor such for a, it was also desirable to evolve increased “home grown” conferences which will put the local operators on their toes.. Ako also called on operators to be more involved in relevant community sponsorship as part of their corporate social responsibility. He explained that the insurance sector has not been very prominent in this regard, a situation which as placed insurance business as superficial before the public who correspondingly view their services as undesirable.
According to industry watchers, the new financial strength of operators makes it mandatory for more branches to be established. If new branches are thus set up to match the growth, they content that the situation calls for customized training and development program which will not only make operators to be attuned to current market trends but also make their services to meet the growing demands of the insuring public.
He advised operators to aggressively pursue capacity building as it remains the only weapon needed to sustain the accompanying increased returns on investment, enhanced profit margins and strategic service delivery.
Corroborating, The insurance consultant challenged operators to embrace the dynamic innovations and service delivery platform of the banks. Unless this is done, he said, banks may swallow up 50percent of insurance core services, especially against the background of rising acquisition of insurance firms by banks and the existing incursion of banks into some traditional insurance businesses.
To be able to manage the huge demands, which the post-consolidation will herald in the sector; emphasizing that capacity building poses a big challenge in meeting sustainable capital adequacy, human resources development and upgrading of information Communication Technology (ICT).
Still on strategic alliances, this analyst explained that such would allow for uniform services such as the one being rendered by banks presently through various services such as e-banking.