The Nigerian insurance sector is expected to witness considerable growth in the medium to long term, despite an interruption in 2020 due to the COVID-19 pandemic.

In specific terms, players in the smaller life insurance segment of the market are expected to grow their collective premiums by 4.8% to N179.81 billion in 2020. This is a downwardly revised forecast due to the country’s weakened economic condition. Meanwhile, the life insurance segment is expected to grow its premiums to as much as N207.96 billion by 2024.

On the other hand, the non-life insurance segment of the market (which is significantly larger), is projected to grow its premiums by a revised 2.9% to N248.85 billion in 2020. In the medium term, growth in the non-life segment is expected to reach N321.53 billion in 2024.

Explore the Advanced Financial Calculators On Nairametrics

It should, however, be noted that these projected growths are not going to come about easily, mainly due to Nigerians’ general lack of enthusiasm for insurance. According to Fitch Solutions, premiums growth will continue to be limited due to expected low average earnings by the insurance firms.

Widespread poverty was identified as a major factor making it impossible for a lot of Nigerians to access insurance covers. But then again, some wealthy Nigerian are known to avoid spending on insurance covers. This general lack of enthusiasm is known to hamper growth in the Nigerian insurance sector. The report, therefore, called for more action to be taken towards educating Nigerians about the importance/benefits of both life and non-life insurance.

READ MORE: Lagoon and Blue Ocean narratives of Nigerian Insurance sector – Report 

“With a market supported by the country’s steady economy and large population, Nigeria’s insurance sector will enjoy a period of growth and development over the medium and long term, albeit interrupted by a slower pace of growth in 2020 due to the effects of the coronavirus pandemic. The outlook for premiums growth, however, continues to be limited due to low average earnings and widespread poverty, which will weigh on insurance affordability. As even the more affluent middle-class consumers tend to avoid purchasing insurance, which hampers the growth of compulsory basic insurance lines such as motor vehicle insurance, Nigeria’s potential consumer base needs to be educated more about the benefits of both life and non-life insurance coverage to support more robust growth in the sector.

“In spite of Nigeria’s large population, only a small proportion purchases life insurance. Life premiums currently account for 41.9% of overall insurance spending in the country. Low incomes and a lack of understanding of the benefits of life insurance remain the most important obstacles facing life insurers. However, a recovering economy, coupled with rising employment and incomes, will drive demand for life insurance products over the forecast period,” part of the report said.

In view of the competitive and regulatory landscapes, Fitch Solutions noted that the insurance sector in Nigeria is replete with mostly small players. The highly fragmented nature of the market makes it very competitive, even though only a few really command a greater percentage of the market share. In total, there are approximately 57 insurance companies in Nigeria and the report forecasted that the number may shrink in the coming years due to possible mergers/acquisitions.

Note that the National Insurance Commission, NAICOM, had recently revised its capital requirements for various segments of players in the insurance. You may keep up with that development by clicking here.

In the meantime, foreign players have been showing serious interest in the Nigerian insurance sector. A typical example is the French insurance firm – AXA which has stakes in Nigeria’s  AXA Mansard Insurance Plc. Other examples are South Africa’s Old Mutual Ltd and Sanlam Emerging Markets (Proprietary) Ltd. As Nairametrics reported, Sanlam recently took over full ownership of FBN Insurance Ltd after FBN Holdings Plc divested all its stakes in the insurance firm which used to be one of its many subsidiaries.