Only 21 Percent Of Vehicles In Nigeria Are Insured & That’s Just One Part Of The Problem
As of Monday, 30 September 2019, only 2.53 million of the 12 million registered vehicles in Nigeria were captured in the Nigerian Insurance Industry Database (NIID). This is according to the Nigerian Insurers Association (NIA).
The NIID is sort of the “book of life” for Nigerian vehicles and based on the data available, only 21 percent of Nigerian vehicles are contained in it. That’s a whopping 79 percent of vehicles in Nigeria either without any form of insurance cover or just hiding under fake cover.
The NIA spoke of the huge gap as a mind-boggling trend that not only robs the industry of its expected revenue but also puts many Nigerians at risk of accident, death or other losses without compensation.
Nigeria Has An Insurance Problem
Although the latest data from the NIA is solely restricted to the state of vehicle insurance in the country, it pretty much sums up how much of a tough sell insurance (in its entirety) is in Nigeria.
Indeed, a report from a few weeks ago suggested that overall insurance penetration in Nigeria currently stands at a miserly 0.31 percent. That’s lower than Ghana, Kenya, and South Africa, which currently do 1.1 percent, 2.8 percent, and 15.4 percent respectively, in that regard.
Damning still are the findings from a study conducted by the Chartered Insurance Institute of Nigeria (CIIN) in 2017, which revealed that out of about 100 million adult Nigerians, more than 86 million do not have any form of insurance.
The same study also put it out there that, currently hovering around USD 6.20, the figure for insurance density in Nigeria (a measure of industry gross premium per capita) is one of the lowest in Africa.
And this is an area where countries like Angola, Kenya, and South Africa are doing USD 30.50, USD 40.50, and USD 762.50 respectively.
So, besides the notion on the streets that you can hardly assemble a group of 50 random Nigerians and find a single person with some kind of formal insurance cover, the formal numbers also paint a very similar picture.
Why Insurance Is A Tough Sell In Nigeria
By its very nature, insurance is a lot like a promise from one party (the insurance company) to indemnify, compensate or payback another party (the client) in the event of a loss or damage.
To be entitled to this compensation, the client has to trust the company enough to pay a specific monthly sum to the company. And the insurance company, on its part, is expected to compensate the individual in the event of a loss or damage to life and/or property.
By its very nature, much about insurance is hinged on a certain kind of “trust.” And that kind of trust is a luxury the average Nigerian cannot afford, or is not wired to even consider.
“The public view of the insurance industry is very poor. People do not believe that we have the capacity to take claims and to deliver on what was promised,” a source in a leading insurance firm in Nigeria told WeeTracker on condition of anonymity.
The source described insurance as an “intangible asset”, implying that what is being sold is not what someone can see or touch.
“What we are trying to sell is a future, we are trying to sell a promise in the future. To be able to sell that, you must first gain the trust of the person you are trying to sell to. And in a country like Nigeria, that is not easy.”
Indeed, a combination of “trust issues” and unrecognisable immediate benefit make insurance the most difficult sector product to sell in Nigeria.
There is a part of the “Nigerian psyche” that doesn’t quite agree with the idea of paying small amounts in the present for a future disaster.
There is even a widely-peddled joke about Nigerians not caring about insurance because “The Blood of Jesus” is enough. And as odd as it sounds, there’s some truth in it.
The reason why INSURANCE is difficult to sell in Nigeria is because most families are covered by the blood of Jesus which is free???
— I F E N N A (@like_ifee) July 1, 2019
Fundamentally, the barriers to insurance penetration in Nigeria is just as connected to religious and cultural beliefs as it is to lack of trust, poverty and strife, lack of awareness, cost and affordability, as well as the country’s large informal workforce.
Who Is To Blame?
By law, vehicle insurance, for example, is compulsory in Nigeria. By the provisions of the law, vehicles plying Nigerian roads must have a minimum third-party insurance cover.
This guarantees the motorist or vehicle owner protection against third-party damage, loss or death in the event of an accident.
Similarly, Nigerian laws mandate every organisation with a minimum of 3 to 5 employees, to have all the members of their staff covered under Group Life insurance.
On paper, a lot more Nigerians should have some form of insurance cover. But this is not the case on the ground.
WeeTracker’s source partly blames the poor adoption of insurance in Nigeria on the government who, despite being one of the biggest employers of labour in the country, is not a big supporter of insurance in the country.
“Government parastatals at the federal and state levels are some of the biggest employers of labour in the country and yet they are one of the lowest contributors to life insurance companies because they don’t pay group life insurance for their staff.”
The source also put some of the blame on the insurance companies themselves which have not done enough to engage with the public and build trust.
According to the source, the trust deficit can surely be patched up if people know how they can benefit from insurance and who are already benefitting from it. And the insurance firms have their work cut out for them in creating awareness and coming up with easy-to-use insurance products.
“One of the biggest beneficiaries of insurance in Nigeria is a big manufacturing company that produces sugar, cement, salt, pasta, and many other things.”
“They benefit from the highest amount of insurance claims paid in Nigeria. But it’s not common knowledge because neither the benefitting company nor the insurance firms talk about it. So, small businesses cannot be made to see the importance of insurance.”
Is There A Bright Future For Insurance In Nigeria?
Despite the abjectness of Nigeria’s current insurance numbers, the source told WeeTracker that insurance is actually on the up and better days are ahead for the industry.
“The government is currently trying to enforce third-party motor insurance over. The Federal Road Safety Corps will impound your vehicle if you don’t have vehicle insurance,” the source said.
“Group life insurance is also picking up as institutions like the National Insurance Commission (NAICOM) and the National Social Insurance Trust Fund (NSITF) are now stepping up their efforts, though there’s room for improvement.”
The source also cited the entry of global insurance firms like Allianz, Old Mutual, AXA, and Prudential Insurance into the Nigerian market as a good omen for the industry.
“Despite the peculiarity of the Nigerian market, those big insurance firms have masterminded acquisitions of local insurance companies in Nigeria in recent years,” the source said.
“That’s a good sign for the industry. We have the economy and the market. The insurance companies just need to tailor their products to suit the ordinary Nigerian and embrace innovation. The regulators should also play their part.”
Featured Image Courtesy: AutoJosh