Nigeria at 64: Experts chart insurance growth pathway amid Independence Day
September 30, 2024580 views0 comments
Cynthia Ezekwe
Nigeria’s 64th independence anniversary stands witness to its vibrant insurance sector, which dances with possibilities, awaiting the next step in its journey. Despite the hurdles standing in its way, experts believe that with a strategic leap forward and a touch of innovation, this sector can morph into an engine of growth, propelling the country towards a more promising economic future.
Despite facing a diverse range of hurdles and possibilities, the insurance industry in Nigeria finds itself in a dynamic, ever-evolving landscape.
On one hand, the country’s economic growth and technological advancements offer a rich playground for the industry to flex its muscles and innovate. On the other hand, the sector’s potential is dampened by factors like low penetration rate of insurance products and services, the lack of trust in the industry, and the need for more robust regulatory reforms.
However, industry experts maintain an optimistic outlook, believing that the insurance sector in Nigeria has the potential to flourish and contribute significantly to the nation’s economic development in the future.
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A 2022 survey by Augusto and Co., showed that Nigeria’s insurance sector stood exposed as an underachiever, with an abysmal penetration rate of less than one percent, barely scratching the surface of its potential amidst a vast sea of over 200 million Nigerians.
Notwithstanding the sluggish growth of the insurance sector in Nigeria, experts remain steadfast in their belief that the industry has vast untapped potential, just waiting to be harnessed. With the right combination of regulatory reforms, innovative distribution channels, and customer-centric products, insurance penetration can surge, providing financial security to millions of Nigerians. This, in turn, could unlock a wealth of opportunities for the insurance industry, positioning it as a key contributor to Nigeria’s economic prosperity. The sector, they believe, is like a tightly wound spring, ready to release its full power under the right conditions.
Tucked within the folds of Nigeria’s insurance sector is an undiscovered gem – microinsurance. This tailored insurance option, specifically designed for low-income individuals and communities, is believed to hold the promise of unlocking substantial growth.
Another glimmer of hope shines from the world of bancassurance, the distribution of insurance products through banks, which according to experts, can expand the insurance sector’s reach into new markets, making it a more viable option for more Nigerians.
Reflecting on Nigeria’s insurance sector as the country celebrates 64 years of independence, industry expert Gus Wiggle, founder of Carefirst Consult, a claims management company, painted a promising picture. Wiggle shared with Business a.m. that the sector had demonstrated commendable growth and resilience in recent years.
According to Wiggle, the industry recorded a substantial growth rate of 23 per cent in 2021, reaching a gross premium income of N631 billion. He explained that the sector maintained its double-digit growth rate in 2023 as estimated gross premium income exceeded the one trillion naira mark despite disruptions, driven by strong regulatory support and premium rate adjustments on some policies.
“The industry however still has its own challenges which are still facing them till date.
“Some of these challenges include the impact of current economic hardship facing the nation and impacting those buying insurance.
“Other significant challenges include the low public confidence in their trust of insurance companies, and poor product market-mix as some of the products offered do not meet consumers’ needs particularly in the area of retail products. We can also talk about pricing, digitalisation and distribution channels,’’ Wiggle observed.
Given his wealth of experience and insider knowledge, the insurance consultant emphasised the ongoing initiatives to boost financial inclusion, strengthen regulatory frameworks, and increase public awareness of the advantages of insurance. These measures, in his view, will unlock new opportunities for the sector, further fostering growth and cementing its place as a key player in Nigeria’s economic development.
Recognising the dire need for regulatory reforms, Wiggle stated, “There are quite a number of regulatory reforms that could boost Nigeria’s insurance sector. Among them is the current work on the insurance bill the National Assembly is working on and the need to consolidate the existing laws, such as the Insurance Act, Marine Insurance Act, and others, into a single, robust legal framework. This would address contemporary challenges and support growth and innovation.”
Wiggle underlined the critical role of regulators in fostering a fair and flourishing insurance sector. He stressed the need for stricter penalties against unethical practices or violations by insurance companies, as well as the strengthening of consumer protection measures.
According to Wiggle, these steps would help cultivate a culture of prudent management, sound business practices, and strong corporate governance within the industry. This in turn would bolster the sector’s growth, ensuring that it remains a safe and trustworthy option for Nigerian consumers.
