Automotive, oil & gas, housing to drive $105.24bn growth in insurance sector 2018

Opportunity for growth in Nigeria’s insurance sector in the next four years is estimated at $105.24 billion, to be driven by the automotive policy, oil and gas and housing, according to Bismarck Rewane, chief executive officer, Financial Derivatives Company (FDC).

The 2014 to 2018 forecast as presented by Rewane shows the insurance industry is expected to grow to $877.0 billion in 2018, from expected growth of $573.4 billion, and to contribute 7.3 percent of Gross Domestic Product (GDP) in 2018, compared to 6.1 percent expected in 2014.

Rewane and other stakeholders in the insurance industry see proper documentation of assets, lending, reliable data, innovative products and retail as having the capacity to triple insurance activities in the near future.

They are concerned that the insurance industry in Nigeria contributed only 0.56 percent to the (GDP) as at 2011, lower than in South Africa where it contributed 12.9 percent, Kenya 2.3 percent, and Ghana 1 percent.

The stakeholders, who spoke at the second edition of the BusinessDay Annual Insurance Roundtable with the theme ‘Access to Insurance Services in Emerging Markets: Challenges and Opportunities’ organised by BusinessDay Media in Lagos, were not satisfied that despite having 59 insurance firms in the country, Nigeria accounts for only 1 percent financial inclusion, lower than 5 percent inclusion in Ghana with 47 insurance companies.

Rewane said areas where risks are experienced and insurance is needed have a low share. He listed these areas to include life assurance, medical/critical illness cover and livestock/agriculture insurance.

The constraints to insurance growth, he said, included poor corporate governance, high default rates, low capital, low capacity and skills, as well as cultural factors and high level of consumer ignorance of the advantages of insurance products, high unemployment rates, low GDP per capita figures, and lack of genuine property ownership documents.

Making a presentation on ‘Positioning Nigeria’s Insurance Industry for Global Competitiveness’, Rewane listed the opportunities in the insurance sector to include a young and growing population of 170million people, growth rate of 2.6 percent (4m), technological advancement, stable economic growth projected at 6.2 percent, mobile phone ownership at 84.9 percent in urban areas and 55.6 percent in rural areas, and sale of life insurance using mobile phone networks to 126 million active lines.

Fola Daniels, commissioner for insurance, said that the challenges noticeable in the industry were poor product design, reluctance to take advantage of opportunities in the industry and poor corporate governance, among others.

Daniels, who was represented by Mohamed Kari, deputy commissioner for insurance, said the country’s 170 million population offered huge opportunity for growth in the industry, adding that operators could take the advantage to design products that meet the needs of the people.

“Indeed, there is a strong link between development of insurance and that of an economy,” he said, noting that market penetration was a major challenge to the Nigerian insurance industry, as well as poverty, unemployment, and cultural outlooks.

He reiterated the commission’s commitment to providing leadership in the sector, saying the vision 2020 development plan of the Federal Government describes the Nigerian insurance sector as “a grossly untapped opportunity”.

He said the fact that out of a population of over 170 million people, only 1 percent of the adult population, estimated at over 40 million, is currently covered by insurance clearly showed the massive potential lying ahead of the industry.

“Technology is a major driver for insurance growth,” said Kola Oyeneyin, CEO, AutoGenuis, adding that it was also a major driver for growth inclusion in the insurance sector.

“The Nigerian insurance sector today is less than N2 billion but if it were to be where South Africa is today within the next few years, then we should be looking at a value of over N100 billion,” he said.

Speaking at the panel discussion, Kola Ahmed, director general, Chartered Insurance Institute of Nigeria, said the 120 million telephone subscribers in the country were a challenge for operators, noting that to address this, insurance practitioners must design products that would be acceptable to people at the grassroots.

HOPE MOSES-ASHIKE & DANIEL OJABO