The Nigerian insurance industry

Nigeria with a population of about 166 million people has only 0.5 percent insurance penetration. This suggests that insurance in Nigeria is in an early stage. It also means Nigeria is a potential hub for expanding into West Africa; more so that Nigeria and Ghana together account for over 75 percent of the region’s GDP. There are about 1.3 million Nigerians that have insurance cover, according to a 2012 report by Enhancing Financial Inclusion & Access (EFInA). Most Nigerians have vehicle insurance while life assurance, medical, critical illness cover and livestock/agriculture insurance have extremely low uptake.

The recent reforms in the insurance sector created significant opportunities in terms of market induced consolidation for greater risk retention capability and an upgrade in technical capacity; as well as in funding which will a play major role in taking up larger ticket risks particularly in the oil and gas sector, energy and aviation sectors.

The insurance industry in Nigeria consists of 59 insurance companies and two reinsurance companies; 24 of them are currently listed on the Nigerian stock exchange. Although, the industry has two main types of income, investment and technical income, it contributes a mere o.56 percent to GDP, but the growth rate of the industry premium is estimated at about 18 percent per year. And the level of foreign ownership is increasing. The industry is still consolidating; there have been some mergers and acquisitions, for instance, Crusader Insurance merged with Custodian & Allied Insurance, and Assurance African Holdings acquired GT Assurance, now Mansard Insurance.

In terms of peer country comparison in Africa, Nigeria with a population of about 166 million has 59 insurance companies, while South Africa with a population of about 52 million has 184 insurance companies; and Ghana with a population of about 25 million has 47 insurance companies. The insurance industry in South Africa and Ghana contributes 12.9 percent and one percent to their respective GDPs.

Compared to advanced economies, the total insurance premium as a percentage of GDP for US is 14.5 percent, UK, 15 percent, Ireland 22 percent and Germany 8.9 percent. The major constraints to the Nigerian insurance industry are poor corporate governance; high default rates; low capital; low capacity and skills; cultural factors; high level of consumer’s ignorance of the advantages of insurance products; high rate of unemployment and low GDP per capita figures as well as lack of genuine property ownership documents.

With a young and growing population coupled with technological advancement and stable economic growth projected at about 6.2 percent, there is no doubt that opportunities abound in the Nigerian insurance industry. The push that the industry requires now is essentially to implement good corporate governance and for the government to implement favourable policies with respect to automotive policy, oil and gas as well as the housing sector.

Hence, to boost activities in the insurance industry, we urge the FG to: also extend bailouts to the industry; review the provisions of Insurance Act 2003 and regulation of insurance company investments in line with the realities of business; and enforce the Cabotage Act 2003. Likewise, given Nigeria’s present low insurance penetration levels, we call on the Insurance practitioners to make conscious and deliberate effort to positively alter, influence and shape the negative perception of the general public on Insurance through public enlightenment programmes, awareness creation and education on accruing benefits derivable from Insurance activities.