Olumide Ibidapo is the managing director/CEO, of FBN Insurance Brokers Limited, a subsidiary of FBN Holdings Plc in this interview with Modestus Anaesoronye looks at the Nigerian insurance industry, growth opportunities, challenges, and the future of the market.
How do you see the Nigerian insurance industry evolving in the next five years?
The Nigerian insurance industry has undergone significant changes in recent years and is expected to continue to evolve in the next five years. Several factors will drive the growth of the industry, while there are also challenges that may hinder its progress.
One of the key drivers of the growth of the Nigerian insurance industry is the increasing awareness and adoption of insurance products by the Nigerian populace. As the Nigerian population continues to grow and become more aware of the importance of insurance, the demand for insurance products is expected to increase.
Another factor that will drive the growth of insurance is the increasing use of technology in the industry. Technology is becoming more prevalent in the insurance industry, and this will help to increase efficiency and improve customer experience. Insurance companies are increasingly using digital platforms to provide services to their customers, and this trend is expected to continue in the next five years.
The Nigerian government has also been taking steps to promote the growth of the insurance industry in the country. The National Insurance Commission (NAICOM) has been implementing reforms programs and regulations aimed at improving the regulatory environment for insurance companies in Nigeria.
However, there are also challenges that may hinder the growth of the Nigerian insurance industry. One of the major challenges is the low insurance penetration in Nigeria. Despite the efforts of the government and the insurance industry, insurance penetration in Nigeria which is 0.5 percent is still lower than expected, and this may limit the growth potential of the industry. Low insurance literacy is also a challenge in Nigeria, as many Nigerians are not familiar with insurance products and do not understand how they work.
What do you think are the biggest challenges facing the Nigerian insurance industry currently?
In addition to the penetration and literacy challenges mentioned earlier, some other major challenges include a lack of trust. Trust is a crucial factor in the insurance industry, and unfortunately, there is a lack of trust between insurance companies and customers in Nigeria. This lack of trust is due to the perception that insurance companies are not transparent and that they do not pay claims promptly. But this is not always true. In 2022 the industry paid N318.2 billion in claims to its customers. This shows that the key players in the insurance industry are dedicated to delivering on the promise of insurance.
Furthermore, it is very important to engage the services of an insurance broker in order to have a seamless insurance experience whether as a person or as a corporate entity.
The insurance distribution channels in Nigeria are also underdeveloped. The majority of insurance sales are still done through agents, and the use of technology and other distribution channels, such as bancassurance and mobile insurance, is still low.
What opportunities do you see for growth in the Nigerian insurance industry?
The Nigerian insurance industry presents significant growth opportunities, and there are several areas where the industry can expand and thrive. Microinsurance is an area that presents significant opportunities for growth in the Nigerian insurance industry. According to a report by Enhancing Financial Innovation and Access (EFInA), there are over 100 million underserved and unserved individuals in Nigeria who could benefit from microinsurance. In 2019, the Nigerian insurance industry’s microinsurance market was valued at N4.4 billion, with a growth rate of 36.1 percent from the previous year.
Agriculture insurance is another growth opportunity because Nigeria is an agricultural-based economy, and agriculture insurance presents significant opportunities for growth in the industry. According to the Nigerian Insurers Association (NIA), only 0.5 percent of Nigerian farmers have agricultural insurance. With over 35 million smallholder farmers in the country, agriculture insurance represents a huge untapped market. In 2019, the Nigerian insurance industry’s agriculture insurance market was valued at N5.6 billion.
Health insurance is another area with significant growth potential in the Nigerian insurance industry. According to the National Health Insurance Scheme (NHIS), only 5 percent of Nigerians have health insurance coverage. The low level of health insurance coverage presents an opportunity for insurance companies to offer more health insurance products to meet the growing demand. According to a report by Fitch Solutions, healthcare expenditure in Nigeria is predicted to reach N5,762.061 billion by 2021 growing at a compounded annual growth rate of 8.35 percent Y.O.Y
Oil and gas insurance: The Nigerian oil and gas industry is a major contributor to the country’s economy, and insurance products for this sector present significant growth opportunities. According to a report by PwC, the Nigerian oil and gas insurance market is projected to grow at a compound annual growth rate (CAGR) of 5.2 percent between 2021 and 2025. In 2019, the Nigerian insurance industry’s oil and gas insurance market was valued at N26.5 billion.
