There is a cliché that almost anything can be sold in Nigeria; this may not be the case for insurance products, as they are one of the hardest to sell in the Nigerian market place.
Among other factors responsible for the reasons why the product is difficult to sell, disposable income on account of the sluggish economic growth ranks the top on the list on why most Nigerians don’t like to patronise insurance companies.
Out of the about 100 million adult population in Nigeria, a 2018 survey by the Chartered Insurance Institute of Nigeria (CIIN) revealed that about 86.6 million Nigerians do not have any form of insurance cover.
“More Nigerians won’t and don’t intend to take up any form of insurance cover if given the choice,” CIIN noted.
At the end of H1 2018, the World Poverty Clock, a model created to track progress against poverty in real time by the Brookings report revealed that Nigeria eclipsed India as the poverty capital of the world. It said 6 Nigerians enter into extreme poverty every minute.
Explaining why many Nigerians don’t consider an insurance cover as a priority, Jim Ovia, the Founder/Chairman of Zenith Bank Plc, said in a statement that the major problem “we see in the Nigerian market is that per capita income of the people is very low and people tend not to take insurance as a priority against other things related to them.”
Nigeria exited its worst recession in Q2 2017 which resulted from declining oil prices and the reduction in the volume of oil production.
The effect of the 5 quarter contraction has left an almost permanent scar on many Nigerians, as after almost two years of slow but positive economic growth, not much has changed about their eroded purchasing power.
On how this may have impacted on them, Ngozi Amandi, a manager at a company in the V.I axis of Lagos said “I only now have the compulsory insurance products, but when everything was better I had series of insurance products.”
She explained that “Since I haven’t renewed my insurance products, I and my family have been safe and that money has been channeled into more pressing needs.”
Industry stakeholders see the outcome of the 2018 survey by CIIN as worrisome as it shows that the nation’s insurance sub-sector is not growing as a result of diminishing patronage.
This is despite the sector being one of the oldest in the country, having been in existence for almost a century.
A recent survey by NOIPolls, further underscored the situation, saying that nine out of 10 Nigerians do not have any form of insurance.
Lack of trust on the insurance companies to pay claims and on time is one of the reasons why some Nigerians are not encouraged to take on insurance products.
According to Ada Ufomadu, a senior financial institutions analyst at Agusto & Co Limited, a credit rating agency, “the issue of trust in the Industry has to be addressed because insurance is a business of trust.”
However, the motor insurance and Group life insurance which has now been made compulsory by the government is expected to support growth.
Data from Agusto & Co as analysed by BusinessDay revealed that motor and general accidents insurance have been the most profitable business lines with underwriting profit margins of 34.2 percent and 31.8 percent respectively in 2017.
Lack of information technology and standardisation of insurance data (including lack of local expertise in the field of insurance IT solutions), meaning manual operations is still prevalent in the industry, is another issue traced by industry experts to be stalling higher insurance penetration in Nigeria.
Adekunle Ayo, a young graduate who was unemployed for two years after completing the compulsory National Youth Service Corp (NYSC) was happy when he got a job as a direct sales agent with one of the country’s insurance firm but he said “waking up to go on the field in search for prospective insurers is almost like a nightmare.”
He said this is because “not many Nigerians are interested in insurance. At the mention of the sector I operate, people get turned off and show the not interested body language.”
Industry survey by BusinessDay revealed that the lack of affordable, easily accessed and tailored retail products to the excluded segment of the Nigerian economy is also one of the setbacks of the industry.
“There is also not much information, awareness and advertisement done by the companies operating in that space, unlike the culture of other financial institutions which seize every opportunity to tell their customers about their products,” an industry expert who asked not be identified explained.
With about 59 insurance firms underwriting non-life and life businesses in Nigeria, the Industry’s asset base stood at N1.3 trillion as at 31 December 2018, reflecting a compound annual growth rate of 17 percent in the last three years.
However, total assets, GPI and profits are controlled by a few. Top 5 players account for 45 percent of GPI, 42 percent of total assets and 61 percent of after tax profits.
In 2018, the Industry generated premiums of about N448.6 billion, which reflected a 12 percent growth year on year. With this volume of GPI, the industry’s penetration ratio stands at 0.5 perecnt, one of the lowest in Africa when compared with countries like South Africa (17%), Kenya (2.8%) and Ghana (1.1%).
“This present huge opportunities for growth and is the reason why we have classified the industry as one in a growth phase,” Ufomadu said.
She added that Agusto & Co believes that there are opportunities in the millions of Nigerians without any form of insurance policy. “In addition, there is the potential to deepen market share from the pockets of already insured populace.”
The Lagos-based agency therefore projected that in 2019, Nigerian insurance industry will record a 10 percent growth in its GPI to about N493.4billion.
The growth is expected to be driven by an improved operating climate as well as opportunities in oil & gas (particularly refinery) and engineering considering the Dangote projects that are on-going, including the refinery and fertilizer plant.