By Henry Uche, [email protected]
As Nigeria celebrates 64 years of independence, poor insurance penetration and other challenges cast a shadow over the festivities.
According to experts, the alarmingly low insurance uptake, especially in the countryside, remains a challenge that be tackled urgently.
Despite its vast economic potential and a burgeoning population exceeding 200 million, only about 1 percent of Nigerians have access to insurance products. The lack of coverage leaves millions unprotected against financial risks, including health emergencies, natural disasters, and economic downturns.
Experts point to several factors contributing to this dismal statistic, including widespread public mistrust of insurance providers, inadequate awareness of the benefits of insurance, and a regulatory environment that has yet to foster inclusivity and innovation within the sector.
The result is a fragmented market where essential insurance services remain out of reach for many, particularly in rural and underserved areas.
The low uptake of insurance not only jeopardises individual financial security but also hinders broader economic growth. Without a robust insurance framework, experts say businesses struggle to mitigate risks, and investors remain wary, stifling the country’s potential for sustainable development.
As the nation reflects on its progress since gaining independence in 1960, stakeholders are calling for urgent reforms to enhance awareness, accessibility, and trust in the insurance sector. The need for strategic initiatives aimed at increasing insurance literacy, improving product offerings, and strengthening regulatory oversight has never been more critical. With a commitment to transforming the insurance landscape, Nigeria has the opportunity to harness its economic potential and secure a more resilient future for all its citizens.
The Genesis
The insurance sector in Nigeria has traversed a remarkable journey since its establishment, evolving in tandem with the nation’s socio-economic landscape. From its early inception to its current role as a critical driver of economic stability, the insurance industry reflects both progress and ongoing challenges that shape its future.
Insurance in Nigeria traces its roots back to the 1920s and 1930s, primarily with the emergence of foreign insurance firms that catered to expatriates and colonial enterprises. The early focus was predominantly on marine and fire insurance, which were essential to the burgeoning trade and commerce during the colonial period.
Impact of independence
Following Nigeria’s independence in 1960, the government recognised the necessity of a robust insurance framework to support national economic growth. The Insurance Decree of 1976 was a watershed moment, mandating that insurance companies operate locally and encouraging the formation of indigenous firms. This shift marked the beginning of a more structured insurance landscape, aimed at building local capacity and enhancing consumer trust.
Expansion and challenges
The insurance sector experienced significant growth in the 1980s and 1990s as awareness of insurance benefits spread across various segments of society. The introduction of compulsory insurance, particularly for motor vehicles, played a pivotal role in expanding coverage. However, this growth was tempered by numerous challenges, including inadequate regulatory oversight, public skepticism regarding the reliability of insurance providers, and limited access to insurance products for many Nigerians.
Reformative years
The late 1990s and early 2000s ushered in a new era of reform for Nigeria’s insurance industry, characterized by a commitment to transparency, consumer protection, and corporate governance. The establishment of the National Insurance Commission (NAICOM) in 1997 marked a turning point in the regulatory landscape. Key reforms during this period included; stricter capital requirements which were implemented to bolster the financial health of insurance companies and ensure they could meet policyholder obligations.
Another is enhanced governance standards with the introduction of robust corporate governance practices aimed to foster accountability and operational integrity within insurance firms.
Consumer protection initiatives also helped where policies designed to protect consumer rights and improve the claims process were introduced, aimed at rebuilding trust in the sector.
Technological advancements and current trends have come into the insurance landscape.
In recent years, the Nigerian insurance sector has witnessed a technological revolution, driven by the rise of InsurTech firms that leverage digital solutions to enhance service delivery. This transformation has improved operational efficiency, reduced costs, and expanded access to insurance products, particularly among younger and tech-savvy consumers.
However, despite these advancements, insurance penetration in Nigeria remains critically low, hovering below 1 percent. Factors such as economic challenges, public mistrust and a limited range of suitable products continue to pose barriers to growth. However, concerted efforts to enhance financial literacy and public awareness are underway, offering promising prospects for increasing insurance adoption.
The future of the Nigerian insurance sector appears bright, with opportunities for significant growth on the horizon. Emphasising digital innovation, expanding product offerings to meet diverse consumer needs, and fostering partnerships with financial institutions will be pivotal in enhancing market penetration. Furthermore, ongoing regulatory reforms aimed at consolidating and modernising the legal framework will create a more favorable environment for investment and growth.
Experts’ views
Assessing the development, Mr. Gus Wiggle, former Chairman of the Nigerian Insurers Association (NIA) and Principal Consultant at Carefirst Consult, shared insights on the sector’s journey thus far and its future prospects.
He said: “I believe that the insurance sector has demonstrated significant growth and resilience over the years, particularly in recent times.”
He highlighted the remarkable achievement of a 23 percent growth rate in 2021, culminating in a gross premium income of N631 billion.
This upward trajectory continued into 2023, with estimated gross premium income exceeding the one trillion-naira mark, driven by strong regulatory support and necessary premium rate adjustments on various policies.
Despite the progress, Wiggle acknowledged the ongoing challenges plaguing the sector. “Current economic hardships impact consumer purchasing power, leading to a hesitance in buying insurance. Moreover, public confidence in insurance companies remains low, compounded by a poor product market mix that often fails to meet consumer needs, especially in retail offerings.” He further elaborated on other pressing issues, such as pricing inconsistencies, digitalisation hurdles and underdeveloped distribution channels. Nevertheless, he expressed optimism for the future, highlighting ongoing efforts to enhance financial inclusion, strengthen regulatory frameworks, and raise public awareness about the benefits of insurance.
