The Chairman & Consulting Actuary, TAF Consulting Group, Debo Ajayi, has said that insurance penetration is low in Nigeria compared to many African countries because the policyholders are not getting sufficient value from the insurance companies.
He said this during an interview with our correspondent in Lagos.
Ajayi said, “The average loss ratio in Nigeria is 24.2 per cent. What that really means is that out of every N100 of premium collected; only N24.2 is returned to the insured population.
“If you are in a transaction that somebody collects N100 from you and gives you N24, how sustainable is that transaction on an ongoing basis.”
While citing some examples, he said in Kenya, the loss ratio is 59 per cent, which means out of every 100 Kenyan shillings collected, they return 59 shillings.
He explained that Kenyan penetration rate grew in 2008 from 2.6 per cent to 3.3 per cent in 2013, while Nigeria’s penetration rate remained 0.6 per cent.
Other countries like Tanzania, according to him, have loss ratio of between 50 and 60 per cent; Uganda has 63 per cent; South Africa has 61 per cent, while Egypt has 73 per cent.
From the statistics, the United States has an average loss ratio of 95 per cent, which means that out of every 100 dollars collected, 95 dollars is returned and the remaining five per cent takes care of expenses plus investment income to make up profit.
The actuarial noted that insurance penetration in Ghana went from 0.9 per cent in 2008 to 1.8 per cent in 2013 while Morocco’s figure rose from 2.9 per cent to 3.2 per cent in the period under review.
He suggested that underwriters should either cut down premium for the same claims or increase benefit for the same premium to raise the loss ratio.
“If Nigerians are not buying insurance, it is not because they don’t have the need for insurance or they don’t value insurance but the price is too high and not sustainable,” Ajayi said.