A financial analyst, Festus Kayode Arishe is the Managing Partner and Executive Director of Eminent Financial Limited in the United Kingdom. He spoke about a number of issues, from banking, Artificial Intelligence (AI) and the unpopularity of Insurance policies amongst Nigerians, comparative analysis of Insurance in Nigeria and UK, the imperativeness of the scheme, solutions to the challenges. SEGUN KASALI brings the excerpts.
What is Eminent Financial Limited into?
We are appointed representatives, open work partnership. One of the largest networks in the United Kingdom. We are one of the fastest growing firm in the sense that we have grown significantly by size and business. I have been in the industry for about 20 years. Insurance or protection is one of our major products and of course we know that insurance is the bedrock of financial planning. And I always say this to people that insurance is a need not a want.
How do you mean?
If you have a life that is when you need a life assurance. You can’t go to the graveyard and say take a life assurance policy. It is for the living that needs a life to protect. It is when you have income that you need to protect your income. It is when you have a house that you need to protect your house. If you are a parent that your children depend on you, insurance becomes a need for you in the sense that either you are dead or critically ill, who and how are you going to maintain the lifestyle of your family or to secure the future of your children particularly their education or maintenance of their lifestyle, shelter, food and basic necessities of life in general. So, it is a need because you have children that depend on you financially. You need to cater for them. It is not a want. You don’t have to enjoy the process. You didn’t have to love it. You don’t even have to agree. It is part of your responsibility to provide for the people that you brought into this world and the people that depend on you financially. That was why I said it is a need not a want.
In analogy, it is just as if someone has a medical condition. If a doctor should diagnose that you have high blood pressure, of course you don’t want to die, isn’t it? And in that process you need to take medication. Of course, you need to pay for that medication. You need to swallow that medication. That means in the process of you taking your money from the wallet to buy medication, it is painful. You are losing money. Taking that medication daily is not that smooth; it is also painful. Despite the pain, you need to take the medication in order not to die. The same thing is applicable to insurance. That is why it is a need; you need to have it because you don’t want your family to beg for food or bread in life. It is something that you can prevent.
What is your assessment of the state of insurance in Nigeria?
In Nigeria, we are a developing economy, a developing country. That is the word they call us. Nothing is perfect, and truly nowhere is perfect in the world. In comparing what the government is providing in terms of support system, system in the United Kingdom is advanced compare to that of Nigeria.
The banking system in Nigeria has drastically improved but the insurance system in Nigeria is still backward. For instance in the UK, direct debit is being collected by monthly bank payment and I think few banks in Nigeria have started doing that as well. For you to have a very effective insurance company, you have to be sure that your premiums will be collected accurately. The system used in the UK is by direct debit. There is also this belief that insurance is a fraud, and that it does not pay claims. It could be cultural and lack of understanding. Even in the UK before maybe in the early 40’s or 60’s, insurers might not want to pay claims because they are responsible for paying the claims directly. But nowadays, insurers also reinsure themselves. The insurer that reinsure them is the one that is responsible for the risk in terms of reinsurance. I think the most significant part that we need to address is education about knowledge and use of insurance.
At times, we hear people say my religion does not permit me to take insurance. God created insurance. Just the way God created the life we use today, the telephone that we use to communicate. In the early days of life, those things were not in existence because they were yet to be discovered. Insurance is a financial tool just the way we have bank account as a financial tool. So, insurance is a financial tool to plan for the future. It is similar to saying I believe in God but I don’t believe in providing for my family. Both Bible and Quran acknowledge the fact that a good man should provide for his family. A man that cannot provide for his family is worse than an infidel. So, it is a thing of responsibility and the culture. The culture needs to change in Nigeria and then the system will be created and we will begin to have a viable insurance providers that can provide services in Nigeria. In Nigeria, we need more insurance than it is in the UK.
Why do we have that?
The mortality rate is quite high. Our roads are quite bad and that is the reason people are prone to accident on a daily basis compared to a developed world where the roads are quite safe and motorable. So, all these factors to me are a process. We need the right people with the right mindset to create the system or give the system the power to be able to do the things they need to do. This will require some time because Rome was not built in a day. We need a bit of time to have what is in the UK but we need to have change of orientation and change of mindset about the product itself just the way we bought into banking. There was a time in Nigeria people did not believe in leaving their monies in the bank, instead preferred to put their monies under the pillow. But now, they trust the banking system in Nigeria. People put their monies in the bank because they think the bank is safe. It will require some time, education and sensitisation of the people and at the same time help of the government in creating a reliable insurance system.
What is your advice for the government in this regard?
The job of the government in any society is to create an enabling environment for the people to operate. We have brilliant guys in Nigeria and across the globe that can run a successful business particularly about this topic we are talking about. It is about providing the necessary amenities or resources.
Electricity for instance is very key to running a very operational business. And at the same time, insurance underwriting is about risk business. So, if the risk perceived by insurance companies is very high, it means the premium will be very very high, and because of high premium, people might not be interested in paying that high premium based on the kind of cover they need or they can’t actually afford it. So, that is one aspect. Insurance is something that is kind of intertwined with other factors in the economy. But, if the banking system can work, that can be replicated in the insurance industry because the people need it. It is about scaling it up for the general public.
What about the private sector intervention?
If banking can work, insurance can work. And kudos to those operating insurance businesses in Nigeria. I know quite a number of them who are doing very well already. Scaling up their production and expanding across the country and at the same time partnering with the banks to see how they can make things easier is of great concern. For instance, most banks can be big distributors of insurance products. It is just about expansion. We have a lot of youths that are unemployed. So, agency business is a big one across the globe because we have huge population and that is a big market to explore – Market in the sense of helping people to create jobs and at the same time helping people to secure their future. What makes an insurance company good is the payment of claims. If genuinely insurance companies are in business for payment of claims, the insurance industry will explode in Nigeria because people know they can make claims easily and of course without element of fraud. If they know claims will be paid, they will build confidence in the industry.
What would be the ripple effect of AI if deployed in the insurance sector?
The world is about 10 miles ahead of Nigeria and Africa in terms of using Artificial Intelligence (AI) in their business operations. I think my encouragement would be that we should open our mind to technology in Nigeria the more, and of course to invest more in technology in order to get involved in the world stage because AI is going to take over the world. AI will make your life easier as an adviser. Starting from even preparing report for your clients, researching product for your clients, preparing documentation for your clients, AI will be a fantastic tool to make your job easier. With AI, I will be able to attend to more than 10 clients a day because if I know what I want to do I can use AI to get the job done quicker. AI is to help you in terms of speed and quality. I believe AI will play a huge role in admin work. AI will be useful when it comes to underwriting.
Underwriting?
Yes, what is underwriting? Underwriting is about assessing the risk of individuals or the case you are bringing on board to be kind of assessed if the risk worths it. If the risk worths it, how much risk are we taking? Artificial Intelligence is about access to information. Underwriting in Insurance is about permutation and combination. With AI having the kind of brainbox of combining information from various sources, it can help to quickly make a decision about a case.
Using Life assurance as an instance, at times some clients are overrated because of the perceived risk through the underwriting. But, if Artificial Intelligence (AI) is involved, there will be accuracy of the assessment of the risk the insurance company is taking, and there will be accuracy in the assessment of what will be charged as premium. Instead of you doing linear programming and all that, AI will put all those things together. It is just going to instruct you to assess this. And the person at the back end here can make a decision because AI is more accurate than human. AI has more information than human.
With AI, would there be job loss?
I don’t really buy the idea of job loss due to AI. AI will not only create different jobs but also makes things easier for everybody.
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