By Bakare Olatunde
Stakeholders in the nation’s insurance industry have expressed optimism that the sector will take its place in the economy’s financial sector and contribute significantly to the country’s Gross Domestic Product (GDP) growth in the New Year.
The industry players’ optimism in the new year is no doubt anchored on the passage, late in 2024, of the Nigerian Insurance Industry Reform bill by the upper legislative house.
Similarly, they expect the N4 trillion allocated to infrastructural development by the federal government in the 2025 appropriation bill, which the presidency presented to the joint session of the National Assembly shortly before proceeding on Yuletide holidays, to rub off positively on the industry.
The industry insurers are confident that if the budget is passed into Act, some portions of the infrastructural fund would hit their vaults through the insurance coverage of those projects.
The players in the sector also believe that with the passage of the reform bill, going by the speed with which the present administration treats economic matters, the bill will, this time, secure presidential ascent. They also accept as true that once the bill gets ascent from the presidency, the insurance sector is good to go in its efforts to secure its essential position in the finance services sector of the economy.
According to the National Insurance Commission (NAICOM), the Nigeria Insurance Industry Reform Bill 2024, if signed into law, would unlock the growth, prosperity, and potential of the insurance sector. NAICOM thinks that the passage of the bill by the National Assembly has already marked a significant milestone in the country’s efforts to revamp the insurance industry after nearly two decades.
The regulator described the bill as a game changer for Nigeria’s insurance industry that is going to have a highly positive impact on the contribution of the insurance sector to the country’s GDP and economy as a whole, NAICOM said by consolidating existing insurance laws, the new legislation marks a new era in the ongoing efforts to strengthen Nigeria’s insurance industry.
Some of the Key highlights of the legislation which ignited the fire of fresh hope on underwriting firms in the New Year and beyond include the enhanced capital requirements in the area of new minimum capital requirements for insurance companies, requiring insurance companies to be adequately capitalized to underwrite risks and protect policyholders. Risk-based supervision, strengthened consumer protection, and streamlined regulatory framework among others.
According to the commission, this achievement comes after years of operating with laws that have failed to keep pace with the country’s evolving economic landscape. This is unlike other sectors that have undergone multiple phases of legislative reforms to reflect current economic realities. With these hopes, operators said the sky would be their limit in realising their dreams of the growth of the industry.
A check by The Guardian in the industry revealed that before the passage of the bill by the lawmakers, some of the underwriting firms had embarked on self recapitalization by upgrading their capital from the present statutory level, which inflation and exchange rates have reduced to nothing, to a new level.
Presently, insurance firms’ minimum capital requirements stand at N2 billion for life underwriters, N3 billion for general business, N5 billion for composite firms, and N10 billion for reinsurers. But in the new bill, the regulator is seeking to increase it to N10 billion for life underwriters, N15 billion, for general business underwriters, N25 billion for composite firms, and N35 billion for reinsurers. Both insurance managers and their regulator believe that if the insurance bill receives presidential ascent, the sector will be robust enough to underwrite some of the big-ticket accounts that are often flown abroad due to the low capacity of indigenous firms.
Indeed, both the operators and regulators have come to agree that if there is anything the insurance sector needs most in the new business year, it is the recapitalization exercise if the sector must continue to exist. Also, the industry is determined in the New Year to make use of technology to block every loophole through which businesses slip off operators’ hands.
Speaking on the development in the industry, the Chairman, the Nigeria Insurers Association (NIA), Kunle Ahmed, pledged that the association would through technology end the era of claims fraud and controversy over claims payment between the industries and ensure public by exploring the possibility of digital collation and tracking of claims payment to delight customers and reduce insurance fraud. Also, going by what the insurance commissioner said the industry will from 2025 cease from reflecting figures of unpaid claims in their accounts book.
Outside Nigeria’s shores, a peep into the insurance markets of other countries shows that similar difficulties and challenges that faced Nigerian markets also obtain, leaving them with Ernest’s search on how to make a difference in the new year.
