The regulatory authority in the Nigerian insurance industry, National Insurance Commission (NAICOM) has been called upon to provide an enabling environment that will ensure the growth of microinsurance in the country. Microinsurance is the insurance for the low income group.

With growing markets and new players, Olumayowa Ajetunmobi, senior partner, AOW Integrated Resources Limited, said an enabling policy environment remains the prerequisite for microinsurance to develop in Nigeria.

He noted that sound policies and regulations for microinsurance in Nigeria will encourage innovation, investment, sustainability and growth in the insurance sector, while protecting consumers and the soundness of institutions. The overall objective, according to him, is to provide value-for-money products on a massive scale to the low-income population.

The growth of microfinance industry has shown that there is a strong demand for financial services in the low income groups, while the development of microinsurance can be seen as a natural evolution for the microfinance sector.

Out of the three billion people who live on less than two dollars a day, he said it has been it has been established that less than 10 million of them currently have access to insurance.

With the recorded success of microfinance delivery around the world, the development of microinsurance has become a well-accepted component for any financial inclusion and poverty alleviation strategy.

He stressed that access to insurance services at an affordable cost to the poor is now seen in many countries as a condition sine qua non for poverty reduction and social protection in the financial landscape.

Having recognised its huge potential demand, an increasing number of insurers, governments and donors have been promoting microinsurance. The supply side of microinsurance is developing greatly, commercial insurers are beginning to show their interest in this new market segment and the informal clients also are beginning to seek integration into the formal insurance system in order to grow sustainably.

According to the Landscaping Study from the MicroInsurance Centre in 2007, it has been found out that in Africa that only 3.5 million people are actually using microinsurance to secure themselves against various risks. This means that less than two per cent of the poor populations have access to microinsurance.

However, a number of successful approaches have proven that the poor are insurable if adequate products and distribution channels are offered to them and they can trust in the services of the insurers.

Commercial insurers in Nigeria are increasingly becoming active also and the informal clients are also seeking integration into the formal insurance system.

The challenges the financial systems face in terms of the broadening of microinsurance lie at the various levels of the financial system hence there is a great need for capacity building in service delivery and new products development, to equip insurers on developing products that meets the needs of the poor.

Apart from the need for development of enabling regulatory environments for microinsurance to develop and to be embraced in this part of the world, there is a need to develop policymaker's know-how and awareness on microinsurance, he further said.

He also canvassed the provision of efficient customer protection and financial literacy, pointing out this is of utmost importance for microinsurance market development.

A thriving microfinance sector and open-minded policy makers are favorable preconditions for market development of microinsurance and donors and investment in this sector, he said adding that it is also necessary to develop a nationwide information and advocacy programme on the benefits of microinsurance.

Source: http://allafrica.com/stories/200904290196.html