Insurance Sector’s 14 Years Journey to N1tn Premium Income

Fourteen years after insurance sector regulator mandate to transform into N1trillion market from N164 billion, the taeget was finally achieved in Q4 2023. Ebere Nwoji explains what made it possible.

 Recent announcement by the National Insurance Commission (NAICOM), that the insurance sector at the close of business last year (Q4 2023 ) achieved a premium income of N1.003 trillion is a cheering news to the sector operators and a realisation of target set by the regulator for operators 14 years ago.

It was indeed a realisation of operators’ dream of transforming the insurance market from N164 billion annual premium then to a trillion Naira market.

NAICOM had  in earnest search for an initiative that will unveil the Nigerian insurance industry to the world for patronage and investment opportunities, launched an initiative tagged Market Development and Restructuring Initiative( MDRI).

It was a medium term plan of the commission targeted at driving insurance penetration in Nigeria.

The commission planned the launch and implementation of the initiative in two phases saying the first phase would span between 2009 to 2012 while the second stage would span from 2012 to 2017.

The target by the then NAICOM Chief Executive Officer, Fola Daniel, was that through the successful implementation of the two phases of the initiative, Nigeria insurance sector would join the prestigious club of global insurance markets that pride themselves in multiple trillions of their currency in terms of premium income generation which positions the sector in other climes as parent body of the banking sector.

MDRI objectives

Some of the objectives of the initiative according to NAICOM, were to ensure the deepening of the insurance market and moving the industry’s gross premium form the then N164 billion level to NI.1 trillion 2012.

The initiative, according to NAICOM, also has the objectives of creating 50,000 jobs in Nigeria through the insurance agency system, fight against fake insurance institutions and ensure enforcement of compulsory insurances.

NAICOM, had since the launch of the MDRI  with the aforementioned objectives been struggling to hit this much dreamt trillion Naira premium income but had remained  far from its achievement until  Q4 last year when the industry’s premium hit N1.003 tn mark.

Q4 2023 report

In a  statement titled, “Market Performance at a  Glance-Q4 -2023,” released by the Directorate of Research, Statistics and Publications, the Commission said,  “The insurance industry of Nigeria has sustained its progressive trend of positive market performance at the close of 2023 fourth quarter, recording a milestone growth to close at N1.003 trillion, representing about 27 per cent growth compared to the N790 billion recorded in 2022. 

The commission gave a breakdown of how the premium was generated saying the non- life business accounted for 61.3 per cent of all premiums written during the year while the life segment contributed 38.7 per cent, valued at N388.1 billion. 

The statement further said the market also recorded a retention of about 87.7 per cent for the life  business, just about 54 per cent for non-life while the aggregate market average retention stood at 66.7 per cent during the same period. 

According to NAICOM, major growth drivers in the non-life segment of the market were oil & gas and fire insurances, which contributed 27.3 percent and 24.1 percent respectively.  Motor insurance contributed N114.8 billion, general accident generated N59.1 billion , marine N69.1 billion .

Net motor insurance premium stood at N100.3 billion, fire N75.3 billion, general accident 39.0 billion marine 33.5 while oil and gas stood at N54.6 billion .

The commission said in  terms of market performance percentages, motor insurance polled 66.5 percent, fire polled 46.9 percent, general accident 6.7 percent, marine 30.9 percent oil and gas 25.5 percent .

Talking in terms of claims settlement for the period, the Commission said, “Direct reflection to the ongoing regulatory measures regarding claims settlement, the life business recorded about 95 per cent of net claims to the total recorded claims during the year while the market average stood at about 71.4 per cent of the N536.5billion gross claims reported at the close of fourth quarter, 2023.”

The Commission further noted that in a direct reflection to its  “no-premium no-cover” policy, the outstanding premium has continued to decline, as the industry posted just  1.6 per cent outstanding of all the premiums generated in the market during the period. 

It further said that within the period under review, total assets of the sector stood at about N2.67trillion while capitalisation stood at  N851billion in 2023.

Giving a break down of claims payment by various classes, the commission said motor insurance class paid gross claims of N32.1 billion and net claims of N31.0 billion, fire insurance class paid gross claims of N61.5 billion and net claims of N41.3 billion, general accident paid gross claims of N22.3 billion and net claims of 17.0 billion, marine class had a gross claims of N16.9 billion and net claims of 12.0 billion while oil and gas class had gross claims of N157.1 billion and net of N54.6 billion.

In terms of market size and market capitalisation, NAICOM said non -life had N1.669 billion assets, life had N1.00 billion bringing the market aggregate to N2.673 billion.

Market capitalisation wise non -life has N670.2 billion, life has N180.9 billion bringing the aggregate to N851.0 billion.

In terms of outstanding premium, for non -life, outstanding premium stood at just 2.5 percent of the total premium, life 0.2 percent  bringing the aggregate of outstanding premium for the industry in the period under review to 1.6  percent.

Fola Daniel Responds

In a brief telephone chat with the former Commissioner for Insurance, Mr Fola Daniel whose regime in NAICOM set the trillion Naira premium market target,  said though he has not read the NAICOM’s 23 fourth  quarter report and could not speak on speculations; but stressed that it was an achievement worth celebrating.

“I will celebrate it if it is true. Honestly I have not read it myself and I am no longer in NAICOM and cannot speak based on speculation but if I read it and it is true, it is an achievement worth celebrating,” Daniel said.

Two years ago when THISDAY contacted him on his feelings on the fact that between 2009 when the target was set and 2021 the industry was still at N500 billion premium margin and his advice on how to realise the dream, Daniel had said, “The trillion -Naira goal remains achievable with rapid fueling of the economy, focus on agricultural sector, the exploration of hitherto mineral resources and a growing population , the attainment of industry trillion -Naira will be a reality rather than a mirage.”

He said he believed that the regulator and the industry players were more determined than before to take the industry to the trillion- Naira size, adding that it was doable if all stakeholders play their expected roles diligently.

“The potential of the Nigerian insurance market are phenomenal,if viewed from the demography, economic resources and other measurable parameters.The fundamentals are strong to support sustainable growth of the industry,” he said.

NAICOM Reforms

Speaking on the development, Commissioner for Insurance, Sunday Thomas said various reforms embarked on by his administration has successfully taken the industry to a new landscape.

Thomas said NAICOM had taken some major reforms that contributed to the trillion naira premium income achievement.

“For instance late December 2022 the Commission had announced  200 per cent  increase in third party motor insurance from N5000 to N15000, saying it would  take effect from January 1, 2023.This came after over 20 years of non increase in the compulsory Motor Third Party insurance policy, “he said.

NAICOM equally raised the claims and cost of insurance on all classes of motor insurance, including motorcycles.

It also set up seven point transformation agenda for the sector.

In doing this, Thomas said  over the next decade (2024-2033), the industry would seek to continue its transformation journey along the following seven strategic thrusts with the objective of achieving the corresponding goals.

He listed the agenda as: transforming the regulatory environment to sustain the industry growth transition to risk-based capital model, promoting insurance awareness and adoption, broadening insurance product offerings and improving effectiveness of distribution channels

Others are; enhancing digitalisation of the insurance industry, deepening the industry’s talent pool and capabilities and supporting Nigeria’s economic transformation and sustainability agenda.

Thomas said NAICOM under his leadership had remained resilient and focused on implementing initiatives that would foster development of the Nigerian insurance industry and align its fortune with that of the nation as the Africa largest economy.