How has technology impacted the industry, and what changes do you anticipate in the future?
Technology has played a significant role in transforming the Nigerian insurance industry in recent years. The introduction of technology has improved operational efficiency, enhanced customer experience, and increased market penetration. The digitalization of insurance products has made it easier for customers to access and purchase insurance products. Customers can now buy insurance policies online and via mobile devices, and insurance companies can use digital channels to distribute and manage their products. This has resulted in increased market penetration and customer engagement. In 2019, online insurance sales in Nigeria were valued at N1.9 billion, a 31 percent increase from the previous year.
Another is data analytics. Insurance companies in Nigeria are using data analytics to gain insights into customer behavior, preferences, and risks. This has helped insurers to develop targeted insurance products and improve underwriting accuracy.
Looking to the future, we can anticipate that technology will continue to transform the Nigerian insurance industry. Some of the changes we can expect include:
Telematics: Telematics can be used in the Nigerian insurance industry to monitor driver behavior and offer personalized auto insurance products. Telematics-enabled insurance products use sensors and GPS to monitor driver behavior, such as speed, braking, and acceleration. This allows insurance companies to offer personalized insurance products based on driver behavior and reward safe drivers.
Increased use of digital platforms to offer personalized insurance products.
In conclusion, technology has had a significant impact on the Nigerian insurance industry, with the introduction of digitalization, AI, data analytics, and telematics. These technological advancements have improved operational efficiency, enhanced customer experience, and increased market penetration. Looking to the future, we can expect continued innovation and transformation in the industry as technology continues to evolve.
How can the industry better serve the needs of the underserved population, such as those in rural areas?
The Nigerian insurance industry has a significant opportunity to serve the needs of the underserved population, particularly those in rural areas. With a large population, vast geographical area, and limited access to traditional banking and financial services, rural communities in Nigeria are often underserved and overlooked by the insurance industry. However, with the introduction of innovative and inclusive insurance products, the industry can better serve the needs of these populations.
The Nigerian insurance industry has a significant opportunity to better serve the underserved population, particularly those in rural areas. By introducing innovative and inclusive insurance products, collaborating with NGOs and government agencies, increasing education and awareness, and leveraging digitalization, insurance companies can bridge the gap between the underserved population and the insurance industry. By doing so, they can expand their customer base, increase market penetration, and contribute to the economic development of the country.
What are the topical must-have insurance products for individuals and corporates this season?
The insurance industry is constantly evolving, and the needs of individuals and corporates are always changing. However, there are certain insurance products that are always in demand, regardless of the season. Below are some of the topical must-have insurance products for individuals and corporates this season:
Health Insurance, Motor Insurance, Property Insurance, and Travel Insurance. The above insurance products are some of the topical must-have insurance products for individuals and corporates this season.
While the needs of individuals and corporates may vary, these insurance products are always in demand and can help provide protection against unforeseen risks. It is important to consult with insurance experts to determine the specific insurance products that best suit your needs.
What are your thoughts on microinsurance and its potential to expand insurance coverage in Nigeria?
Microinsurance is a type of insurance that is designed to provide insurance coverage to low-income individuals and families and SMEs who cannot afford traditional insurance policies. In Nigeria, where a large portion of the population lives below the poverty line, microinsurance has the potential to expand insurance coverage and provide financial protection to those who need it the most.
One of the main advantages of microinsurance is that it is affordable and accessible to low-income individuals. It is designed to offer basic insurance coverage at a low cost, making it accessible to those who may not be able to afford traditional insurance policies. This can be particularly beneficial in rural areas of Nigeria, where access to financial services is limited.
Another advantage of microinsurance is that it can help reduce the financial burden of unexpected events, such as illnesses or accidents. For low-income individuals, these events can be catastrophic and may result in significant financial hardship. Microinsurance can help provide a safety net and protect against financial losses, ensuring that individuals and families can continue to provide for their basic needs.
Microinsurance has the potential to expand insurance coverage in Nigeria and provide financial protection to low-income individuals and families. However, there are challenges that must be addressed to ensure that microinsurance is accessible, affordable, and effective. With the right regulatory frameworks, infrastructure, and education programs, microinsurance can help bridge the insurance gap and provide financial protection to those who need it the most.