2024: Year of Upheavals for Insurers

For insurance sector operators, the year 2024 was a year of hardwork to overcome challenges and ensure easy claims payment to win public trust, writes Ebere Nwoji

Insurance sector operators and analysts in Nigeria and other climes had at the beginning of 2024 business year projected that the year would be one full of upheavals and challenges. They also saw the year as one which business climate would be misty and as such required hardwork and innovations on the part of  insurers and their board members to navigate through the difficult business terrain. They anticipated that the situation portends challenges to both insurance managers and their board members.

In Nigeria, one of the major challenges to the sector  in 2024, according to insurance marketers, was the harsh economy which eroded the purchasing power of the masses forcing many to drop insurance expenses from their scale of preferences.

According to the marketers, though insurance had always ranked  last in the scale of preference of an average Nigerian, the harsh economy worsened the situation during the year. They, however, added that some Nigerians were wise enough  to know that it was a period they needed insurance cover most.

For the National Insurance commission (NAICOM),  there was much determination to deal with problem of claims repudiation and delays as well as individual firm’s financial capacity. NAICOM had unequivocally  cautioned insurance operators that the year 2024 was a year of zero tolerance to outstanding claims as the commission would not want to see any unpaid claims figure in the financial book of any insurance firm.

The commission also proposed that  from year 2024, it would maintain zero tolerance to unnecessary delays in claims  payment. Consequently, the commission reiterated its commitment and determination to enforcing laws and taking action against insurers failing to meet their claims obligation and thereby  underscoring the importance of financial stability and soundness of financial institution and robust capital for operating firm through the enthronement of robust capital regime.

The commission towards the end of November demonstrated its determination not to spare any firm failing in its financial obligation by removing the board and top management of one of the prominent life insurance firms, the African Alliance insurance and in their place, installed interim managers to oversee the affairs of the company. It further alerted operators that there were more of the likes of African Alliance existing in the sector that would leave the business stage if the board and management of such firms fail to put their houses in order before the commission’s regulatory baton hits their doors. 

African Insurance Market

Within the African Insurance market, Deloitte reports indicates that during the year 2024, operators passed through  a transformative period, influenced by changing economic landscapes, rapid technological advancements and regulatory reforms. According to the report, amidst economic challenges such as high interest rates and inflation, South Africa’s largest insurers, representing over 80 percent of the insurance market, have demonstrated resilience. Deloitte observed that the introduction of IFRS 17 took a huge effort to implement and has impacted financial reporting and analysis of financial results – something that will be focused on more over the coming years. The report forecasted that as  climate change and economic inequality become more pressing, the insurance industry faces dilemma. 

Against this backdrop, insurers were urged to move beyond traditional risk aversion towards creating stakeholder value. The report foresees that by aligning financial products with Sustainable Development Goals (SDGs) and fostering innovation for inclusion and resilience, industry can turn challenges into opportunities, thereby driving sustainable development.

The  Deloitte report expressed optimism that the East African insurance market was showing resilience and growth despite macroeconomic and geopolitical challenges, driven by a rising demand for risk transfer solutions. According to the report, in  2022 the insurance penetration rate in East Africa was 1.39 percent, with Kenya at 2.14 percent leading, while Tanzania, Uganda and Ethiopia had lower rates of 0.62, 0.74 percent and 0.3 percent, respectively. This presents both growth potential and challenges, necessitating innovation and enhanced customer engagement. 

Maintaining that the trend did not change significantly negatively in 2024, the report said the  industry’s future hinges on its ability to adapt and turn challenges into sustainable growth opportunities. 

Global Insurance Market

At the global arena,  Senior Managing Director, Global Insurance Lead, Kenneth Saldanha  in his analysis  early  in the year  highlighted five major issues that  the sector  contended with, saying that Property and Casualty insurance carriers   slowed down to 2.6 percent on average for 2024 and 2025—down from 3.4 percent in 2023 (Swiss Re Sigma). According to him, Life insurance segment   witnessed stronger demand for savings and retirement products, while in  emerging markets, revenue growth  reached  5.1 percent on average in 2024 and would be same in 2025.

Deloitte, during its global insurance outlook for the year 2024 hinged the future of insurance success on insurance industry’s ability to be customer-centric. It advised that insurers must evolve through digital and cultural transformation to address changes in their operating landscape and meet new societal expectations.

Warnings by Analysts

Apparently, high inflation rate, refinancing and insolvency pressures, geopolitical; Economic, Social and Governance issues (ESG)  were witnessed during the year. These aligned with signals, warnings and advise of  sector analysts to  the insurers early in the year to  be prepared for these headwinds and have a strategy that could adapt when   confronted with challenges of the business. 

They recommended that diversity in the choice of boardroom members for insurance institutions would allow companies to have varied approaches to such problems during the year while board  members and company executives should be held liable for an increasing number of unhealthy scenarios. 