Wiggle also focused on the pivotal role of insurance education in the Nigerian market, arguing that regulators must require insurance companies to allocate a portion of their revenue to educational campaigns. The aim of these campaigns, he explained, would be to increase public understanding of insurance basics, such as premiums, excess, warranties, policy conditions, deductibles, and the claims process.
“Have workshops and seminars tailored towards different demographics, such as students, working professionals, religious organisations etc. Integrate insurance education into school curriculums to build a foundation of knowledge from a young age and collect feedback from claimants and consumers to understand their needs better.
“And of course, the use of media and particularly social media to disseminate information and raise awareness about the importance of insurance literacy,’’ he stated.
Dwelling on the potential of InsurTech in revolutionising Nigeria’s insurance sector, Wiggle underlined the transformative power of technological innovation in streamlining various processes, from underwriting to claims management. These advancements, he noted, would not only decrease operational costs and enhance efficiency but also pave the way for novel products and services, introducing a wave of healthy competition.
The next five years, in Wiggle’s view, holds promise for the Nigerian insurance sector, where significant growth is on the horizon. However, this growth hinges on the timely implementation of appropriate reforms, which Wiggle sees as essential for steering the sector towards success.
“We should see an expected growth at a compound annual growth rate (CAGR) of over 10 percent from 2025 to 2030. This growth will be driven by increasing awareness and adoption of insurance products and higher insurance penetration. I see a sector that will continue to embrace digital solutions, improving customer experience and operational efficiency.
“Ongoing regulatory reforms which are key will likely create a more robust framework for the industry, enhancing consumer protection and encouraging more investments.
“Overall, the Nigerian insurance sector is set for a period of dynamic growth and transformation, driven by technological advancements, regulatory support, and increasing consumer awareness,” Wiggle noted.
Chima Nwachukwu, author of the bancassurance literary work “When Life Happens”, in his assessment of the Nigerian insurance industry, noted that the insurance sector is underperforming with penetration figures still hovering around one percent for a population of over 200 million people.
This, Nwachukwu said, is far below the expectations one might have for a nation 64 years post-independence. He identified the key challenges as low insurance education, cultural biases, government policies, unbalanced product offerings, accessibility issues, and a persistent lack of trust.
Nwachukwu underscored the need for regulatory reforms, stating: “When we talk about regulatory reforms,we often think of it in terms of what stringent measures the government Regulatory Agencies can impose on the operators to carry out their businesses in a certain way or get sanctioned.
“The best form of reform I would recommend is what the prime minister of Malaysia did for the insurance industry when the Takaful Insurance took off in that country about 25 years or so ago.
“According to Wan Zamri Ismail of Noor Takaful Malaysia, the then prime Minister led the way to opening the doors for insurance companies to access every public institution and tell the public about their products and services and market them without hindrance.
“Any regulatory reform that does not empower the insurance operators to market their products and services without hindrance is already an obstacle in itself,” he stated.
Nwachukwu stressed the need for insurance education, while calling on insurance operators and various stakeholders to embrace what he referred to as the “Catch-them-young Initiative” which entails the use of fiction and storytelling to get the attention and win the interest of young people.
“In recent times I have been attending seminars, workshops and conferences where the challenges militating against the growth of Insurance in Nigeria are being discussed and one thing that always stands out is that everyone agrees there’s the need for increased insurance education and awareness among the people.
“For me, every effort in this direction must focus largely on the young people which is a major inspiration for the crafting of the first Insurance based literary novels in the African Creative Space – WHEN LIFE HAPPENS fictional series, which I published in March, 2024,’’ he noted.
Nwachukwu explained that insurance is a long term investment which requires consistent efforts to achieve meaningful results, emphasising the need for operators and various stakeholders to work towards earning the trust of the public.
Speaking on the future of the insurance industry in Nigeria, he said: “With the entrance of some of the big players in Southern Africa and Europe into the Nigerian insurance space in recent times, coupled with the gradual dominance of young creative workforce, the industry is already showing signs of a great future.
“So, I foresee a future where the Insurance Sector will begin to play a prominent role in the development and sustenance of the nation’s economic growth and significant impact on the GDP. I’m personally convinced that it is possible to raise the penetration figure to 10 percent by 2050 if we adopt the Catch-them-young Initiative using fiction and storytelling.’’
Nwachukwu expressed optimism over the sector’s growth, underscoring the need for collaboration among operators and stakeholders to allow flexibility in their product offerings while maintaining constant strategic community engagement.