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Tuesday, March 28, 2023

Insurers’ Gross Premium Income Grows 19.04% to N174.82bn in Half Year

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Despite the challenging environment, insurers were able to grow premium income by 19.04 percent to N174.82 billion as at June 2022, according to data gathered by MoneyCentral.

Also, the combined net premium income (NPI) of the largest and most liquid firms was up 24.20 percent to N102.42 billion in June 2022 from N82.46 billion.

There was an improvement in all the key segments as customers are attracted to insurers’ innovative products  making an inroad into the Nigerian market.

Analysts say the growth mirrored the improvement in general business activities, demand for product, improved adoption of digitalization, and regulatory efforts to drive insurance inclusion.

Of course, insurers lost money during the coronavirus pandemic as a lockdown policy imposed by the government to curb the malaise prevented new customers from taking up an insurance cover, while renewals for the old ones were delayed.

Nigeria’s Gross Domestic Product grew by 3.11 per cent in the first quarter of 2022, according to a recent report by the National Bureau of Statistics (NBS).

The insurance sector has recorded a year-on-year growth rate of 6.2 per cent at the end of March 2022, according to the National Insurance Commission, NAICOM.

The commission added that the market size of the sector also grew by 15 per cent in the same period, making it one of the fastest sectoral asset expansions in Nigeria during the period.

It appears prompt and expeditious settlement of claims has bolstered the take up of covers by Nigeria who want their obligations honored as at when due.

With a 44.3 percent share of total sector premiums in the first half of 2022, life insurance premiums grew by 13.96 percent to N62.70 billion as PENCOM enforcements of the group continued to drive growth.

Of course, annuity business is the major driver of life premium as a growing number of retirees are taking up Annuity for Life policy as retirement benefit as permitted by the Pension Reform Act 2014.

Oil & Gas recorded the largest share of non-life premiums in 2022 with an 19.17 percent increase to N30.61 billion, representing one-thirds of total premium.

“This class of insurance continues to benefit from the federal government local content policy and the Energy and Allied Risks insurance pool of Nigeria,” said analysts at Afrinvest Securities.

“Both policies aim to increase the proportion of oil and gas risks retained locally,” add the analysts.

Motor insurance premium increased by 13.27 percent to N15.49 billion in June 2022, as the compulsory third-party insurance policy supports transactions in this sub-class.

However, fake vehicle documents undermine the growth of the sector despite stringent policies put in place by regulators to spur compliance.

For the first six months through June 2022, fire insurance premium rose by 25.79 percent to N14.05 billion from N11.17 billion as at June 2021.

Analysts at Afrinvest believe fire insurance should be added to the list of compulsory insurance policies and adequately enforced given the depth of  losses incurred (especially by third parties) in the event of a fire outbreak.

A lot of Nigerians do not insure against catastrophic events and there has been a growing number of cases of infernos that ravages markets, resulting in traders losing significant amounts of money.

Despite the growth in premium income, insurance penetration is abysmally poor and it contributes less than 1 percent to the economy.

In ranking terms, the Nigerian insurance industry underperformed significantly, contributing a minuscule 0.02 percent to world premiums. This ranked the Nigerian insurance industry 81st (previously 71st) out of 88 countries profiled by the Swiss Re Institute in 2021.

The sector has been beset by a tough and unpredictable macroeconomic environment, lack of trust for the claims process, poor regulations, and rising inflation that impoverishes consumer wallets.

It is difficult to increase penetration in a country where over 50 percent of a population of 200 million people live on less than $1.98 a day, and the misery index is deteriorating.

The regulator has not been resolute on the recapitalization as it has been incessantly posting the deadline for meeting the minimum capital requirement, a major setback for a reforms that is needed to transform the industry.

The regulator has been working hard to deepen insurance penetration through technology such as the launch of web aggregators aimed at marketing products to customers through digital platforms; and analysts are sanguine that the Bancassurance model will magnify awareness and inclusion.

Drilling down the financial statement of firms shows AIICO Insurance’s gross premium income was up 17.82 percent to N40.57 billion as at June 2022 from N34.43 billion the previous year.

AXA Mansard saw gross premium income rise by 33.92 percent to N34.71 billion in June 2022 while coronation insurance’s gross premium was up 32.75 percent to N9.29 billion as at June 2022.

NEM Insurance’s gross premium rose by 20.36 percent to N18.33 billion in June 2022 from N15.23 billion the previous year.

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