Government’s spending, devaluation to drive 8% GPI growth in insurance sector – Augusto & Co

The nation’s insurance industry is projected to witness Genuine Progress Indicator (GPI) growth of 8 percent in 2017 on the back of a probable devaluation, infrastructure spending and continued growth in life business, according to Augusto & Co, a rating firm.

The industry, according to the rating firm, witnessed slower GDP growth rate from 2.11 percent in quarter four 2015 to a negative 1.22 percent in quarter three of 2016. The recession has resulted in a general slowdown in economic activities.

However, Yinka Adelekan, executive director, financial institutions ratings at Augusto & Co, calls for ingenuity on the part of operators and close monitoring on the part of the regulators for harnessing of the vast potentials in the industry, which have not been tapped.

Adelekan also calls on the operators and regulators to study the report and its recommendations so as to move the industry forward.

Presenting “The Nigerian Insurance Industry Report 2017, titled, Forging Ahead” in Lagos on Wednesday, the firm noted that foreign exchange demand management had caused a reduction in sector’s GPI, particularly in the oil and gas business line.

However, the industry’s low penetration rate of 0.4 percent presents huge growth opportunities, while evolving risks such as job losses, cyber risk, among others, offer prospects for the development of new insurance products.

In the report, Ada Ufomadu, analyst, financial institution ratings, says the 2017 outlook will be stable, saying, “GPI growth of 8% in 2017 is hinged on probable devaluation, infrastructure spending and continued growth in life business. The life business in 2015 grew by a marked 54%; however, penetration rate of the segment remains low at 0.045%. Kenya: 1.2%, South Africa 11.4%.”

Also, that there is higher expectation of increase in motor GPI arising from asset revaluation, although growth will be tampered by a switch to cheaper motor insurance covers such as third party insurance.

She says profits will be upheld by increased investment income due to rising interest rates, but moderated by rising claims payments.

“Anticipated government spending in construction could support growth in the industry, specifically bonds, group life, workers compensation, among others.

“Microinsurance is also expected to gain traction on the back of a large populace, which remains outside the insurance coverage,” she says.

In his presentation on 2017 Insurance Consumer Survey (Retail), Muyiwa Jesuro, senior analyst, outlines products consumers will like to see in 2017, including savings, investment and life, which is put at 8.7 percent, electronics – 7.4 percent, loss of employment – 6.2 percent, children’s education – 3.7 percent, dollar-based life insurance and intellectual property.

Jesuro says the consumer insurance survey highlights, for instance, the key reasons for insurance, which he lists to include protective, diversifying risk and compulsory product.

He lists key disincentives for insurance products to include mistrust, unawareness of benefits, low purchasing power and religious reasons.
Customer satisfaction level, according to Jesuro, shows that motor, health and life insurance have the highest levels of satisfaction, while general accident has the lowest level of satisfaction.