Why insurance penetration in Nigeria remains low –Report

By Henry Uche

The inability of insurance companies to deploy new technology has been identified as one of the reasons why there is still low insurance penetration in Nigeria.

In a report released by Intelpoint, a research company, as at 2023, Nigeria had less than one percent insurance penetration and ranks fifth on the African continent.

The report stated: “The vision for the Nigerian insurance industry was expected to be in its mature market stage post-2020 and predicted to hit 15% penetration by 2020.

However, in 2023, the industry is still in its dormant stage with less than 1% penetration. According to Atlas Magazine, Nigeria is ranked the 5th insurance market in Africa by turnover in 2021 with 2.1%. Africa’s figure is small considering its share of the global population in the same period. This points to the fact that insurance penetration on the continent is still low.

“As of today, there are 610 different types of insurance companies in Nigeria, 510 of which are licensed insurance brokers. Interestingly, the number of insurance players in the country does not reflect in its insurance penetration figures. This is despite the presence of third-party motor insurance, group life assurance, and six other compulsory covers in Nigeria.

“Unlike the banking sector with active participation from Nigerian startups, only a handful of startups play in the insurance space, predominantly in the hands of traditional insurance companies. The milestones attributable to the activities of startups in the banking and payments space prove how important they are to their respective industries.”

In 2017, former Minister of Communications, Adebayo Shittu, revealed that only 1.5 million

Nigerian had an insurance contract. Shittu enjoined insurance companies to rely on new technologies to increase the industry’s penetration rate.

“Like traditional banks, insurance companies are riding on technology to serve their customers better while increasing their customer base. According to Forbes Global 2000, the United States accounted for six of the top 20 largest insurance companies in the world in 2021, followed by China with three companies. No African country has an insurance company in the world’s top 20. Tweaking the traditional model of insurance business might be the way to build trust and increase its penetration in Africa.”