Looking at the Nigerian economy in late year 2024 is experiencing fast expansion, and as a result of this growth, there is a heightened demand for insurance products.
This demand arises from the desire of both businesses and individuals to protect themselves from potential financial risks.
The government is taking action to encourage and facilitate the growth of this sector. These actions include implementing various policies aimed at promoting the development and success of the insurance industry in Nigeria.
Despite these positive factors, the insurance industry in Nigeria still faces several challenges, including low insurance penetration. There is a low rate of insurance coverage among Nigerians because only a small proportion of the Nigerian population has any form of insurance, indicating that the majority of individuals in Nigeria do not have insurance coverage.
There is also the problem of lack of awareness and understanding about insurance, which industry operators agree “is a significant barrier in Nigeria.
Many Nigerians may not be aware of the benefits that insurance can provide, such as financial protection against unexpected events or the ability to save and invest for the future. Additionally, there may be limited knowledge about the types of insurance products available and how to navigate the insurance market.
This lack of awareness and understanding can stem from various factors, including limited financial literacy, cultural beliefs, and inadequate educational campaigns about insurance.
To address this issue, it is crucial to promote financial literacy and raise awareness about the importance of insurance through targeted education and outreach programmes.
These initiatives can help Nigerians understand the benefits of insurance, how to choose the right products, and how to access insurance services transparently and reliably.
Another challenge confronting the insurance industry is the high cost of insurance. Insurance premiums in the country can indeed be relatively high compared to the average income, making them unaffordable for many individuals and businesses. This can limit access to essential insurance coverage and leave people financially vulnerable in the event of unexpected events or accidents.
The high cost of insurance is often attributed to factors such as limited competition, inadequate risk assessment, high administrative expenses, and fraudulent activities. Efforts are being made to address this issue and make insurance more accessible and affordable for all Nigerians.
The major problem with insurance in Nigeria is the issue of lack of trust in insurers. This is a common concern among many people, not just Nigerians. The perception that insurance companies may not pay out claims fairly can stem from various factors, including inadequate communication, excessive bureaucracy, delays in claim processing, or cases where claims are denied for reasons that policyholders find unfair.
The industry should invest in the training and development of a skilled and competent workforce crucial for the industry’s growth. They should also create new and innovative insurance products that cater to the specific needs of different customer segments to attract and retain customers.
Assessing another insurance market through the Deloitte outlook report released recently, cited by Orimix Times, on global insurance, particularly the United States market, said as risks become more complex and unpredictable and consumers more empowered, particularly with generative AI tools at their fingertips, insurers can no longer evaluate risks through the rear-view mirror.
They should continue to evolve the way insurance works and how they interact with customers and distributors.
The report noted that it is becoming increasingly important for carriers to elevate technological and operational excellence, innovate product solutions, and broaden the insurance value proposition—making the insurance safety net more reliable, accessible, and resilient.
The report stressed that by modernising and streamlining infrastructure, operations, and business models, insurance companies can develop a more forward-looking approach to risk modeling, assessment, analysis, and mitigation.
“As insurers evolve their business models, it will be important to maintain trust with the customers and markets they serve. For example, after a period of consumer “sticker shock” from large non-life premium increases, coverage pullback, and fears of surveillance from advanced technologies, the industry may first need to rebuild goodwill among stakeholders to help support their objectives.
According to the Global insurance giant, Allianz Global Corporate and Specialty (AGCS) in its yearly Directors’ and Officers’ Insurance Insights report taking a look into the new year to alert global insurance directors and officers to the risk trends in the year 2025.
The report cautioned insurance managers on the risk that would emanate from insolvency, geopolitical tension, and ‘AI washes’ which insurance experts said would dominate other risky lines of business in the New Year.
The experts said risks from these aforementioned areas were most likely going to pose serious challenges to directors, managers, and officers of insurance institutions.
