INTERVIEW: Some Nigerians see insurance as luxury rather than necessity, says Edu

Oyinjadesola Hafisat Edu has spent half a decade in the field of insurance and risk management. She has a bachelor of science degree in insurance from the University of Lagos and a master’s degree in insurance and sustainable risk management from Glasgow Caledonian University, London.

In this interview with TheCable, Edu spoke about her venture into risk management and how she discovered her passion for the field.

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TheCable: What’s your assessment of the insurance and risk management industry in Nigeria at the moment?

Edu: The significance of Nigeria’s insurance and risk management industry has never been more pronounced than it is today. Escalating economic and regulatory challenges are heightening public awareness of the critical importance of insurance and risk management, which is a positive development. Consequently, the industry presents both significant potential and considerable challenges. There is substantial market potential and growth opportunities. The increasing awareness, coupled with the industry’s currently low penetration rate, underscores its growth potential.

Improvements in market regulation have also contributed to the industry’s expansion. The National Insurance Commission (NAICOM) has been proactive in implementing reforms. Recent regulations, aimed at increasing capital requirements for insurers and standardizing premium rates, are designed to bolster the industry’s financial foundation and enhance risk management practices. However, despite these efforts, enforcement of regulations remains a challenge. Inconsistent compliance among some operators undermines the overall credibility of the industry.

Technological advancements also signal growth for the industry. Digital transformation, particularly through Insurtech, is making significant inroads, with numerous startups introducing innovative solutions to improve accessibility, customer engagement, and claims processing. Mobile technology is especially pivotal in reaching underserved markets.

Furthermore, data utilization is becoming increasingly crucial across all sectors. There is a growing emphasis on leveraging data analytics and big data to assess risks more accurately and tailor products to meet customer needs.

Nonetheless, the industry faces several issues that need to be addressed. These include inadequate insurance coverage, limited product variety, and low customer trust. Some Nigerians still perceive insurance as a luxury rather than a necessity. Therefore, increased education and information dissemination are essential to shift this perception.

TheCable: Having worked as a risk analyst in Nigeria and the UK, how would you compare the two systems? Do you think Nigeria needs to learn some things from the UK system?

Edu: A comparative analysis of the insurance and risk management systems in Nigeria and the United Kingdom reveals significant disparities between the two industries. These differences are most pronounced in terms of maturity, infrastructure, regulatory frameworks, and market dynamics.

The UK insurance and risk management market is in a mature stage, characterized by high penetration rates and a diverse range of products. Public awareness and understanding of the benefits of insurance are widespread.

Conversely, the Nigerian insurance and risk management sector is in a growth phase, with low penetration rates and a significant lack of public awareness and understanding of insurance products.

Risk management practices in the UK are notably more sophisticated, with comprehensive frameworks and standards such as ISO 31000 being widely adopted across various industries. There exists a robust culture of risk awareness and mitigation. In Nigeria, while risk management practices are evolving, there remains a considerable need for the greater adoption of formal risk management frameworks and practices.

Another critical area of divergence is the level of technological adoption between the two countries. The UK insurance and risk management market extensively leverages advanced technology for underwriting, claims processing, customer service, data analytics, and risk management.

Insurtech plays a significant role in driving innovation. In Nigeria, although there is a growing adoption of technology, progress is slower, and infrastructure challenges persist.
In conclusion, Nigeria’s insurance and risk management industry can derive valuable lessons from the UK’s mature system.

Key areas for improvement include regulatory enforcement, public awareness, technological adoption, risk management practices, customer service, and economic stability. By addressing these aspects, Nigeria can enhance the effectiveness, reach, and credibility of its insurance and risk management sector, thereby fostering greater trust and participation among its population.

TheCable: How is risk management in the Nigerian banking industry? What are the challenges?

Edu: Risk management within the Nigerian banking sector has undergone notable advancements over time, propelled by regulatory reforms, technological innovations, and an increasing acknowledgment of the criticality of robust risk management frameworks. The Central Bank of Nigeria assumes a pivotal role in overseeing and regulating risk management practices across Nigerian banks. The adoption of regulatory frameworks such as Basel II and III has been instrumental in bolstering capital adequacy, stress testing, and overall risk management capabilities. Additionally, stringent corporate governance standards mandate

Nigerian banks to adhere to rigorous protocols concerning risk management, with board oversight ensuring compliance with risk policies.
Despite these strides, the industry confronts several significant challenges, including economic instability, the burden of high regulatory compliance costs, deficient enforcement and supervision of regulations, inadequate adaptation to technological transformations, and the influence of political and social factors.

