Foreign investors increasing entry captures expert’s prediction for industry
The continued entry into the Nigerian insurance market by global bigwigs on insurance and equity investors captures expert’s prediction about abundant growth potential in the local market.
Experts have said that Nigeria has a favourable demographic structure that is tilted towards the middle class, which has great potential for sale of insurance; a large population that should stir growth in retail business; opportunity for infrastructure spend, which will require insurance for protection and risk management as well as a growing concern for financial inclusion.
According to expert at PwC, Nigerian insurance industry has grown steadily over the past decade the and this can be shown in the total premiums which have gone from about N75 billion in 2005 to over N300 billion currently.
Even though Nigeria has shown positive signs of development in this industry there is still room for more growth when compared to other emerging markets. There are challenges faced by the Nigerian insurance industry which include low penetration levels, for lack of consumer trust, low implementation of compulsory insurance and a lack of professionals that are adequately skilled in this space. These challenges, however, can be overcome if the insurance industry in Nigeria adopts some of the ideas and methods from the banking sector in Nigeria which has grown significantly over the past ten years whereby the total banking assets are now over US$150 billion.
Presently, Nigeria has 3 million policyholders out of a population of 174 million people. This means that
There is a lot more potential to increase the number of policyholders to 10 million in the next 3 years. Selling insurance policies can be done through mobile phones due to the high penetration of mobile phone of over 70 percent. This allows for the insurance industry to tap into the informal sector in order to increase the number of policyholders.
Approximately only 1.5 percent of all Nigerian adults are covered by insurance today. Uninsured Nigerians face risks and require better mechanisms to mitigate these risks as an alternative to the informal arrangements currently in use. The low insurance penetration in Nigeria is, in part, a consequence of the lack of trust and confidence in insurance companies.
A contributor to this perception of the market is the limited knowledge of insurance amongst the public. There is scope to develop a revised market strategy centered on educating the public on the mechanism of insurance and conveying the benefits inherent in its provision.
Foreign investors have shown a great interest in the Nigerian insurance sector through entry into the market. At the last count Old Mutual of Sought Africa has acquired 60.7 percent of Oceanic Life and Oceanic General Insurance; MMI Holdings, a South African JSE listed financial services group acquired 100 percent of UBA Metropolitan; Sanlam Emerging Markets, a group of South Africa-based investors, bought 35 per cent stake in FBN Life Assurance Limited; France’s Axa acquired a 77 per cent interest in Mansard Insurance valued at €198m; Group NSIA, a company based in Abidjan, Cote d’Ivoire bought 96.15 percent equity of ADIC Insurance Company; SUNU, a Cote d’Ivoire based company acquired 60 percent of Equity Assurance valued for N7 billion; Liberty acquired 75 percent of UNIC Insurance valued $246 million; Prudential, a British insurance giant invested in Zenith Life insurance; Saham, a Morocan based firm acquired 40 percent equity stake in Unitrust Insurance; Swiss re acquired 25 percent equity in Leadway Assurance; and International Finance Corporation (IFC), a member of the World Bank Group also partnered Custodian & Allied on a $12.5 million Convertible Loan Stock.
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