Decades after the industry took its root, Nigeria’s insurance industry, sadly, stands at less than five per cent penetration. The poor adoption is a big threat to the survival of about 58 insurance firms across the country.
Already, about 30 per cent of the operators are less active and have been taken over by the National Insurance Commission (NAICOM) while the rest grapple with a series of challenges ranging from poor financials to low patronage.
Other challenges bedeviling the industry include insecurity and negative public perception. The insecurity in the country has increased claim responsibilities whereas premium growth has failed to match the rate of claim increase.
With an expected annual total gross premiums of N480 billion in the 2020 financial year, much below the targeted N1 trillion, the industry must improve, if it wants to be reckoned with as a key driver of the economy.
This country is profoundly endowed, blessed with enviable resources and supposedly advantageous to the numerous business opportunities and prospects.
A marketer of one of the insurance companies, who spoke on condition of anonymity, shared her experience with The Guardian on the development of the sector asking: “how can you sell a product to someone who in the first place does not believe it?”
In “Selling insurance to a ‘die-hard unbeliever’, you have the challenge of educating them about what insurance is all about. In essence, share the gospel of insurance.”
According to her, “Nigerians are renowned to be lovers of quality and expensive items but providing succour in the case of mishap or calamity still won’t attract them to Insurance. No one likes the taste of bitter herbs but we are not ignorant of the superb benefits it does to our body. What am I saying?
“There is stuff we do or take and gladly accept in different aspects of our lives through it is highly inconvenient but because we know the truth about it, we have no choice but to do it. What about those who believe in it very partially? Well, they are the ones who consider it a sort of scheme- like insurance is going to swindle them. Insurance is not meant to swindle, but to be your third leg when either of your legs breaks by accident or creates a palliative.”
The Chairman, Nigerian Labour Congress (NLC), Lagos, Idowu Adelekan, said the economy has an enormous impact on insurance.
“The minimum wage has been an endemic issue. Many states still pay N18, 000 ($63) as minimum wage, which is a total disappointment, bearing in mind the inflation crisis.
“This can hardly take care of any basic need ranging from shelter, electricity bills, gas, food, hospital bills, leisure, school fees (if he has kids) to transportation. Will you blame somebody who earns N18, 000 if he does not have an insurance cover? He cannot even afford the very basics,” he said.
He said low insurance penetration and acceptability are not entirely the fault of individuals as government also contributes to it. The government, he said, should be blamed for failing to support the insurance industry to stand on its feet.
Just a few months ago, the Nigerian senate voted against the idea of a bill for comprehensive homeowners’ insurance. NAICOM and the Nigerian Insurers Associations (NIA) did nothing to oppose the position of the lawmakers.
Of course, there has been an improvement over time but there is still a long way to position the industry for growth.
Experts say branding is essential for building a stronger insurance industry.
An industry analyst, Lanre Akinjide, who also spoke on the development, told The Guardian that the poor management made matters even worse for the operators.
“The industry needs competent individuals who will not just think outside the box but will also go ahead to create their boxes which will reflect innovation and first-class products. This will certainly increase the value of the assets. Let us not forget that the insurance industry is a vital part of the financial sector.”
Insurance is a big deal in developed countries and accounts for a large fraction of the economies. On the positive side, Nigeria has well over 50 insurance companies with a few doing impressively well.
Underwriters have, over the years, devoted attention to the development of products for corporate firms. Thus, insurance companies generate about 80 per cent of their premiums from corporate organisations.
On the other hand, less than one per cent of the Nigerian population has an insurance cover from the industry that has been in existence for close to a century. The result is the low penetration, contributing less than one per cent to the country’s Gross Domestic Product (GDP).
The nation’s insurance industry since its inception in Nigeria is confronted with the need to overcome endemic challenges that continues to inhibit its much-expected growth Chief of the challenge is the perception crisis.