The growth of insurance business anywhere in the world is dependent on the growth of the larger economy. Nigeria is a developing economy with a lot of poor people and poor financial power to make economic decisions that can drive growth.
The implication is that the citizens still have very low economic power (purchasing power) to afford basic needs and so insurance which is usually the least in their order of priority barely gets attention of the populace.
These accounts why market penetration is still very low at less than 0.4 percent despite the huge population of about 200 million, with total premium of the industry at below N500 billion per annum.
60 years after independence, the insurance industry like many other sectors in the economy is still crawling despite a lot of efforts by operators and regulators to create market awareness. Most a times, the lack of penetration is usually blamed on low level of awareness, but this is not really the truth as research findings show that it is largely due to low economic powers of many Nigerians, even though culture is also an issue.
In this case, when people are not able to acquire assets then insurance does not grow, given that the economy is dried of credits for housing, mortgage opportunities.
Dominic Onyeulor, an insurance broker in his analysis of the state of the insurance industry today said the greatest challenge of the industry is poor state of the economy, which no doubt is as a result of the dwindling national revenue following the sharp drop in the price of crude oil being a mono-economy that largely depends on oil.
Onyeulor however noted that with Nigeria’s population estimated to surpass 200 million in 2020, and about 40 percent of that within the youthful age, there is a huge opportunity for underwriters in Nigeria to explore and tap potential of a larger retail market for inclusive insurance.
The future of the Nigerian insurance industry is going to be eventful and vibrant as the industry continues to seek various means to deepen insurance penetration in Nigeria, while also increasing its capacity to underwrite big ticket risks, come up with better technology infrastructure for distribution and better service delivery, as well as well innovative products.
He said it’s expected that the contribution of insurance to the GDP will increase tremendously when the on-going recapitalisation of the sector is concluded by June 2021, with emergence of mega insurance and reinsurance companies.
That Nigeria is now 60 years means that the country is ripe for development in all ramifications, and this no doubt will impact the insurance industry as well as other sectors of the economy if government begins to make right policies that will increase the purchasing power of the average Nigerian.
