Nigeria’s National Insurance Commission (NAICOM) recently made key statistical information on the insurance industry’s unaudited performance in 2021 available to journalists. It showed that the Gross Premium Income (PMI), which measures the industry’s aggregate earnings over a period, stood at more than N630 billion – roughly $1.5 billion – a growth of more than 22 per cent on the previous year.
The regulatory agency is also moving fast to strengthen the market and increase activities in the industry with the help of improved access to digital technology.
The aim is to increase both transparency in the insurance industry and the contribution of Insurance to the country’s Gross Domestic Product (GDP).
It does not indicate how many people have insurance coverage, the quality of coverage and the value it provides for consumers.
But experts say that it is an indicator of development in this sector within Nigeria and to what extent it contributes to the national economy.
The current position of the industry, according to NAICOM shows that while the number of policies held by individual Nigerians is 1.3 million, corporate and non-individual policies remain at approximately 1.2 million with total written policies coming in just shy of 2.5 million.
Industry insiders have long claimed Nigeria’s 200 million population represents an untapped boon for insurers, which, if properly harnessed, could unleash an insurance market boom with continent-wide effects.
But present realities suggest the industry continues to grow at a snail’s pace, with just two per cent of Nigerian adults covered by insurance in 2021.
While the juicier bulk of the underwriting business is ceded offshore and handled by foreign companies with bigger capital, opportunities beckon for local insurers familiar with consumers’ needs, tastes, preferences, and expectations.
There is enormous, room for growth, according to insiders. For example, Millennials – people born between 1980 and 1995 – are said to be showing interest in opening trust funds for their offspring and investing more in education and career development.
Meanwhile the generation identified as Digital Natives (1996 to 2012) are said to be averse to debt, and keen to not only open savings accounts early on in life, but also display deep interest in alternative investments such as cryptocurrency.
However, it appears the operators are yet to embrace this information and successfully move it forward. Instead, they continue to scan the market for brand new growth areas.
Analysts believe that insurance companies need to reverse the negative perception of the industry on key issues like trust and credibility, which many believe are essential if the insurance market aims to make a greater economic impact.
Most indigenous insurance companies also lack the technical knowledge needed to underwrite lucrative sectors like aviation, marine trade, power, and oil and gas.
Meanwhile low-hanging fruit, like car insurance, is not seen as profitable enough, and overlooked as a result.
For example, the National Bureau of Statistics (NBS) estimated the number of vehicles in Nigeria in 2018 was 12 million.
By 2022 this number is expected to have increased. However, only one-tenth of Nigerian automobiles, or 1.2 million vehicles, have comprehensive insurance policies, with most car owners opting for third-party cover.
Third-party motor insurance is one of just six forms of cover currently compulsory in Nigeria.
The other five are employer’s liability/workmen’s compensation, group life assurance, health care professional indemnity, and occupiers’ liability insurance or insurance of public buildings.
Many insurers have strongly linked their survival to policies woven around business with the government, meaning the N1trillion ($2.4bn) gross written premium target given by the government in 2015 has not yet been realised.
This target is expected to increase to N5trillion ($12bn) by 2024, according to the government.
Obinna Chilekezie, an insurance researcher, said it would be one of the wonders of the world if the Nigerian insurance industry hit the target, with insurance penetration currently languishing at around six per cent.
The director of information technology at NAICOM, Abiodun Aribike, said: ‘The low insurance penetration can be increased through the adoption of technology and digital solutions.’
Aribike said the adoption of such technologies as Cloud computing, mobile technology, Artificial Intelligence (AI) and Blockchain will help provide digital solutions for increased insurance penetration in the country.
He added: ‘New technology is already disrupting the claims processing and the industry is advised to invest in data-driven and analytics-enabled customer experience that incorporates artificial intelligence (AI) and other advanced technologies. This will transform claims from a necessary back-office function into a source of competitive advantage, market differentiation and increased customer loyalty.’
Price comparison sites, apps and e-commerce retailers were also identified as areas of opportunity for the insurance sector.
NAICO said it will promote insurance as a tool for stimulating growth of other sectors and raise funds for project development at the federal and state levels.
It hopes to create more than 250,000 new jobs and increase the industry’s contribution to GDP from 0.4 per cent to over three per cent by 2030.