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Nigeria Insurers Pay N38.55bn Claims in First Quarter

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While insurers in Africa’s largest economy are honoring obligations to policyholders, most of them are paying out more money in claims than they are receiving from premiums.

The largest quoted companies on the NGXASI index collectively incurred N38.53 billion in claims in the first quarter of 2022, and that is 13.83 percent higher than 2021’s N33.85 billion, according to data gathered by MoneyCentral.

The average industry claims ratio based on MoneyCentral calculations increased to 58.02 percent in March 2022 from 44.73 percent as at March 2021.

This means on average they spent N0.58 to generate every N1 of premium income, and investment income always helps to compensate for poor underwriting results.

Custodian Investment’s claims expenses were up 14.54 percent to N4.21 billion in March 2022 from N3.68 billion the previous year. Claims ratio rose to 66.61 percent in March 2022 from 64.85 percent in March 2021.

AIICO Insurance’s claims expenses were up 0.93 percent to N11.07 billion in the period under review from N10.97 billion the previous year.

Consolidated Hallmark’s claims expenses spiked by 60.23 percent to N1.11 billion as at March 2022 from N698.12 million as at March 2021.

Of course mounting obligations are normal to sector players, and this cuts across the globe as firms in the United States, Asia, and Europe are exposed to huge insurance losses which stems from floods, hurricanes, Earthquake, Typhoon, and the Australian wildfire.

Some analysts attribute rising claims in Nigeria to the reopening of the economy that pave the way for cars to hit the road, hence ballooning motor insurance costs; and the rally in crude oil price on the back of relaxation of lockdown measures and the war between Russia and Ukraine have bolstered oil and gas claims.

However, a weak macroeconomic climate as evidenced by rising inflation and currency devaluation balloons the replacement cost of an asset.

It is important to note that insurers were also exposed to the losses that related to the ENDSARS protest as properties were destroyed across the country.

According to a recent report by the Nigerian Insurers Association (NIA), insurance companies have paid N11bn claims on losses suffered during the 2020 #EndSARS protest.

Insurance Technocrat and former Chairman of the Nigeria Insurers Association, Gius Wiggle who unveiled Carest Consult firm to pioneer a new vista in claims management and strengthen the value chain in the insurance industry, confirmed that the #ENDSARS riot inspired this new outfit coupled with the existence of many policyholders who do not know the extent of their insurance coverage.

He noted that many people are just buying insurance to satisfy the law without understanding that they should report the incidents or accidents to their insurance companies.

Wiggle said that the new company will assist victims of motor or workplace accidents to get compensations against the insurers of the motor vehicles or their principals against their liability insurance policies.

“Given my knowledge of the working process in an underwriting company, insurance companies have neglected a significant portion of their recoveries from claims and lose lots of inflows that should enhance their revenue line and reduce their claims cost,” said Wiggle.

The headline inflation climbed further by 90bps to settle at 16.8 percent year on year (y/y) in Apr-22, from the previous print of 15.9 percent y/y in Mar-22, which is 12bps higher than our forecast of 16.7 percent, according to data from the National Bureau of Statistics (NBS).

A sizable number of insurance companies have solvency that is above the regulatory threshold, which means they have the cash flow to pay claims and meet other financial obligations.

Analysts are of the view that sector players have to magnify their capital so as to enable them to assume more risk by underwriting new policies that need to generate more premium.

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