Why Insurance is Still Confusing to Many Nigerians

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Tuesday, March 30, 2021 / 09:35 AM / OpEd By Ekerete Ola Gam-Ikon  / Header Image Credit: Getty Images


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We are already familiar with some of the statistics for insurance in Nigeria:

  • Only 1.9 percent of our adult population had one form of insurance policy as at 2018 (National Financial Inclusion Strategy Report);
  • Insurance penetration to our Gross Domestic Product (GDP) was 0.3 percent in 2019 (National Bureau of Statistics);
  • Out of 11.7m registered vehicles (NBS 2018), only 2.5m have genuine insurance cover evidenced in the Nigerian Insurance Industry Database (NIID) domiciled in Nigeria Insurers Association (NIA);
  • Over 80 percent of the Gross Written Premium (GWP) recorded in 2019 was attributed to corporate businesses (NIA);
  • Lagos State accounts for about 83 percent of the Total Gross Written Premium of the insurance industry in 2019 (NIA);
  • Brokers and agents accounted for about 78 percent of the GWP of N473b in 2019 (NIA).

 

These statistics and more have often been interpreted as reflecting the huge growth potentials of the insurance industry in Nigeria. 

 

However, a very large population of Nigerians have remained unmoved and very slow at taking up insurance despite obvious threats to their health, assets and rising reports of insecurity.

 

Recent efforts through random interviews to ascertain the reasons for this persistent apathy against insurance revealed three key reasons:

 

1. Poor knowledge of insurance, as compared to cultural and religious beliefs;

2. Low purchasing power and disposable income in view of essential needs;

3. Outright confusion regarding how to start the journey and who to rely upon.

 

In my view, the first two reasons were probably as old as the insurance industry in Nigeria and unlikely to go quickly but the last one seemed new and unusual, thus requiring more of my attention.

 

A further attempt at ascertaining the reasons why anyone should be confused revealed about three major concerns these Nigerians have namely:

 

1) Nigerians love to copy but have not seen those that have taken up insurance and feeling cool that they could copy.

 

Only one in every 200,000 Nigerians has an insurance policy and hardly discuss it. Word of mouth is still the strongest means of awareness and, unfortunately, it is only when something goes wrong that those holding insurance policies talk about them.

 

The confusion is, if it was a good thing to have, how is it that certain respected people and influencers are not talking about their own policies?

 

2) The premium that insurance companies chargee would unlikely enable them fulfil their promises when the time to pay claims come.

 

It is confusing to many how a vehicle worth N10m is insured for a premium of N200,000 or N300,000 with an assurance that even if it is stolen, the insurance company will pay. Discerning persons that do not however understand insurance and the place of reinsurance argue that it is almost impossible to meet up with claims when they occur.

 

I agree with them and consider that the rising problems of delay in claims settlement and payments are traceable to the poor pricing. This is worsened by the ill-equipped efforts at marketing and selling insurance, that is, where the products suit the needs of potential customers.

 

Insurance is not one of those products that people will buy because it is cheap, rather they expect that it should be expensive until more people have subscribed to force down the price. Certainly, a hard but necessary work for the insurance industry in Nigeria.


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3) The approaches of the insurance industry players are not like those of their colleagues in the banking industry.

 

Nigerians are best at comparing one with other people using any basis on sight, so their confusion arises from the perceived inability of the insurance companies to offer and deliver the kind of services the banks do. It is just so difficult and confusing for many people who are touched by their banks daily to understand why insurance companies cannot be as strategic, aggressive and customer-focused like the banks.

 

Indeed, some acknowledge that even the banks need to do more but are at a loss on why the gap between both industries should be so wide.

 

They hope that with digitization and Insurtech, we will likely see quick positive changes in the insurance industry, yet those changes need to come faster.

 

The days of paying insurance premium only on annual basis and not hearing from your insurance company until the next renewal are areas we expect faster actions. 

 

Also, the enlightenment campaign needs to be believable and consistent, considering the depth of mistrust. 

 

The insurance industry in Nigeria must acknowledge the fact that their products and services are often confusing and bear this in mind when pitching to people irrespective of position or vocation.

 

Simply letting your prospects tell you their insurance stories could more likely enable you achieve success with them and provide opportunities for more sustainable relationships.

 

Let their trial not leave them confused anymore please.


About The Author 

Ekerete Olawoye Gam-Ikon, MNIM, CPP, is a management consultant with a specialization in Strategy and Insurance. You can contact him via e:mail olagamola@gmail.com and mobile +234-806-648-1111 


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