Interview: Nigeria’s Insurance Sector at a Crossroads: Growth Potential Amid Persistent Challenges
MR. HUMPHREY OFUEGBE is graduate of Banking and Finance from Lagos State Polytechnic, Associate of Nigeria Institute of Management (AMNIM), member Chartered Insurance Institute of Nigerian and also holds the CIIN certificate in Insurance. Associate of the Nigeria institute of public Relations (AMNIPR). An Alumnus of the prestigious Pan- African University – Lagos Business School. A graduate of International Institute of Journalism where he obtained a certicate and Post Graduate Diploma (PGD) in journalism. He also holds a an M.Sc. Degree in Mass Communication (Nasarawa State University) Vastly experienced in key business areas as Treasury Operations, Branch operations and Marketing. He has more than 25 years working experience both in the Public and Private sectors. He started his working career with the then Kwara Agric Development Project as an Administrative Officer and later joined WAPIC Insurance Plc in 2000 where he rose through the ranks and became the Head of Business Development. In 2007 he was seconded as part of the pioneer Executive Management Team to establish a subsidiary arm of Life Assurance Company (Intercontinental Life Assurance Ltd), where he became the Divisional Head, South-South and South Eastern Region.
He attended various local and international training programs in Marketing and Risk Management, and senior management Courses. Until his retirement from Coronation Insurance Plc in 2022, he headed various units as Head of Financial Institutions, Zonal Head Abuja & Northern Region.
In this interview with Biodun Jimoh, Humphrey enumerated problems facing Insurance sector. Excerpts
How will you assess the state of insurance policy in Nigeria?
The insurance policy landscape in Nigeria is evolving, presenting substantial opportunities for growth, yet it encounters numerous obstacles that impede its advancement. Here’s a snapshot of the current situation:
Low Penetration: Nigeria’s insurance penetration is about 0.5% of GDP, signaling a pressing need for heightened awareness and greater uptake of insurance products.
Limited Awareness: A significant portion of the population lacks a clear understanding of insurance offerings and their advantages, which hampers adoption rates.
Trust Issues: The industry has faced skepticism due to delays in claims processing and unclear contract terms, which in turn affect consumer trust and the sector’s overall effectiveness.
Regulatory Challenges: Regulators are tasked with addressing various challenges, including the enhancement of capital requirements and strengthening oversight to foster a more robust insurance market.
What are your observations on Nigeria’s insurance policy nowadays?
The Nigerian insurance sector is experiencing notable changes, largely influenced by new regulations, technological progress, and a growing appetite for insurance products. Here are a few important insights:
Regulatory Changes: The Nigerian Insurance Industry Reform Act (NIIRA) 2025 has established a more modern regulatory landscape, boosting financial stability, improving market practices, and strengthening governance. This Act aligns Nigeria’s insurance sector with global best practices.
Growth and Performance: Recently, the industry has seen impressive financial growth, with gross written premiums surging by 56% to ₦1.56 trillion for the 2024 financial year. Listed insurance firms have also shown enhanced performance, fueled by rising investor confidence, better corporate governance, and innovative offerings.
Recapitalization Deadline: Insurers face a deadline to meet new minimum capital requirements by July 2026, which may result in mergers, consolidations, or some firms exiting the market. This situation has raised concerns about the industry’s adaptability and the implications for smaller players.
Digitalization and Innovation: The sector is increasingly adopting digital technologies, like artificial intelligence, aimed at improving customer experiences, enhancing risk evaluation, and boosting market penetration. Insurtech innovations are poised to significantly influence the industry’s future direction. Despite these advancements, the industry continues to grapple with challenges, such as low market penetration, trust issues, and limited public awareness. A significant number of Nigerians, especially the youth, remain uninsured or underinsured, underscoring the need for more educational and awareness initiatives.
Youth Engagement: Insurers are recognizing the critical need to connect with Nigeria’s youthful demographic that is leading in fintech, e-commerce, and entertainment. To engage this audience, firms should create innovative, digitally focused products that resonate with younger Nigerians. Embedded Insurance: There’s a rising trend toward embedded insurance, where insurance offerings are incorporated into other services like telecommunications and e-commerce. This strategy can enhance accessibility and attract a broader audience. In summary, the Nigerian insurance industry stands at a pivotal moment, ripe with opportunities for growth and innovation. However, to realize its full potential, it is essential to tackle existing challenges and adapt to evolving consumer demands.
