Nigeria at 62: Insurance Sector Struggling to Achieve Penetration

Nigeria at 62: Insurance Sector Struggling to Achieve Penetration

As Nigeria clocks 62 years, the country’s insurance industry operators are still struggling to achieve mass awareness on the value of insurance, writes Ebere Nwoji

The Nigerian insurance industry, after 62 years of independence, is still struggling to overcome twin problems of ignorance of its values and acceptance, which will culminate in mass patronage, growth of premium generation and meaningful contributions to the gross domestic products (GDP) of the economy.

Indeed, insurance industry in Nigeria has since inception been battling with unawareness problem and poor patronage by the masses.

Insurance expenses always occupy the last position in the scale of preference of an average Nigerian.

To the extent that even the five compulsory insurances in Nigeria are not immune from this problem.

Operators’ efforts

In their bid to overcome the problem, the operators have found solace in collaboration tactics among themselves in order to work for one single purpose. 

The various arms of the industry, namely; the Nigeria Insurers Association (NIA), the Nigerian Council of Registered Insurance brokers. (NCRIB); the Chartered Insurance Institute of Nigeria (CIIN) , the Institute of Loss Adjusters of Nigeria(ILAN) and Association of Insurance Agents (ARIAN).

This mass unawareness problem and its attendant low patronage of the industry by the masses has become worrisome to the operators compelling them to embark on series of insurance awareness campaigns in order to popularise insurance and attract patronage to the industry.

Industry observers said at this stage of insurance practice in Nigeria, the operators have no choice than what they are currently doing because although the industry is older than Nigerian independence having been in operation for over a century, its level of acceptance, stage of development compared to its sister sector, the banking industry, is still not satisfactory although it has in recent years begun to record some notable achievements that are gradually lifting its status among other sub sectors of finance services sector.

But despite this, the insurance industry is apparently still battling with a number of challenges that have retrogressed its growth. 

Operators’ view 

These challenges recently prompted the chairman Heirs Holding, Tony Elumelu at the recent 60th anniversary of the Nigerian Council of Registered Insurance Brokers (NCRIB), to challenge the operators on the need to be professional at all times.

“In redefining the practice and practitioners in the broking profession, NCRIB should lead the war against many of the unethical practices that have been the bane of the industry for years. These include premium rate cutting, delayed premium remittance, unremitted premium, overloading of premium, returned premium, fake documents, fraudulent claims, collusion to defraud, mis-selling, unhealthy competition, misrepresentations, manipulation of policy conditions, self-enrichment methods disguised as marketing expenses and many more.

While NAICOM continues to play its role as the industry regulator, NCRIB as a body must ensure that appropriate sanctions are imposed on any of its members found using unethical practices, ”he said.

Elumelu said insurers should collaborate more to deepen insurance penetration in Nigeria, “Where there are differences on issues, such must be resolved as friends and colleagues to protect and preserve the image of the industry.”

He said insurance industry could benefit from innovation across all phases of the service, adding that for this to happen, there is the need to reward and incentivise innovation across the industry.

He added that the industry must also benchmark against global trends, adding that the starting point for innovation is retail insurance development.

“Over the years, brokers in the market have not been recognised as corporate insurance specialists. So, it is high time the brokers community began to shift focus to retail because this is where the future of insurance lies in Nigeria. Brokers have the capacity to lead in this area, ”Elumelu said.

Changes and Achievements 

Through critical study of the insurance sector, THISDAY notes that prominent and most current among positive changes recorded by the industry is the on going effort by the regulator to address the low operating capital syndrome which has been impoverishing the industry as most of the big ticket businesses that suppose to shoot up the annual premium income and profit of the industry go to foreign insurers due to lack of financial capacity by indigenous insurers. 

At present, the industry operates on cash basis and is well positioned to pay claims and handle big accounts.

Closely connected to this is the problem of activities of fake insurance operators especially motor and marine insurance operators which many years drained the industry’s vault.

Currently, the industry has been able to address this through its insurance industry database platform set up by the Nigerian Insurers Association.

The development of micro insurance, which the industry is still experimenting on now is another milestone recorded by the industry in recent years.

Also the introduction of the Risk Based Supervision model, which the industry adopted is a major change that would classify the operating firms according to their financial capacity in business handling and enable them operate in line with their solvency margin.

Also Consolidated insurance bill waiting for the passage by the law makers which when passed into law is expected to fill many gaps left by the insurance act 2003, which is another important achievement 

Total digitalisation of operations of the industry is another milestone achieved in the industry.

The sector regulator National Insurance Commission (NAICOM) had recently announced publicly that any insurance firm that is opposed to digitalisation should look for other sectors to operate in because such operator will have no room in insurance industry.

These changes and more if sustained, will in the nearest future turn around the fortunes of the industry and reposition it as a major contributor to the GDP of the economy.

Prior to these changes, insurance industry in Nigeria since  the exit of  British operators, had recorded a chequered history due to  activities of the early Nigerian practitioners  resulting in alienation of the people from the industry. 

Indeed, the industry has suffered the worst neglect and poor patronage as insurance ranks last in the scale of preference of an average Nigerian.

The industry was so jettisoned by every Dick and Harry in the country that very few Nigerians want to buy insurance, work in an insurance company or want to have anything to do with the industry.

Although this is changing, the industry is still faced with some challenges.

At the top of these challenges is the problem of low capital base which has over the years incapacitated the operating firms in handling capital intensive businesses especially in the oil and gas and aviation industries.

The above problem combined with poor patronage of the industry to result in low premium income low contribution to the GDP of the economy.

Several attempt by NAICOM to increase the industry’s capital base failed but recently, both the operators and the commission seem to have settled for Risk base capital increase model.

