- Life insurance premiums have grown from 43 billion in 2010 to 309 billion in 2022.
- Individual life insurance plans account for 39% of life insurance premiums, while group life insurance plans account for 34%.
- Legislation, insecurity, and a failing economy have contributed to the growth in premiums.
Life insurance is the major contributor to Nigeria's insurance industry premiums, according to Intelpoint’s The Nigeria Insurance Industry report.
Although the insurance industry is one of the oldest in the country, it has witnessed slow growth and adoption. Less than 1% of Nigerians have any form of insurance, despite government policies aimed at boosting coverage.
However, the past few years have seen some progress, as gross premiums have gone from ₦326 billion in 2016 to ₦726.4 billion in 2022, with life insurance seeing the most growth.
Premiums paid by policy holders in 2010 amounted to ₦43 billion and rose to ₦309 billion in 2022. Individual (39%) and group life (34%) insurance policies accounted for the bulk of life premiums generated in 2022.
This outcome is consistent with the expectations in this 2020 McKinsey article, which predicted that much of the growth in Africa’s insurance sector would come from pensions and individual life insurance.
Legislation has played a role in the growth of life insurance
According to Yinka Awosanya, Research Lead at Intelpoint, group life insurance being mandatory by Nigerian law has played a huge role in its performance.
The Pensions Reforms Act of 2004 mandates businesses with five or more employees to provide group life insurance for their employees.
His views are supported by the performance of the premiums generated by the sector. Of the seven industries that generated the most premiums between 2010 and 2022, six of them are compulsory by law.
Vehicles in Nigeria are required to have compulsory third-party insurance. However, only three million out of more than 12 million cars in Nigeria were insured as of January 2022, suggesting that compulsion is not enough incentive to drive insurance penetration. Similarly, the National Health Insurance Authority Bill was signed into law in 2022, making health insurance compulsory for all Nigerians.
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Still, life insurance’s growth is noteworthy in a country where religion and culture influence an aversion to insurance.
The report also surveys financial sales agents to understand how easy it is to sell insurance products. Auto insurance was the easiest to sell, according to the agents, and life insurance came in third.
A lack of trust in the system was identified as the major challenge with selling insurance products in the country, while low awareness levels and non-acceptance were also identified as problems.
Worsening state of the economy believed to play a role
Beyond the role that policies play in insurance adoption, some experts believe the dire state of Nigeria's economy has contributed to the growth in life insurance plans.
Speaking to local news outlet, Vanguard, in 2023, Ben Ujoatuonu, the Managing Director of Universal Insurance, said, “Over the years, subsequent governments have not been able to turn around the economy, which has left many Nigerians in despair. People are worried about the level of assurance they can give to themselves when they depart, and their dependents will not be faced with any bad experience.”
After witnessing an average GDP growth of 6.4% between 2007 and 2014, Nigeria’s GDP fell to an average growth rate of 1.38% over the next seven years.
Government policies like border closures, multiple exchange rate regimes, and restricting access to foreign exchange have negatively impacted businesses in the country.
Rising rates of insecurity have also contributed to a tougher business environment, while a brain drain ensures businesses are frequently hiring to replace employees. The country’s ease of doing business rankings have also tanked, and numerous businesses have either closed shop or downsized their operations.
While efforts to deepen the insurance penetration rate appear to have yielded little results, the trajectory of the life insurance segment suggests that there’s room for growth. Therefore, strategic efforts are needed to increase awareness, build trust, and provide suitable insurance products for Nigerians.