How will you rate the level of insurance industry in early 2000 to date?
The Nigerian insurance sector has experienced notable growth and transformation since the early 2000s. Here’s a look at the key trends and challenges:
Early 2000s (2000-2005) During this period, the industry witnessed rapid expansion, with gross premium income skyrocketing from ₦29.5 billion in 1990 to ₦76.32 billion by 2005. The total number of insurance companies surged, yet the penetration ratio remained low, sitting at around 0.71% of GDP. To strengthen the sector, the National Insurance Commission (NAICOM) implemented reforms that included a crucial recapitalization exercise to increase the minimum capital requirements for insurers.
Mid-2000s to 2010 (2006-2010): This era was marked by significant consolidation. The number of insurance firms plummeted from over 100 to just 49 following the recapitalization efforts. Gross written premiums grew at an impressive average rate of 23% annually, with premium income jumping from ₦105.37 billion in 2007 to ₦232 billion by 2011. Additionally, the industry’s total assets expanded by 55% during this period.
From 2011 to Now: The industry has continued its upward trajectory, with gross premium income surpassing ₦1 trillion in 2023 and total assets reaching around ₦3.3 trillion in Q1 2024. However, challenges persist, such as low penetration rates, trust deficits among consumers, regulatory hurdles, and a lack of product innovation. The penetration ratio currently stands low at approximately 0.34%.
Based on these trends, I would evaluate the Nigerian insurance industry’s progression from the early 2000s to today as follows:
Growth: 8/10 – There’s been substantial growth in premium income and asset values. –
Penetration: 2/10 – The low penetration ratio suggests a pressing need for greater awareness and adoption of insurance products.
Regulation: 7/10 – While regulatory progress has been made, challenges remain in ensuring compliance and building consumer trust.
Innovation: 5/10 – The industry must prioritize the development of innovative products and services that meet the diverse needs of Nigerians. Overall, while the Nigerian insurance sector has advanced since the early 2000s, it still has significant room for improvement in overcoming challenges and enhancing penetration rates.
Overall, the Nigerian insurance industry has made progress since the early 2000s, but there is still room for improvement in addressing challenges and increasing penetration.
How has insurance policy affect the Nigeria Economy?
The insurance sector in Nigeria is experiencing remarkable growth, with gross written premiums soaring by 56% to reach ₦1.56 trillion in the 2024 financial year. This surge paints a positive picture for the economy. Here are several ways in which insurance policies are contributing to Nigeria’s economic landscape:
Boosting Economic Growth: Research indicates that insurance premiums play a vital role in bolstering Nigeria’s economic progress. The premiums from both life and non-life insurance segments show a meaningful positive correlation with GDP growth.
Investment and Job Creation: Insurance firms channel premiums into varied sectors, which fuels economic activities and generates employment opportunities. Such investments are essential in driving overall economic development.
Effective Risk Management: By offering financial protection to individuals and businesses, insurance policies help mitigate risks. This safety net allows them to navigate unexpected events, thereby lessening the economic impact of losses.
Promoting Stability and Security: A robustly regulated insurance sector can enhance economic stability by ensuring that insurers are capable of withstanding economic shocks and reliably fulfilling their claims obligations. Nonetheless, several challenges remain:
Low Penetration Rates: With an insurance penetration rate hovering around 0.5% of GDP, Nigeria’s insurance sector has substantial room for growth, which currently limits its overall economic impact.
Trust Deficits: Issues such as delays in claims processing and unclear terms have eroded trust in the industry, hampering its development and effectiveness.
Regulatory Complexities: The sector is confronted with regulatory hurdles, including the necessity for stronger capital requirements and better oversight. To tackle these challenges, both the government and regulatory agencies can:
Enhance Awareness and Education: Implement campaigns aimed at increasing public knowledge about the advantages of insurance.
