Nigeria’s insurance industry has earned a total of N615.8 billion on retiree annuity under the country’s Contributory Pension Scheme.
Managed by life insurance companies, as of the end of December 2022, the scheme had 105,047 retiree annuitants who collected N6.24 billion monthly, according to data from the National Pension Commission.
Annuity for life is a retirement option for employees offered by a life insurance company licensed by the National Insurance Commission (NAICOM). It is a type of insurance contract that provides in return for a lump sum a monthly or quarterly payment, starting immediately after retirement and continuing for the rest of the retiree’s life.
The contract is often purchased by retiring persons who want an income that is guaranteed to last for the rest of their lives, no matter how long that might be.
Section 7(1a) of the Pension Reform Act 2014 states that an employee on retirement shall procure Annuity for Life Policy or Programmed Withdrawal. The lump sum for the procurement of Annuity for Life Policy or Programmed Withdrawal must have been accumulated through series of employer/employee contributions into the Retirement Savings Account of the retiring employee throughout his/her working career.
Sunday Thomas, commissioner for insurance, described the potential of the industry growth from annuity business as huge, saying a lot of the pension funds will empty themselves into insurance as more people begin to understand the benefits of annuity.
While challenging life insurance companies to take advantage of this growth opportunity, he said the commission was building the human capital requirement that this segment of the business will require through its actuarial talent programme for the industry.
He said several initiatives have been designed by the commission to facilitate the attainment of the strategic focus, which will redefine the future of the Nigerian insurance market.
“The commission has already commenced the Actuarial Capacity Development Programme in collaboration with the College of Insurance and Financial Management, and the programme is expected to develop 100 certified actuarial analysts and a minimum of five actuaries in Nigeria by the year 2024,” he said.
This is an important component of the commission’s strategic focus on capacity development, he said.
NAICOM’s fourth-quarter 2022 data released recently showed that out of N726 billion premium generated by players in the industry, life insurers contributed N309 billion, with 27 percent coming from annuity business.
The rest, 34 percent and 39 percent, came from group life insurance and individual life respectively.
According to the commission, the proportional significance of life in the industry sustained a positive course in recent times, reflective of the consumer’s confidence and awareness.
“Despite operational challenges posed in domestic and global economies, the industry continues to post inspiring numbers in business retention, reflective of the market resilience and increasing capacity,” NAICOM said.
Read also: Resilience, rising capacity drives insurance retention
Niyi Onifade, managing director of Heirs Life Assurance, said the company’s annuity product is hinged on making people to retire without financial worries as the plan pays policyholders a guaranteed pension for life.
According to him, the Lagos State government had a year ago announced Heirs Life as one of the few life insurance companies providing annuity plan to its pensioners, demonstrating the government’s confidence in the company. He said the company has partnered with several organisations to provide the annuity plan to their employees.
“These partnerships are testament to the confidence regulators and other partners have in the company’s capacity to fulfil its promises and its consistent delivery of service excellence,” Onifade said.
He added: “Pensioners have every reason to live life confidently as the Annuity Plan takes care of the worries of retirement, specifically, the uncertainty of the future. We are delighted to provide Annuity to pensioners in Nigeria.
“We consider this as a big win because it is an indication that our customers, regulators, and government agencies are confident in our promise of service excellence.”
