By David Akinmola
Nigeria’s insurance sector is under strain as a sharp rise in operational costs and claims payouts erodes profitability, despite robust revenue growth. The sector recorded a staggering 40% decline in aggregate profits during Q1 2025, according to Vanguard’s analysis of financial results from the country’s top 14 insurers.
Gross Premium Written (GPW) surged by 38.2%, rising from ₦213.1 billion in Q1 2024 to ₦294.5 billion in the latest quarter. However, claims payments surged even more, climbing 56.6% to ₦167.4 billion from ₦106.9 billion during the same period.
Major insurers—AIICO Insurance, Axa Mansard, Consolidated Hallmark, Cornerstone, Coronation, and Custodian—recorded significant year-on-year spikes in claims, ranging from nearly 12% to a staggering 145%.
Analysts warn the claim surge, paired with rising operational costs—driven by inflationary pressures, naira depreciation, and elevated reinsurance costs—is undermining underwriters’ bottom lines. As reported previously, net claims paid by select firms topped ₦116.6 billion in the first nine months of 2023, a 20.4% increase, signaling a long-running trend.
Industry experts emphasize that efficient claims and risk management are crucial to preserve profitability. Empirical studies find that poor expense control and excessive claim payouts are key determinants in Nigeria’s insurance firms’ profit weakness.
Financial executives point to urgent need for insurers to embrace cost-cutting, fraud detection, loss control education, and digital transformation. A joint industry report by Agusto & Co. suggests 2025 holds potential for industry turnaround, driven by technology-led product innovation and expected capital injection ahead of regulatory reforms.
Despite the challenges, the sector retains long-term potential. The Nigeria Insurers Association projects continued premium growth—boosted by mandatory insurance policies, digital distribution expansion, and infrastructure-driven underwriting demand.
For now, however, industry players brace for intense cost pressures. Without swift improvements in operational and claims efficiency, many could face persistent margin erosion—forcing some to merge or double down on strategic efficiencies amid stricter capital requirements.
