The Nigerian insurance sector remains underpenetrated despite achieving a N312 gross premium income in the first quarter of 2023, FBN Quest says in the latest report on the insurance industry.
According to the most recent data from the National Insurance Commission (NAICOM), the gross premium generated by the insurance sector increased by 39 percent year on year ( y/y) to N312bn in Q1 ’23.
However, on a quarter-on-quarter basis (q/q) basis, the gross premium income declined significantly by 47 percent quarter on quarter. The total premium figure comprised of income generated from the life insurance and non-life insurance businesses, which were down by -64 percent q/q and -52 percent q/q to N111 billion and N201 billion, respectively.
The marked q/q decline in the sector’s gross premium income can be attributed to the negative impact on economic activity resulting from the cash crunch caused by the Central Bank of Nigeria’s (CBN) naira redesign policy.
Despite the q/q drop in revenue generated in Q1 ‘23, Nigeria’s insurance industry has made considerable progress. This is reflected in both the sector’s gross premium generation and market size.
However, the industry remains underpenetrated, with individuals’ exposure to insurance products and services in the country still low.
To put this into perspective, Nigeria’s level of insurance penetration rate stands at less than 1 percent, according to a 2022 industry survey report by Augusto and Co.
According to FBN Quest, the result is quite discouraging, particularly considering that Nigeria has a population size of over 200 million people.
Although one of the objectives of the National Financial Inclusion Strategy launched by the CBN in 2012 was to achieve a 40 percent insurance coverage rate in Nigeria by 2020, there remains significant ground to cover in achieving this target.
Nigeria’s low level of insurance coverage is due to multiple factors, including lack of awareness, weak regulatory structure, and low standard of living, among others.
It also noted that the non-payment and delay in claims settlements to customers has been a persistent issue in the industry and has created negative perceptions of individuals towards insurance products.
Moving forward, more awareness and sensitisation must be created on the benefits of insurance products and services, especially those in the informal sector. Additionally, there is a need to build public confidence and perceptions of the insurance business through timely and fair claims settlement.
“We also recommend that the sector continues to expand distribution of its products through digitization methods, which would facilitate the adoption of insurance and further drive financial inclusion in the country.”
Addressing these issues and deepening insurance penetration, could unlock the immense potential of Nigeria’s insurance market and contribute significantly to economic growth, FBN Quest said.