Insurance Market at Mercy of Few Operators


The recent market performance indices of insurance firms released by the Nigeria Insurers Association showed market dominance by few firms, writes Ebere Nwoji

The Nigerian Insurers Association (NIA), recently in its annual published Insurance Digest, released the score cards of the 59 insurance firms operating in Nigeria, showing the market share of each firm in terms of their business outing in 2018.

From the figures released, between January to December 31st 2018, the 59 insurance firms raked in a total of N413.8 billion as gross premium, showing that the industry recorded an annual growth rate of 13.4 percent from N365 billion gross premium the operators generated in 2017.

Out of this, General Business underwriting, yielded N235 billion premium showing 15.6 per cent growth from the 2017 figure of N203 billion, while life business yielded N178 billion, signifying 10.6 percent growth from the 2017 figure of N161 billion. Looking at the individual companies’ performances as depicted by the publication, one could see that the industry’s performance in terms of individual firms’ efforts and result was lopsided; indicating that only a particular set of firms dominated the market.

From their performances, it was apparent that the industry did not have a balance in its trading structure during the year under review as available businesses were dominated by a particular set of firms while some set of firms kept sliding down in their performance. This happened in 2016, 2017 and repeated itself in 2018.

2019 in focus

Similarly, as the industry is collating results from 2019 activities, from their unaudited financial statement, there were signs that the trend would continue.
From the data on individual firm’s performance, Leadway Assurance, cornered the largest chunk of the market, thus occupying 21.18 percent of the market.

Indeed, a glance at individual company’s performance showed that the following firms dominated the available businesses: Leadway Assurance Limited possessed the largest share of the market having 21.18 per cent. AIICO insurance Plc, followed with 8.95 per cent; FBNInsurance Limited, had 6.23 per cent; Custodian & Allied Insurance limited, 5.76 per cent and Axa Mansard Insurance Plc, 5.57 per cent.

NEM Insurance Plc, had 3.64 per cent; Custodian Life Assurance Limited, 3.31 per cent; Zenith General Insurance Limited, 2.65 per cent; Royal Exchange General Insurance Company Limited, 2.59 per cent; Sovereign Trust Insurance Plc, 2.54 per cent and Cornerstone Insurance Plc, 2.54 per cent.

Wapic Insurance Plc, had 2.51 per cent; LASACO Assurance Plc, 2.18 per cent; Mutual Benefits Assurance Plc, 1.94 per cent; NSIA Insurance Limited, 1.67 per cent; Consolidated Hallmark Insurance Plc, 1.64 per cent; Linkage Assurance, 1.30 per cent; African Alliance Insurance Plc, 1.25 per cent; Niger Insurance Plc, 1.23 per cent and FBN General Insurance Limited, 1.12 per cent.

Contrary to this, 29 insurance companies did not get up to one per cent share of the available business. Prudential Zenith Life Insurance Limited, has 0.92 per cent; Sterling Assurance Nigeria Limited, 0.91 per cent; Regency Alliance Insurance Plc, 0.82 per cent; Capital Express Assurance Limited, 0.82 per cent Veritaskapital Assurance Plc, 0.78 per cent.
Others are, Saham Unitrust Insurance Nigeria Limited, 0.77 per cent; Royal Exchange Prudential Life Plc, 0.93 per cent; Sunu Assurance Plc, 0.61 per cent; KBL Insurance Limited 0.41 per cent.
Also Industrial and General Insurance Plc; Old Mutual Nigeria Life Assurance Company Limited; Metropolitan Life Insurance Nigeria Limited and a few others, fell within the same category.

Experts’ views
But analysts, who spoke to THISDAY on this, urged firms to ensure that their solvency margin remains intact, adding that they should strive hard to make a difference in their product offerings. This, they said would attract the targeted members of the public.
The analysts also said they should ensure spread in their marketing channels to reach the unreached in the market and be able to expand their market share.

According to the analysts, the firms should take full advantage of the huge capital that will be available to them after the recapitalisation exercise.
However, the immediate past president of the Nigeria Council of Registered insurance Brokers (NCRIB), Mr Shola Tinubu, said the situation in the industry is such that while inflation has caused prices of goods and services in other sectors of the economy to go up, in insurance, the reverse is the case in that instead of going up, the rate is going down.

“During and after the naira devaluation in 2016, while business operators in other sectors of the economy up scaled their price rates to be in tune with naira value, insurance operators for fear of losing businesses due to hardship experienced by the Nigerian business community coupled with the fact that by its position as the last item in the scale of preference of consumers that could easily be scrapped out in time of scarcity of resources, insurers for fear of losing their businesses, failed to effect necessary upward changes in the premium rates,” he added.
According to him, some underwriters, rather than increasing their rates, decreased to dance to their customers’ tune and retain such customers.

He said now that risks from such businesses are crystallising and the underwriters are expected to pay claims at the prevailing rate of value of Naira this according to him has left most insurers struggling to pay claims.

He said this was part of the reason Nigerian insurers seem not to match their counterparts in other climes.
He, however, said insurers are to be held accountable for the situation because they supposed to set their pricing right while customers should adapt to such prices.

Obviously, the current situation in the industry has spelt the need for drastic action to be taken in the area of capital improvement which the regulator is on top of at the moment, so that the present situation in which according to statistics, the industry loses average of N2.8 trillion annually to foreign insurers due to lack of financial capacity to handle high technical and capital intensive businesses will stop and such huge fund channeled to indigenous operators’ coffers.

Tinubu, who said any company that would not meet the new capital requirement on stand-alone status or merger would definitely loss its license. He, however, said capital raising was not the main issue that would bring major turnaround in the fortunes of the insurance sector.

But at a recent forum in Lagos, the Deputy Director General of NIA, Mr Lanre Ojuola, had lamented that the problem was not just that insurance rate was not increasing with inflation rate, but that a major problem was that while rates were going down instead of up, insurance claims increase has maintained geometric trend.

According to him, whereas claims grow astronomically, premium growth was in trickle form.
He said the industry needs speedy growth in the number of policy holders, adding that as at December 2018, the industry only recorded 1.6 million policy holders.
He said this was why operators are anxious to see that more and more Nigerians embrace insurance through the federal government’s financial inclusion strategy.

He said if this happens, it will help to push up the industry’s contributions to the GDP of the economy.
Presently, the contribution of insurance to the national GDP is 0.34 per cent. Insurance penetration in the country during the year under review was 1.6 per cent, total assets of the industry stood at N1.2 trillion, profit after tax of the industry stood at N315 billion while share holders’ funds stood at N378.3 billion. Clams paid during the period stood at 193.5 billion management expenses at the period stood atN88. billion.