Claims paid out by Nigeria’s top insurance companies surged to N94 billion in the first 9 months of 2022. This is on the back of a high inflationary period in 2022 which has seen the cost of goods and services rise across the country.
Inflation increases the risk of higher operating costs for Insurance companies when they honour their claims to their customers for life and non-life-based products.
Nairametrics reviewed insurance claims expenses of the top 5 insurance companies by net assets quoted on the Nigerian stock exchange. They are Custodian Insurance, NEM Insurance, AxaMansard, AIICO, and Coronation Insurance.
By the numbers: The quintet of insurance companies incurred a total net claim of N94 billion in the first 9 months of the year compared to N66.8 billion in the same period in 2021, thus representing a 40.7% surge.
- In comparison, the whole of 2021 total net claims reported by the 5 insurance companies was N90.1 billion.
- Insurance claims are often compared with net premiums to assess how efficient the companies are at managing costs.
- During the period under review, the insurance companies reported a net premium income of N148.7 billion meaning claims as a percentage of net premium was 60.5%. This compares to 62.9% same period in 2021.
- This suggests the insurance companies still managed to increase their net premium income amid the rising cost of meeting claim obligations.
Claim drivers: Custodian Investments and Axa Mansard contributed significantly to the surge in claims in the period under review.
- Custodian’s claims incurred of about N28 billion single-handedly led to the hike in total claims collated for all the companies under review.
- Both companies contributed over 58% of total claims for the period and over 91% of the surge in claims reported.
Why the surge in claims: Whilst the insurance firms did not specifically explain what drove claims up, several snippets of their report point to higher inflation and exchange rate as a major factors sending claims up.
- The surge in claims is largely attributed to the soaring cost of goods and services which has forced insurance to pay more for underwriting assets.
- Soaring medical insurance costs also contributed to the surge in claims paid by some insurers, especially Axa Mansard.
- Nigeria’s fast depreciating exchange rate is also thought to have contributed to the higher claims paid by some of the insurers
What they are saying: Claims paid by the insurance firms cut across, health, life, and non-life related businesses.
- For example, most of NEM’s insurance claims arose from its motor insurance division. It paid N3.69 billion in total claims out of a total claim of N4.8 billion.
- Axa Mansard HMO business contributed about N22 billion to its total claims of around N26 billion.
- Axa Mansard Health CEO, Tope Adeniyi, provided some insight. “Though the company’s half-year report shows that claims have risen owing to medical inflation and utilization, the business has continued to rise to the challenges. We expect to begin to see an adjustment from October till year end as we account for the economic situation on our premiums”,
- AIICO’s insurance claims largely came from its dominant life business incurring making up about N31 billion out of total claims of N32.9billion.
Profit outlook: Despite the challenges with higher most of the companies under review we anticipate a slightly higher profit this year compared to the last.
- Currently, profit after tax for the five companies stood at N18.1 billion compared to just above N12.6 billion a year earlier.
- Most of the upsides recorded are gains from the revaluation of assets as well as from investment income.
- The companies also reported a healthy cash balance of N80.1 billion compared to N75 billion at the end of last year.
