Report shows majority of Nigerians rely on family support to survive risks
…as experts recommend insurance protection
A study by the Centre for Financial Regulation & Inclusion and the World Bank to understand how insurance market development can contribute to sustainable and inclusive growth in Nigeria, shows that majority of the population depends on family for support when risks crystallize.
Albert van der Linden, speaker/senior Research Associate, Cenfri who released the report at the Insurance Directors Conference organized by the Center for Insurance and Financial Management held in Lagos, said there are a lot of opportunities for enhancing individual and household resilience.
According to him, less than 2 percent of Nigerian adults have insurance and most people rely on family and friends to cope with risk. Alternatively, they forego consumption or draw on savings, thus decreasing their resilience.
The limited uptake he said is underpinned by low trust in insurers and a lack of awareness of insurance. Health insurance is the most popular, but at 609,000 adults, it serves only a fraction of the adult population. Other notable categories include life insurance (including compulsory group life), vehicle insurance (including compulsory third-party liability insurance) and endowment savings products.
Insurance uptake is concentrated in urban areas, largely in the south and within specific target markets that are typically easier to reach. Almost half of the 1.8 million adults who have insurance work as salaried employees; and 65 percent of all those with insurance are male.
Distribution is largely broker-driven, and most premium collection is done through corporate payments. Agent sales are growing, but agent distribution is limited to a few insurers that are proactively pursuing retail insurance.
Bancassurance holds much potential given the large number of banked individuals without insurance, but there have not been any significant developments so far, partly due to recent bancassurance guidelines being perceived as restrictive.
Opportunities for enhancing individual and household resilience:
The diagnostic report identifies several opportunities for the insurance market to contribute towards the resilience of individuals and households:
• Easy-to-reach target market.
The formally employed market of 7.9 million individuals remains largely untapped (only 10.6 percent having insurance, 33 percent being women) and presents a ready distribution channel via employee groups. Voluntary group health presents scope to deepen the employee benefits market for the growing middle class. The annuities market is growing fast on the back of pension’s market growth and is seen as a core growth area for many life insurers.
• Aggregator-based distribution.
To reach individuals in rural areas and the urban mass market, distribution through aggregators that have an existing relationship with clients is needed. Mobile distribution, bancassurance and retailer distribution all hold potential. In each case, however, several barriers would need to be overcome: the trust barrier on the demand-side, a supply-side innovation-barrier and a regulatory framework largely orientated to broker distribution.
• Takaful insurance.
Sharia-compliant insurance products hold potential to increase the penetration of insurance to northern parts of the country, but indications are that reach is still limited, largely due to distribution constraints in serving the northern regions and the limited availability of individuals that can serve on the requisite Shariah boards.
Microinsurance is regarded as an opportunity for innovation, but overall market interest is lacklustre – understandably so, given the constraints in serving even the upper end of the retail market. Regulatory restrictions for that have held back the development of mobile money and the use of airtime to pay premiums prevent scale via mobile insurance distribution.