The relevant authorities should work harder to enhance insurance penetration in the country
Despite recent reports that insurance claims in the country rallied to N1.5 trillion in six years, Nigeria is grossly under-insured. Successive reports by local and international rating agencies point to the fact that the Nigerian insurance industry has not taken its pride of place in the fast-growing global insurance ecosystem, especially in terms of spread and product distribution. This in turn reflects in turnover, profit, and contributions to gross domestic product (GDP). While we acknowledge the efforts of the National Insurance Commission (NAICOM), there is an urgent need to reposition the insurance subsector of the economy.
The Minister of Finance, Budget and National Planning, Zainab Ahmed recently underscored this when she urged insurance operators in West Africa to reposition the industry for global competitiveness. Considering Nigeria’s position as the largest economy in the sub-region and the entire continent, the minister’s call has become more compelling for both the government, players, regulators and indeed every stakeholder to rise to the occasion and take the insurance industry to its pride of place.
The question that should agitate the minds of all relevant stakeholders, including the minister, is whether they have done enough to put the nation’s insurance industry where it should be, considering the nation’s population size, economy, and other potential.
Many factors have been adduced for the rather poor growth of the Nigerian insurance industry, including low penetration of insurance and the attendant sluggish growth in premium and profitability.
Insurance penetration remains reportedly at 0.5 per cent, indicating that out of Nigeria’s over 200 million people, only 0.5 per cent of the entire population buy insurance. According to a report by the credit rating agency, Agusto & Co, the penetration rate (measured as a percentage of GDP) of the Nigerian insurance industry stood at 0.3 per cent in 2018 compared with 14.7 per cent in South Africa; 2.8 per cent in Kenya; 1.1 per cent in Ghana; 0.6 per cent in Angola and 0.6 per cent in Egypt.
Similarly, the density of the Nigerian insurance sector (a measure of industry gross premium per capita) is currently at $6.2 and lags behind its African counterparts: South Africa ($762.5); Egypt ($22.8); Kenya ($40.5) and Angola ($30.5). The asset base of the Nigerian insurance industry was reported to stand at N1.3 trillion as at 31st December 2018, indicating a compounded annual growth rate of 17 per cent over the last three years while Gross Premium Income (GPI) generated was estimated at N448.6 billion, reflecting a 12 per cent growth year-on-year.
While these data portend vast growth potential for the Nigerian insurance industry, many licensed insurers are still largely under-capitalised, thereby limiting their ability to take on big ticket in-country risks, as may be seen in the oil and gas, marine and aviation sectors of the economy. While there is the need to make the underwriting firms’ capital base stronger, other encumbrances to the growth and a more effective role of the insurance industry in the economy should be addressed urgently.
One of such areas is the perennial issue of claims settlement. A recent report by NAICOM that claims paid by the underwriters have been on the rise with increased awareness and premiums is commendable. It is also admitted that one of the things that has wrought significant impact on the image and perception of the industry is the issue of claims payment. The insurance industry needs to become more customer-centric, honour its obligations and do so in a timely manner.
NAICOM and insurance managers must work to enhance the level of insurance penetration in the country by selling insurance products to a larger number of Nigerians, in both urban and rural areas.