NAICOM’s Efforts

Few weeks before the year, NAICOM subjected members of board of various insurance firms to intensive training with emphasis on  sustainability.

Investors in insurance stocks often accuse insurance managers of investing their money in unprofitable ventures and using their money to pay regulatory fines resulting from regulatory infractions. They also accused insurers of not involving in claims reduction techniques that would  reduce their risk exposure, meaning that managers use money that would have been paid to them as returns on investments to pay claims resulting from avoidable risks. Experts further cited that the year witnessed investors dragging insurance managers to court as well over lack of returns on their investments.

Against this backdrop, NAICOM  was very much emphatic on the need for insurance managers and directors to be on their toes in 2024  to help in managing their companies’ businesses in a way that would ensure continuity and avoid collapse that might  attract litigations by investors and other stake holders in the business.

At the  board of directors’ training, the commission emphasised on the need for directors to be fully involved in the business activities going on in their various firms. The commission noted that being a director and sitting on the board of an insurance firm was  no longer business as usual rather directors must contribute efforts towards ensuring the sustainability and continuity of their individual companies.

The  then Commissioner   for Insurance, Mr Sunday Olorundare Thomas had challenged the directors to contribute towards institutionalising sustainability in their various business entities to ensure health continuity of their business. 

The incumbent Commissioner for Insurance, Ayo Omosehin, had  on assumption of duty emphasised on importance of financial stability of operating firms and undelayed claims payment, noting that these constitutes the catalysts that would facilitate the growth of the industry.

Omosehin in his bid to carry every sector of the economy along in the crusade for robust insurance sector during the year paid courtesy visits to various government agencies, departments and parastatals where he marketed the industry and its role in the economy. These efforts combined with those of the former commissioner yielded some positive results as  could be seen from various statistics .

Sector’s Financial Performance  

The sector, in the second quarter of 2024, maintained a positive market performance  increasing its gross premium written by 47.4 per cent to stand at N813.1 billion and an impressive 72.7 per cent, quarter on quarter growth.

The sector, in 2023, successfully hit the N1trillion premium income target it set for itself for over a decade as total premium in 2023  stood at N1.003trillion up from N790 billion in 2022 showing 27 percent growth.

Sector analysts said this was an indication that insurance industry has in the past three years maintained a steady growth trajectory in its underwriting activities

NAICOM, in its Insurance Industry Bulletin said insurers paid total claims of N297.9 billion.

“This performance analysis of the Nigerian insurance industry is an insight into the market behaviour in the second quarter of 2024. The market recorded about N813.1b billion in gross premium written during the period, indicating a 47.4 per cent growth rate compared to the same period of the prior year and an impressive 72.7 per cent, quarter on quarter,” the NAICOM said.

According to the report, continued steady growth from the first quarter of the year correlates with the current performance of the period under review. NAICOM ascribed the industry’s performance to consistent regulatory focus on public awareness and the enforcement of timely claims settlements.

It said, “Consistent regulatory focus on public awareness and the enforcement of timely claims settlements has had a significant impact on the insurance industry, signifying persistent increase in gross claims reported which stood at N297.9 billion in second quarter of the year.”

In the year under review, despite low market penetration coupled with other macro-economic challenges, 15 quoted insurance companies listed on the Nigerian Exchange Limited (NGX), generated N121.78 billion Profit Before Tax (PBT), during the half year ended June 30, 2024. This is about 138.2 per cent increase from N51.1 billion PBT generated by these insurance companies in H1 2023. 

Other Achievements

Other positive things that happened in the industry during the year is the recent passage of the Consolidated Insurance Bill by the upper chamber of the National Assembly which is currently awaiting presidential assent.

Further achievement is the proposal for the enthronement of regime of Risk Based Capital as contained in the bill recently passed by the National Assembly. Also, the industry during the year stabilised the new motor insurance  premium rates as many  motorists have accepted the new rate and this has positively impacted on premium generation of many underwriting firms.

During the year, Omosehin signed Memorandum of Understanding (MoU) with some government Ministries, Departments and Agencies (MDAs) in course of bilateral discussions during courtesy visits to the agencies such as: Infrastructural Concession Regulatiry Commission, the licensing of NPF Insurance Company Ltd, the commission’s collaboration with the Nigerian Data Protection Commission with the purpose of strengthening data protection in insurance industry as well as collaboration with Economic  And Financial Crimes Commission (EFCC) to sanitised the insurance sector of financial crimes.

On the negative side the failure by the president to renew the tenure of the former Commissioner for Insurance, Mr Sunday Thomas and the  death of his wife the same week he lost the tenure renewal bid was a big blow to the industry due to operators’ love towards him

Also the sudden death of Margret Moore the president of  the Professional Insurance Ladies Association (PILA) was not a cheering news to the industry, especially among female insurance folk.