In conclusion, while risk management within the Nigerian banking industry has made noteworthy progress, persistent challenges loom large. Addressing economic instability, enhancing regulatory compliance mechanisms, embracing technological advancements, refining data quality, nurturing a robust risk culture, and fostering collaboration represent imperative steps toward advancing risk management practices. By effectively addressing these challenges, Nigerian banks can fortify their ability to navigate risks prudently, thereby fostering stability and fostering growth within the financial sector.

TheCable: Some companies still ignore the importance of risk management in their corporate governance. What are the implications?

Edu: Companies neglecting to incorporate risk management into their corporate governance framework may encounter significant repercussions. Firstly, they become vulnerable to financial losses stemming from unforeseen events or shifts in the market landscape.

Secondly, effective risk management practices are increasingly regarded as vital markers of organizational strength and prosperity, potentially undermining investor confidence in those companies lacking such measures. Lastly, failure to implement adequate risk management strategies and readiness for crises jeopardizes their reputation and long-term viability, potentially leading to irreparable damage.

TheCable: Looking at the volatility and uncertainty of the global economy at the moment, how do you think the most industries can strengthen their risk management?

Edu: To better manage risk in light of the present economic instability and unpredictability, industries should take a proactive and flexible approach. They should diversify their revenue streams, try out their ideas in different settings, and routinely evaluate their risk environment as part of this process. Organisations may improve their risk identification and mitigation capabilities by encouraging cross-departmental cooperation and cultivating a risk-aware culture.

TheCable: Do we need more regulations and what is the role of AI in global risk management?

Edu: Regulations and laws serve as crucial benchmarks for establishing standards and holding individuals accountable. However, it’s imperative to recognize that mere adherence to rules falls short of optimal risk management strategies. Nevertheless, given the escalating complexity and interconnectivity of global issues, there’s a growing imperative for clearer and more targeted regulations to address specific challenges.

Artificial Intelligence (AI) stands poised to revolutionize risk management by enabling swift and precise identification and assessment of threats. Nonetheless, it’s paramount to acknowledge AI as a tool whose efficacy hinges on the accuracy and comprehensiveness of the data used for its training.

The significance of AI In global risk management cannot be overstated. Its applications span a multitude of areas within risk management, including predictive analytics for anticipating potential risks, fraud detection, cybersecurity, identification of vulnerabilities, resilience enhancement within supply chains, and financial risk management through market trend forecasting. The integration of AI in risk management operations augments efficiency, accuracy, scalability, proactivity, and adaptability.

The necessity for additional regulations varies based on contextual factors and industry specifics, requiring a delicate balance between regulatory benefits and potential drawbacks. AI emerges as a pivotal asset in fortifying global risk management capabilities, furnishing advanced tools for risk prediction, detection, and response. However, to harness AI’s full potential while mitigating associated risks, deliberate integration of AI-specific regulations and continuous oversight are indispensable.

TheCable: As far as risk management is concerned, what suggestion do you have for businesses and management across the world?

Edu: My first piece of advice to businesses and management throughout the world is to regard risk management as a critical strategic job rather than an afterthought. This requires incorporating risk concerns into decision-making processes at all levels of the company, from top management to operational workers.

In addition, I recommend committing resources to continual risk education and fostering a culture of transparency and accountability. Organisations may protect themselves and uncover new opportunities for development and innovation in an increasingly uncertain world by proactively identifying, evaluating, and mitigating risks.

As an expert, you mentioned that you ‘re planning to host over 500 youths and small businesses to discussions around risk management in organisations, how do you intend to do this and what are the aims?

To effectively disseminate good risk management practices, I aim to deliver a series of speeches targeting young people and small businesses. Through a combination of online and in-person events, including webinars, seminars, and interactive sessions, I intend to reach a wide audience.

These events will feature myself and colleagues, fostering a platform for informative discussions and Q&A sessions focused on risk management. By facilitating networking opportunities and mentorship, we aim to empower the next generation of business leaders and entrepreneurs to navigate risks effectively.

Through these initiatives, we seek to cultivate a deeper understanding and application of risk management in real-world scenarios. By equipping young individuals and small businesses with the tools to address uncertainty, we can foster a more resilient and sustainable business environment worldwide.