The industry’s contribution to the GDP has remained less than one percent. 

After many years of Nigeria’s independence and the exit of British insurance managers from Nigeria, while other sub-sectors of the economy were recording success and growth, the insurance industry, remained a toddler for several years mainly due to low capital base as the capital base of operating firms was ridiculous when compared to those of their counterparts in other sectors of the economy or with capital base of banks.


To address the capital base problem, the federal government, through the various chief executives of the industry regulator, NAICOM, namely; Chief Oladipo Bailey, Emmanuel Chukwulozie and Fola Daniel carried out  major recapitalisation exercise that  upgraded the minimum capital base of the industry from N50 million, to N150 million then to the current N2billion for life underwriting companies .then from N20 million  to N70 million , to N200 million then to the current N3billion for general business underwriters  and from N90 million to N5 billion for composite companies and N10 billion for reinsurance firms.

This recapitalisation exercise by Emmanuel Chukwulozie raised much dust more than the previous exercises in the industry.


Having secured enough capital, the regulatory body resolved to face the challenge of deepening insurance penetration in the country to raise the industry premium. NAICOM captured this in what it called, Market Development and Restructuring initiative (MDRI), which it launched in 2009.The initiative, has objectives of transforming the industry from N380 billion premium income to a trillion Naira industry. This, the commission said, would be done through the enforcement of compulsory insurances .It listed five compulsory insurances stipulated by the insurance act of 2003 for effective enforcement.

These are third party motor insurance, Statutory Group Life Insurance Employee’s Compensation (which replaced Workmen Compensation). Occupier’s Liability Insurance, Builder’s Liability Insurance and health Care Professional Indemnity Insurance.

The commission launched these insurances in the six geo political zones of the country and declared that enforcement should commence in March 2011.

The MDRI also has the objective of creating 50,000 jobs through the agency system. The initiative was also targeted at fighting against fake insurance practice in Nigeria.

The regulatory body has been at the forefront of efforts to see that the initiative achieved its objectives. Although at the onset the insurers were far from giving their support to the commission, as they preferred the usual way of doing their business. However, of recent they have started aligning with the commission especially in the area of retail insurance. Many operators are now designing products that will attract the interest of Nigerians at the grassroots instead of chasing government and corporate businesses around.

By its original design, the first phase of the MDRI, which was between 2009 and 2012 was meant to achieve the objective of transforming the market into a trillion naira market. This was not achieved at the targeted time as the industry’s premium remained at N300 billion as at December 2012 according to NAICOM prompting the commissioner to declare that come the second phase of the initiative, which will last between 2013 and 2017, the industry would achieve the target.

Also the industry has solved the problem of disjointed and non transparent accounting system as the industry migrated from the Nigerian Accounting Standard Board system to International Finance Reporting standard (IFRS). The industry, also launched the cooperate Governance structure and the Anti money laundry structure in order to remain globally competitive.

Still in search of ways of growing the industry’s premium, the commission in 2010 launched guidelines on insurance of oil and gas business in Nigeria as a way of ensuring that local content policy of federal government is implemented in the insurance industry.

The enforcement of the no premium no cover in the industry received loud ovation of the industry operators as they described it as the beginning of new things in the industry.

The above developments put together have no doubt placed the insurance industry on a better growth plan form as could be seen from signs of growth shown by many firms in the system. 

But the industry is still far from meeting the target set by the erstwhile commissioner for Insurance Fola Daniel, which is that come the year 2017, the value of insurance contracts would rise to about N1 trillion ($6.4 billion) from N300 billion in 2017, and that the industry, would contribute about three per cent to the Gross Domestic Product (GDP), up from the current 0.6 percent contribution. He also targeted that penetration will increase to 22.5 per cent from 10 per cent.

He said compulsory motor-vehicle insurance, which makes up most contracts now, would remain at about 10 per cent by 2017, while life insurance would constitute seven per cent, general business insurance three per cent and petroleum companies’ insurance 2.5 per cent.

One of the major growth plan, which the industry operators have been able to achieve within the period is the development of the Nigerian Insurance Industry Data base by the Nigeria Insurers Association (NIA)


The NIID is a central system that allows all insurance companies to store all valid policy real time.

Also 62 years after independence, Nigerian insurance industry has built its own indigenous College of insurance to address the problem of lack of trained professionals, just as NAICOM has proposed to build training centre for all African insurance regulators.

Also the educational arm of the industry, the Chartered Insurance Institute of Nigeria (CIIN) few years back, collaborated with the ministry of education and obtained approval for inclusion of insurance as a subject of study in senior secondary schools in the country. 

These are signs of growth and developments in the industry within these years.

The industry has also formed a consultative committee comprising of executive members of various arms of the industry. The relevance of the committee is that hence forth, the industry will begin to speak with one voice in any matter of interest rather than speaking separately as individual arms. This according to industry analysts will make the voice of the industry noticeable to government in any matter that affects them.  

Need for better performance

However despite these achievements, there is stillroom for growth for the industry. Efforts should be made to ensure that the underwriters and brokers develop and promote retail insurance, which at the international level is now the cash cow of insurance industry. The operators should try to stand by the regulator in rules like no premium no cover in order to keep afloat and be in position to meet the various targets set for it and remain globally competitive.

Government should stop encroaching in the industry’s territory by taking away its businesses to other sectors while the operators should insist on playing according to rule when it comes to pricing.

Nigerian workers should prevail on government and other employers to give them their right in securing their group life insurance scheme just like pension scheme.

In some parastatals the federal government has not paid for its workers group life insurance and according to the insurers, any of such workers that dies will have nothing paid to his family. At this at out Nigeria’s independence, government should show good example to Nigerians by providing for the insurance needs of its workers.

Related Articles