New laws being introduced in Sierra Leone and awareness-raising efforts by companies are expected to give a substantial boost to its insurance sector, which currently has very low penetration and high scope for growth. Acting MD of one of the country’s top three insurers, the NIC, Ronald K. Hingston looks at the challenges and opportunities in the country’s insurance sector and discusses NIC’s planned privatization and listing on the Sierra Leone Stock Exchange.
Due to the special circumstances of Sierra Leone’s economy, individuals and corporations only use insurance when it is legally binding. Could you give us an overall vision of the insurance sector in the country?
Insurance is a disaster management system that helps individuals, companies and countries to thrive in case a tragedy occurs. In developed economies, insurance presents high levels of market penetration and plays a crucial role warranting stability and protecting individuals and corporations against the unexpected. However, the insurance penetration in Sierra Leone is extremely low, reaching just below 2%. In general, insurance, in terms of our population priorities, is very low down the list. The low purchase power of the majority Sierra Leoneans makes the sector very weak.
Despite the fact that almost everything could be insured, in our country only legally binding insurance contracts are taken, such as car insurance. Recently, new laws and regulations making other insurance contracts compulsory have been enacted: for instance, tenant common properties should now be insured by law. Another new law states that when an individual or a company employs more than five people, they should be insured, so they are better protected. Once these laws are fully applied and correctly monitored, our insurance sector will boom. In addition to the economic growth, the most important effect will be that it will better protect more of our people, relieving part of their pain when a disaster occurs. For example, 20 houses got burnt last month in Freetown and none of them were insured. We need to correct this situation little by little.
What are the main challenges that the insurance sector in facing in Sierra Leone to grow?
The main problem we are facing in Sierra Leone is that insurance companies still have small portfolios which make their prices a little bit more expensive than the average world’s insurance costs. This is why it is important to attract more and more clients to the sector: when you have a big portfolio, the average insurance costs decrease.
This few number of customers is mainly due to a lack of awareness of the importance of being insured, basically due to a bad education and a misperception: most of Sierra Leone citizens believe that insurance companies do not pay claims when an emergency occurs.
The second challenge we face is the low levels of income in the country that make people put insurance in the last space of their priorities in their scale of preferences.
With 11 insurance companies operating in Sierra Leone, what do you consider that differentiates NIC from the other insurers?
Among the 11 insurance companies operating in Sierra Leone, NIC is among the top three together with RITCORP and Aureol, for which, the competitive environment is very cordial. I would like to express our recognition to the customers who continuously trust NIC to cover their insurance needs, especially to our largest insured customer, Flash Motors, for which we are covering their employees’ liabilities, fire, accident, medical and other insurances.
First of all, I would like to highlight our strong brand image and the fact that we cover all the insurance services available in the country. Secondly, our presence around Sierra Leone, with NIC being the only company with freehold land and building in every provincial headquarter town of the country. We are known as “the Mammy for all the insurers” as most of the other professionals of the sector started their careers here, including President Koroma, who started his career here as an insurance man, and the majority of senior managers of the rest of the insurance companies of the country.
NIC is currently one of the state-owned enterprises (SOEs) under the National Commission for Privatization’s (NCP’s) efforts to be privatized. To what extent are you interested in attracting foreign investors as new NIC shareholders?
Our privatization process is undertaken by the NCP, which, first of all, assigns an official value to our company. Once the experts have determined our value, the NCP will put up our advertisement for bids. This has been one of the major challenges for us as our main competitors have already shareholders and thus, a higher market trust. In our case, our sole shareholder is the government of Sierra Leone.
We are interested in attracting investors from everywhere, not only from Sierra Leone. In these investment-attracting efforts, we will soon be listed on the new Sierra Leone Stock Exchange.
If we come back in five years from now, where would you like NIC to be? What about yourself, where do you see yourself in five years from now?
I would like to put NIC at the leadership of the insurance sector, by raising awareness of the importance of being insured and by increasing the capacity of our staff, so they can explain better our services and attract an increased number of customers. Finally, I would like to see our privatization process completed.
Regarding my profile, I was educated in Sierra Leone initially; I later pursued a management accountant course with the Chartered Institute of Management Accountants in London, UK. I am also a holder of a diploma in insurance with the Chartered Insurance Institute of London.
During the next five years, I would like to remain at the top of this company, working hard to reach more and more Sierra Leoneans, insure them, and raise their safety. I would like to make the difference for them, helping once a disaster arrives. I would also like to continue expanding our social corporate responsibility activities as a way of giving back to society what our customers are giving to us.