Although insurance is common and subscribed to by many industries with high-risk operations. However, there remains most small to medium-sized enterprises (SMEs) that cannot afford insurance. This led to the emergence of micro-insurance in Nigeria.
Microinsurance explained
Micro-insurance is the protection of low-income earners against certain risks. It operates like regular insurance and requires regular premium payments in a similar proportion to the cost of the risk involved.
A quick look at micro-insurance in Nigeria
Although at the early stage in Nigeria, Enhancing Financial Innovation and Access (EFInA) carried out a survey in 2016.
This survey showed that only 0.3 million from 96.4 million adults use micro-insurance products.
The study suggests that 32.1 million adults would pick up interest in micro insurance services.
Although the current number is low.
The regulatory body also comes into play
The guidelines released by the National Insurance Commission (NAICOM) have been in operation since the 1st of January 2018.
These guidelines are regulations, set of rules, and written standards for conduct for micro insurance businesses.
It became a sign that the country is accommodating low-income insurance distribution.
What factors affect the emergence of micro-insurance in Nigeria?
Here are the factors that have affected micro-insurance in Nigeria as a whole:
- Low awareness in Nigeria:
Very few individuals and small businesses are aware of micro insurance in Nigeria today.
We should carry massive awareness with great focus on client experience. This is to increase the knowledge and purchase of micro insurance among low-income individuals.
- Poor profiling and understanding of the Nigerian micro insurance market:
Micro-insurance companies and operators have not done a good job of analyzing the low-income market. Understanding the needs of customers and how to meet them would go a long way in their product design.
- Sustainability of micro insurance schemes:
The business of micro-insurance hinges on keeping transaction costs low. However, the cost of marketing and running the services seems too high. Especially when you compare with the low purchasing power of the target customer base.
This creates an imbalance and therefore makes micro-insurance look unattractive.
- Weak product bundling and customer value proposition:
The education of consumers is crucial in sparking the increased purchase of micro insurance products.
Products need to look attractive and have testimonial backing. It should also remain easily affordable since the target market is for low-income earners.
- Poor distribution channels:
Micro insurance and its providers still have very inefficient and inadequate distribution channels in Nigeria.
This is something that needs addressing quickly.
The emergence of Micro-insurance in Nigeria
In February 2019, the National Insurance Commission (NAICOM) approved GOXI micro-insurance company Limited as a micro insurance company.
This license makes them the first full-fledged micro insurance operator and enables them to operate as a state composite micro-insurance company.
More insurance companies came on board
Also, before the end of 2019, CHI Micro Insurance Limited got approved by NAICOM to operate as a micro life assurance subsidiary of Consolidated Hallmark Insurance.
The Central Bank of Nigeria disclosed that 12 companies have applied for microinsurance licenses within 2018 – 2019. They made this public through its financial inclusion newsletter for the fourth quarter of 2019.
Why you should patronize microinsurance
Insurance may be out of reach for low-income earners and small to medium-sized businesses. If you fall into this category, you can still get the benefits of having insurance through micro-insurance services.
Micro-insurance is quickly picking up relevance in Nigeria, which we can see in the rapid emergence of establishments with a license to operate.
Conclusion
Measures are in place today to address factors that affect microinsurance. Take a wise step by insuring your assets in one of these companies today without breaking the bank.