Nigeria's insurance industry to grow by 8% - Agusto & Co

The insurance industry in Nigeria has been facing a rollercoaster ride in recent years, with challenges such as recession, increased claims, and low penetration rates among the populace. However, despite these hurdles, there are also opportunities on the horizon for growth and expansion. According to a recent report by Agusto & Co, the insurance industry in Nigeria is projected to grow by 8% in 2017, driven by an increase in investments in government securities as insurers take advantage of higher interest rates. Ada Ufomadu, Financial Institutions Analyst at Agusto & Co, sheds light on the sector's performance and prospects. In 2016, Nigeria plunged into a recession, which had a significant impact on the insurance industry. Economic activities slowed down, leading to a reduction in premiums from key sectors such as oil and gas. Additionally, businesses struggled to stay afloat, with many shutting down, resulting in a decrease in insurance policies and a rise in claims. The industry paid up to 20% more claims in 2016, amounting to approximately 100 billion. The recession also brought about inflation and higher operating costs, further straining the sector. Looking ahead to 2017, Agusto & Co expects a moderate growth rate of 8% despite the looming recession's effects on major business lines. The rise in claims continues to be a concern, but the growth in premiums and income from investment portfolios have helped offset some of the impacts. Insurance companies are leveraging higher interest rates to bolster their income and manage the surge in claims effectively. One area of focus for the industry is microinsurance, targeted at lower-income earners. Microinsurance offers flexibility in payment structures, making insurance more accessible to a broader segment of the population. By allowing individuals to pay smaller amounts at regular intervals, microinsurance aims to increase insurance penetration and spread the risk for insurance companies. Regulators have licensed several insurance companies for microinsurance, signaling a shift towards inclusive insurance practices. Despite the potential of microinsurance, there remains a challenge of low uptake of insurance products among Nigerians. A cultural aversion to discussing insurance, coupled with a lack of understanding of its benefits, hinders the industry's growth. Education and product customization are key to addressing these barriers and encouraging more Nigerians to embrace insurance as a valuable financial tool. In a market where hand-to-mouth living is prevalent, insurers must tailor their products to suit the unique needs and economic conditions of Nigeria. By demonstrating the tangible benefits of insurance, particularly in times of crisis such as fire incidents, insurers can build trust and credibility with the populace. The challenge lies in effectively communicating these benefits to diverse segments of the population, including individuals like the market woman in Balugo market, who may be unfamiliar with insurance offerings. As Nigeria's insurance industry navigates the complexities of a challenging economic landscape, opportunities for growth and innovation abound. By adapting to the changing needs of consumers, enhancing financial literacy, and promoting inclusive insurance practices, insurers can pave the way for a more resilient and thriving insurance sector in Nigeria.