With its low penetration in the Insurance market, Nigeria, which is celebrating 64 years of independence, confronts many obstacles. Only 1% of the 200 million+ people living in the nation, especially in rural areas, have access to insurance products. Millions of people are at financial risk due to this poor uptake, which includes natural calamities and medical situations. The public’s mistrust, a lack of information, and a lax regulatory framework are among the main contributing causes to this problem, according to experts. In addition to impeding economic growth, a lack of broad insurance makes it difficult for Investors and enterprises to adequately manage risks.
Since the 1920s, when foreign companies concentrated on fire and marine insurance during the colonial era, Nigeria’s insurance market has changed. Building trust and localising operations were the goals of post-independence reforms including the 1976 Insurance Decree. When motor vehicle insurance became mandatory in the 1980s and 1990s, the industry grew, but issues including lax regulatory control and public mistrust persisted. Major reforms occurred in the late 1990s and early 2000s, with the creation of the National Insurance Commission (NAICOM) and the introduction of Consumer Protection programs.
Nigeria has inadequate regulatory frameworks, low consumer trust.
InsurTech companies have recently used Digital Innovation to increase access and efficiency, although their market share is still less than 1%. Developments in technology, product diversity, and regulatory changes are cited by experts as growth potential. Comparing Nigeria to other African nations, the country’s insurance penetration rate is startlingly low. According to current statistics, South Africa, for example, has a penetration rate of roughly 14%, whilst Nigeria’s is less than 1%. While it is above 4% in Morocco, it is approximately 3% in Kenya.
These figures demonstrate Nigeria’s behind schedule status, especially in light of its sizable population and promising economy. In contrast to South Africa, which has a more developed and inclusive insurance sector with robust regulatory monitoring and greater public awareness, Nigeria has inadequate regulatory frameworks, low consumer trust, and restricted product offers. These characteristics are the main causes of the gap. Lacking the financial Security that insurance offers, many small enterprises in Nigeria have failed in the wake of natural disasters or economic downturns. The absence of insurance coverage left many families and companies devastated and unable to recover during the 2022 Nigerian floods, which resulted in the displacement of over a million people and the destruction of property valued at billions of naira.
It is important to have insurance in order to shield people from hazards.
In a similar vein, many Nigerians become impoverished as a result of uninsured medical emergencies. Countless farmers in rural areas have lost their whole harvests to pests, flooding, or droughts and had no insurance to pay their losses. These instances highlight how important it is to have more comprehensive insurance in order to shield people and companies from these kinds of hazards. Nigeria could be able to improve its insurance industry by following successful examples from other nations. For instance, millions of previously underserved people in Kenya now have access to affordable insurance thanks to the growth of mobile-based micro-insurance.
Wider acceptance of insurance products has also been guaranteed by South Africa’s model, which includes a strong regulatory framework and mandatory insurance for specific industries, such autos and employee benefits. Nigeria may use similar tactics to provide low-cost, digital insurance solutions that serve underprivileged and rural regions by utilising its growing Fintech sector. Stakeholder perspectives offer further information. The effect of low insurance penetration on economic resilience has drawn the attention of Nigerian government officials. Reforms spearheaded by the National Insurance Commission (NAICOM) have not moved quickly.
Related Article: Experts Urge Policy Change to Boost Insurance
Rural community leaders frequently point to ignorance and mistrust as obstacles, with many people believing that insurance is unreliable or inaccessible. Insurance companies, on the other hand, contend that in order to close the gap, the industry requires more advantageous laws and public Education campaigns. To increase knowledge and foster confidence in insurance, experts have urged government agencies, businesses in the private sector, and academic institutions to form strategic alliances. Nigeria could increase its insurance industry and give millions of people a safety net by resolving these problems, which would promote Economic Stability and prosperity.