Nigeria’s huge population put at over 180 million should ordinarily be a growth potential for insurance growth because the more there are many people to insure their assets and protect their dependants, the more insurance grows.
Overtime, the country’s population has been the attraction of many international investors into the local insurance business, who believe that the population is an advantage when deepening penetration.
The challenge according to experts is the lack of purchasing power by the citizens to afford some quality of life.
A report by the World Poverty Clock shows Nigeria has overtaken India as the country with the most extreme poor people in the world, with 86.9 million Nigerians now living in extreme poverty, representing nearly 50 percent of the estimated 180 million populations.
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With this figure, it becomes clearer that a larger population of the population do not have the purchasing power to afford quality life, which insurance is part of.
Purchasing power therefore has been described as very critical in the ability of the consumer to buy insurance service for risk protection.
Mohammed Kari, commission for Insurance/CEO, National Insurance Commission said during an interview that increasing insurance penetration does not only depend on population, it is more dependent on spending power of the population.
According to him, if you check the poverty level of Nigeria’s population, it is much lower to some of those countries we keep comparing Nigeria with”.
Kari said the level of education and enlightenment of the insured is a factor, and also, awareness of the benefits of insurance.
“I am sure you are aware that the insurance industry has commenced campaign to make the consumers aware of the benefits of insurance. We believe that when this is done, it will improve on the penetration”.
He however noted that there is still a huge potential because of that population size and that is why the industry is realising the need to do more retail, and personal-line insurance against the corporates.
According to Mohammed Kari, the corporate has almost reached its limit, because you cannot go beyond what exists, but individual classes are yet to be tapped into, and when this is done, then, the population of insured will increase.
Ada Ufomadu, analyst, Financial Institutions Unit, Agusto & Co Nigeria had in report on insurance in 2017 said the Nigerian Insurance Industry, like most other industries, is affected by the macroeconomic environment.
“The downturn in Nigeria’s fortunes which had its roots at declining global crude oil prices since 2014 has triggered changes in the consumption pattern of insurance products in recent times.”
She however stated that with an estimated insurance penetration rate of 0.4 percent and only 1 percent of the population holding any form of insurance policy, the opportunities in the Nigerian market are enormous.
“The Nigerian economy is expanding and new risks are evolving, hence a growing need for companies and individuals to insure businesses and protect themselves in the event of unexpected losses. By this, the economy is able to rebuild and recover from losses quickly. “
When we compare the country’s insurance penetration to economies like Kenya and South Africa which boast of insurance penetrations of 2.9 percent and 14 percent respectively, we see a clear lag.
According to Ufomba, Agusto & Co believes that it is imperative for both operators and regulators to work together to increase awareness and educate the populace on the benefits of insurance. We need to take a cue from countries like Kenya and South Africa who have adopted various strategies including the support of other sectors such as telecommunications to drive penetration of insurance.
“Industry operators must be more aggressive in their marketing approaches, offering products and services that are bespoke to the Nigerian environment and populace.”
