The commissioner for insurance said last month that just three million Nigerians have policies in a population touching 175 million. Gross premium income amounted to N258bn in 2013 according to the National Insurance Commission (NAICOM, the regulator), and increased by 24% to N319bn (US$1.60bn) last year.
The industry employs about 50,000 people. The figures underpin the view that insurance in Nigeria, along with several service sector industries such as advertising and marketing, is far from realising its potential. To make the point differently, 20 million Nigerians have bank accounts yet just three million have insurance policies.
One route to expansion lies in selling insurance policies to groups. Recent examples include deals with the barristers’ association, a group of traders of car parts and a union of market women.
Another route is to tap the informal sector. This has not been adopted by all operators because of the necessary investment in rural branches. However, its advocates are adamant that the sector’s claims record compares favourably with that of their large corporate clients.
In time the industry could capture a larger share of the risk that is placed offshore. This “premium flight” is put at US$750m annually, and is concentrated in the oil and gas, and aviation sectors. Africa Re, founded by members of the then Organisation of African Unity in 1976, maintains that despite its best efforts more than 80% of the reinsurance risks in Africa are covered outside the continent.
These are 36 listed insurance companies on the NSE according to the regulator. Few equity investors are chasing the shares because the individual companies are generally too small and turnover is low. The mandatory recapitalisation of 2007 halved the number of underwriters to less than 60 but, unlike the earlier exercise in the banking industry, did not create large investible companies on the exchange. Investors are likely to remain on the sidelines without a second round of consolidation.
Some international household names have bought into the industry: these include France’s Axa (Mansard Insurance), Old Mutual (Oceanic Insurance) and Sanlam (FBN Life Insurance). They bring new skills to the industry but do not always favour public listings.