By Chiamaka Ajeamo, [email protected] 08060655687
Across the world, the insurance industry is perceived as one of the major drivers of the economy due to its capacity to offer a solid framework which can be leveraged on for sustainable growth and development.
It is in the light of this critical role the sector plays that stakeholders expect the Nigerian insurance industry; a major component of the financial market, to overtly and covertly contribute tremendously to the Gross Domestic Product (GDP) and growth of the country’s economy.
As Nigeria celebrate the country’s 61st independence anniversary, stakeholders have appraised the sector’s performance over the last three decades stating that it has advanced so far considering the numerous challenges bewildering the industry and the volatile business space.
They nevertheless admitted that more work needs to be done in order to grow the industry in line with their expectations to meet up with the other arms of the country’s financial market; such as the banking sector.
Indeed, reports have revealed that aside battling numerous challenges, including low penetration, the Nigerian insurance industry has barely grown in real terms over the last 10 years compared to other countries with comparable economic challenges.
Experts have however projected that the sector’s penetration will rise by a factor of 10 times in real terms to 3.69 per cent in the next 10 years because the technological infrastructure, population and data necessary for its expansion are available.
“With a market supported by the country’s steady economy and large population, Nigeria’s insurance sector will enjoy a period of growth and development over the medium and long term, albeit interrupted by a slower pace of growth in 2020, due to the effects of the coronavirus pandemic.
According to a report by Fitch Solutions “The outlook for premiums growth, however, continues to be limited due to low average earnings and widespread poverty, which will weigh on insurance affordability. As even the more affluent middle-class consumers tend to avoid purchasing insurance, which hampers the growth of compulsory basic insurance lines such as motor/vehicle insurance, Nigeria’s potential consumer base needs to be educated more on the benefits of both life and non-life insurance coverage to support more robust growth in the sector,” the report stated.
Industry performance
Although the sector was badly hit by the COVID-19 pandemic and the #EndSARS riot last year, Agusto & Co in its 2021 report on the sector’s performance disclosed the industry’s gross premium income for the financial year ended December 31, 2020, is projected to record a 15 per cent growth.
It is worth to note that these two eventualities adversely impacted the industry in terms of additional claims, which in turn impaired profitability for the 2020 financial year, as the sector paid over N4 billion claims from the estimated losses from #EndSARS protests.
As a result of the above, reports from the National Bureau of Statistics on the sector for the first quarter of 2021 revealed a decline of 2.08 percent. Fortunately, for the second quarter (Q2) 2021, the sector rebounded to a growth path with a 16.41 per cent increase recorded.
As at December 31, 2020, the industry had an estimated capital base of $1 billion, significantly lower than $2.2 billion recorded as at December 31, 2007. As a result, the National Insurance Commission (NAICOM), the apex regulator in the industry, raised the minimum capitalfor various classes of insurance business.
Accordingly life insurance moved from N2 billion to N8 billion,non-life insurance, from N3 billion to N10 billion, composite insurance was raised from N5 billion to N18 billion and reinsurance from N10 billion to N20 billion.
Stakeholders speak
In a chat with Daily Sun, the Managing Director, Heirs LIfe, Niyi Onifade, said the industry has performed fairly well, but there is still room for improvement.
Onifade noted that it is unfortunate that what people hear more about the industry are the negative reports relating to service and claims payment. However, the truth is that the Nigerian insurance industry has been contributing significantly to the well-being of individuals and businesses over the years.
He said, “For instance, the life insurance arm of the industry grew at a compounded rate of about 20 per cent in the last 10 years, while the general arm also grew at a Compound Annual Growth Rate (CAGR) of about 6 per cent . Yes, there is more to be done when you consider the fact that the industry’s contribution to GDP is less than one per cent and people spend less than N5,000 on the average for insurance annually. The most important thing is that our industry is changing with better adoption of technology, entrance of new operators into the industry, introduction of different innovations, and, of course, the positive contribution of the regulator (NAICOM) to ensure that customers are empowered to make the right decisions. I am very much confident that the next three decades belong to the insurance industry.”
For the Managing Director of African Alliance Insurance Plc, Joyce Ojemudia, it has been a tale of growth across all measurable metrics but operators need to do better in getting more Nigerians of insurable age on board.
“Year on year, according to Nigeria Insurers Association (NIA) figures, the market size grew from N413.15 billion in 2018 to N490.8 billion in 2019. 2020 figures are being collated and I believe despite the pandemic, some good figures are going to spring up from there.
“Also, we’ve had major new entrants into the business, some of them foreign owned. This shows a growing interest in the industry. Have we done very well? I daresay yes. Can we do better? Of course we can and we should. Penetration levels hover around one per cent, this shows there is a huge gap to be filled.”
The Executive Director, Tangerine General Insurance, Supo Sogelola, noted that though the sector has improved with fewer and stronger companies, better corporate guidance, better level of education on the part of professionals, better quality of leaders; but the issue of public awareness on insurance remains a big challenge to the sector.
Suggesting solutions, Sogelola said, “we need to massively educate our practitioners and leaders; maybe NAICOM has to come upwith rules whereby they have to acquire international certifications so that they can run their companies and the industry better with top notch expertise.
“Digitalisation is the way forward, service channels and platforms need to be enhanced and increased in number. We need to attach insurance to all spheres of human endeavour such as food, health and shopping to boost penetration rate.
“Stronger monitoring and full digitalisation of the sector by the regulator is needed. This will ensure all moves within the industry are tracked and documented well enough. We should come together to set new goals for the industry for five, 10 or 20 years. This should not just be handled by the CEOs alone, the strategy units of all firms should be involved”
For the insurance Expert and Consultant, Ekerete Gam-Ikon, the industry has work to do in terms of product innovation, claims payment, customer experience and regulations.
“Insurance has to become a revenue generating avenue for the government by ensuring that Nigerians and businesses required by law to have insurance should pay fines when they do not comply with the law.
“The real development of the insurance industry will be seen in what microinsurance and Takaful come up with in the next decade. Insurtech is the real game-changer that will enable microinsurance and Takaful.
Interestingly, COVID-19 came with pains but may have become the new opportunity for the industry,” he said.