Strengthen Regulatory Frameworks: Develop and enforce regulatory policies that ensure compliance and foster growth.
Promote Innovation: Encourage the creation of innovative insurance products and services tailored to the needs of the Nigerian populace. In summary, while the insurance industry holds significant potential for contributing to Nigeria’s economic advancement, addressing the existing challenges is essential to fully realize this potential.
What are the challenges facing insurance policy in Nigeria.
The Nigerian insurance sector is currently navigating a variety of challenges that impede its advancement. Here are some of the prominent issues:
Low Insurance Penetration: The rate of insurance penetration in Nigeria is strikingly low, reported at about 0.5% of GDP, which is far below the global average of 7%. Additionally, it falls short of other African countries, such as South Africa, which boasts a penetration rate of 13.7%.
Limited Public Awareness: A significant portion of the Nigerian population remains unfamiliar with insurance products and their advantages, leading to their limited uptake. This lack of understanding is especially evident in rural communities where traditional methods of risk management are more prevalent.
Trust and Credibility Issues: The industry faces hurdles in establishing trust, with many individuals experiencing challenges when attempting to claim insurance or perceiving insurance firms as unreliable.
Economic Instability and Volatility: The ongoing volatility in Nigeria’s economy—characterized by high inflation rates and currency fluctuations—has a direct impact on the potential for growth within the insurance industry.
Regulatory Challenges: The complexity and frequent changes in the regulatory landscape create significant obstacles for insurance providers. Compliance with these regulations can often be a daunting task.
Inadequate Infrastructure and Technology Adoption: Limitations in infrastructure and slow technology adoption lead to inefficiencies, delays in service delivery, and increased operational costs within the industry.
Fraud and Lack of Effective Prevention Measures: Fraud poses a major challenge for insurance companies in Nigeria, manifesting through false claims, policy manipulations, and identity theft.
Limited Product Diversity and Innovation: The insurance market in Nigeria lacks a variety of products, restricting its ability to meet the specific needs of various demographics. A shortfall in innovative offerings further inhibits the industry’s capacity to attract new customers and broaden its market presence.
Cultural and Religious Factors: Cultural and religious beliefs can have a profound effect on how insurance is viewed in Nigeria, often leading to reluctance in adopting insurance as a vital financial tool.
Perception of Financial Burden: Many Nigerians view insurance as an added financial burden rather than a protective measure, complicating efforts to persuade individuals to invest in insurance premiums. These challenges collectively hinder the potential for growth and development within the Nigerian insurance industry.
The Nigerian government faces challenges in boosting insurance coverage, particularly in the following areas:
Health Insurance Coverage: Despite the National Health Insurance Authority (NHIA) Act of 2022, which makes health insurance mandatory for all Nigerians, coverage remains low, with only 18.6 million Nigerians insured, representing about 8% of the population.
Funding: Low government funding for health insurance and healthcare contributes to the slow growth of the insurance sector. Nigeria’s health expenditure as a percentage of GDP is less than 5%, which is lower than other developing countries like Kenya and South Africa.
Awareness and Trust: There’s a need to raise awareness and address the low trust in the scheme. Many Nigerians are willing to pay premiums but lack access to insurance due to poor implementation and inadequate infrastructure.
Regulatory Framework: The current legal framework for insurance is inadequate, and there’s a need for more effective regulation to drive growth and ensure compliance.
Political Will: Lack of political commitment and inconsistent policies hinder the growth of the insurance sector.
Inconsistent State Implementation: Some states are not doing enough to drive health insurance coverage, leading to inconsistencies in coverage and access.
Innovative Products and Services: There’s a need for more innovative insurance products and services that cater to the needs of Nigerians, particularly the youth.
To address these challenges, the government can consider the following:
Increase Funding: Allocate more resources to healthcare and insurance to drive growth and coverage.
Improve Awareness: Launch public awareness campaigns to educate Nigerians about the benefits of insurance.
Strengthen Regulation: Enhance regulatory frameworks to ensure compliance and drive growth.
Encourage Innovation: Support the development of innovative insurance products and services.
Promote Consistency: Ensure consistent policies and implementation across states to drive growth and coverage.
