Market With Overall Premium Income of Over USD1billion
By
Turnkey Writer, Said Olanrewaju
According to a recent survey, the 10 largest African insurance markets for 2014 were South Africa, Morocco, Egypt, Nigeria, Kenya, Algeria, Angola,
Namibia, Tunisia and Mauritius. Cumulatively this 10 countries generated 92% of the total African premiums with 6 surpassing the US$ 1billion threshold
in Non-life premiums. South Africa dominated in both life and non-life with its premiums accounting for 87 percent of life insurance and 40 percent in
non-life insurance segments. The survey was published by African Insurance Organization (AIO) in its inaugural edition of the African Insurance Barometer.
Of these top 10 markets, by far the one that has the strongest growth prospects and yet considered as one of the toughest nuts to crack is Nigeria. From a demographic point of view Nigeria’s size and population of over 173.6 million (2013 - World Bank) puts it at a great comparative advantage. The oil rich country and largest economy in Africa is the biggest oil exporter and has the largest natural gas reserves in Africa. However recent news features have highlighted a lot of what is going wrong in the country including the terrorism, fuel and currency crises. And there is the perennial crises of power shortages and corruption which are all weighing heavy on its present economic standing. Its insurance industry also suffered a slight blow with non-life insurance premiums shrinking by -2.2% but on the life insurance side the news was good as the premiums grew in line with the GDP, according the AIO publication.
Negative news aside the long term prospects for the Nigeria insurance industry are extremely favorable especially if you consider the fact that there
has been a steady rise in the number of people in upper-middle income bracket increasing the number of people who can now afford insurance. Also the
government’s concerted efforts of putting in place systems and regulatory frameworks to help enhance the sector are serving to instill investor
confidence for substantial, long term investment in the sector. Several key issues in the sector are pertinent including low insurance penetration,
undercapitalization and lack of specialist risk management capabilities the latter of which is causing flight of premiums to foreign insurers and
hurting the country’s economy as a whole.
One way the government is dealing with the low penetration according to a recent KPMG report is through compulsory insurance such as third-party car
insurance, builders’ liability, occupiers’ liability and employers’ liability and health care workers professional indemnity. (KPMG Sector Report
2015). A similar report for 2014 points to the government drafting new regulations aimed at ‘increasing the capacity of domestic insurance companies so
that they can handle large risks.’ Also notable is the effort to boost mobile banking which has ‘the potential to support the insurance industry’ as it
has done elsewhere on the continent and so thus the signing number of agreements between banks and telcos.
Aside from government initiatives, the industry has also embarked on its own initiatives some of which will help the sector meet changing market and
customer needs and take advantage of new opportunities. Modern systems and solutions have been noted as some of the key factors to the remarkable
performance of the South African insurance sector along with a strong financial sector, high risk awareness levels and the fact that South Africans
trust the local financial providers. The consistent improvements in the Nigerian insurance sector could to some extend be attributed to the utilization
of technology which has subsequently helped put Nigeria on the top 5 insurance markets in Africa ranking 4th with overall premium income of
N386 billion (over $1b)?
As Nigeria seeks to go the way of South Africa, it is also important to note that more awareness and sensitization of the Nigerian population on the
importance and value of insurance is crucial. Overall, a lot still needs to be done within the insurance industry in order to meet up with global
standards and expectations as well as for Nigeria to live up to the enormous potential that lies within its borders.
