A recent survey carried out on the Nigerian insurance industry by Agusto & Co., a foremost Lagos-based rating firm, found that up to 138 million people in Africa’s biggest economy are suspicious of the insurers.
Nigerians’ mistrust of the industry is a factor that has caused a low insurance penetration in the country. Insurance penetration measures the ratio of insurance premium to the country’s gross domestic product.
Oluyomi Akinola, an analyst with Agusto & Co., said in an interview with CNBC Africa on Thursday last week that the industry had struggled to deepen penetration as the rate currently stood at 0.4 percent.
“When we considered why people would not subscribe to insurance, a whopping 74 percent of individuals said ‘I don’t trust the insurance companies. I don’t trust the policies they are offering me’. And I think this is also exacerbated by the fact that the agents are not passing the message across effectively, especially when it comes to claims,” Akinola said.
“If you think about trust, trust is a two-way thing. In insurance contract, there is the insurance consumer, and there is the insurance company,” Yinka Adelekan who is an executive director at Agusto & Co., said.
“Both parties must play their roles. Specifically, when we talk about the insurance companies, the insurance companies need to pay claims as and when due. This is a problem that has affected the industry in terms of perception,” Adelekan said.
The CNBC interview reveals that Kenya has an insurance penetration of 3 percent; South Africa has reached double digits penetration with a rate of 13 percent, and Angola penetration rate of 21 percent.
The survey questions, which Akinola said also bordered on the likelihood of purchasing an insurance product, found that 40 percent of the respondents have not had policies marketed to them in the last 12 months. She wondered how high this proportion would be for the rural parts of the country, given that the respondents were residents of Lagos, an urban centre.
In its 2016 insurance industry report entitled, ‘Waves of change: revisited Insurance opportunities in Sub-Saharan Africa’, Ernst & Young noted that consolidation in the marketplace is necessary to build confidence among consumers.
“The presence of financially weak carriers erodes trust, especially if they are unable to pay valid claims. Regulators may acknowledge the need for further consolidation, but may not always be willing to let foreign insurers control majority shares,” the report said.
Akinola said that Nigeria’s insurance companies are not doing enough to deepen the industry.
“The agent-to-population ratio provides an insight. We have 1 insurance agent to 100,000 Nigerians. That’s not near enough. We also asked respondents what are your distribution preferences for instance. 59 per cent said they still want to speak to agents. 30 per cent said they like web-based marketing. 27 percent of the people actually said they would prefer purchase insurance through their banks.”
Akinola said that Agusto & Co decided to conduct the survey because little is being done to address the issue of mistrust in the industry, saying, “So we said, ‘let’s bridge the gap; Let’s sensitise the operators to say, this is what he consumers are saying.”
The objective is to bring out what the core concerns are to know how they can be worked on, she said.
