Nigeria’s insurance industry is undercapitalized, fragmented and too small to take on large risks, there is need for consolidation in the industry.
According to a survey report by EY Consulting “Waves of change: revisited 2016” on Nigeria said, “Nigeria’s insurance industry is undercapitalized, fragmented and too small to take on large risks. According to a June 2015 analysis from NKC African Economics, Nigeria is home to 17 life, 32 non-life and 10 composite insurers, but companies report to the regulatory authority is more compliance than risk focused.”
The report said, recent data from the country’s regulator, the National Insurance Commission (NAICOM), shows that more than three million Nigerians today hold some form of insurance, up from fewer than one million in 2007. Coverage rates vary, however, with higher levels for property and automotive insurance and a low take-up of personal policies such as life or health.
“The government expects premium volumes to triple by 2017. One example of low-hanging fruit; of the seven million vehicles registered in Nigeria, fewer than one million are believed to have adequate insurance. The government hopes that making automotive insurance mandatory will boost the non-life portion of the industry, which already depends on vehicles for more than half its volume.
“Growth prospects are robust – but so are the risks in Nigeria. Oxford Economics projects the insurance market will grow at 10 per cent annually from 2014 to 2018, reaching US$2.6 billion annually in premiums, up from US$1.8 billion last year. Density per capita is projected to rise to US$13.20 in 2018 from US$10.00 in 2014.”
The report said “Respondents to our survey expect product innovation and rising consumer demand, rather than overall economic growth, to be the principal driver of growth. Some 33 per cent of Nigeria respondents cited product innovation and rising demand as keys to future growth versus 22 per cent of the overall sample. Nigerian survey respondents were also more likely to cite affordability of coverage (42 per cent) as a top challenge than overall respondents (27 per cent) and more likely to cite health insurance as a top revenue stream.”
“Clearer policy directives and government regulations are critical to creating lift-off to the insurance industry. As nearly half of the population of Nigeria is Muslim, the potential for takaful operational guidelines necessary to expand in this direction have been established.”