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Gradual Economic Recovery Lifts Insurers’ Premium Income

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The swift deployment of vaccines and the reopening of the economy that accelerated renewals have lifted listed insurers’ revenue, but penetration remains abysmally low in a country reeling from spiraling unemployment.

The largest quoted insurers collectively grew gross premium income (GPI) by 12.85 percent to N265.73 billion in the third quarter (Q3) of 2021 from a year earlier, data gathered by MoneyCentral shows.

Also, they collectively grew net premium income (NPI) by 17.14 percent to N180.62 billion in September 2021 from N154.18 billion the previous year.

Of course, the relaxation of social distancing rules paved the way for more customers to take up a cover as drivers hit the road to various destinations, while the rebound in crude oil price underpinned the corporate side of the market.

Additionally, the post pandemic era presented an opportunity for companies to introduce more market penetrating products while intensifying their digital strategies, which is the next growth phase of the industry.

The Nigerian economy expanded by 0.51 percent in the second quarter of 2021, according to the National Bureau of Statistics (NBS).

However, rising claims expenses combined with underwriting and management expenses means sector operations are left with very slim profit margins, which fuels investors’ apathy towards insurance shares and poor valuations.

A breakdown of the figures shows AIICO Insurance- the largest listed insurer by total assets- saw gross premium income increase by 16.55 percent to N51.44 billion in September 2020 from N44.13 billion the previous year.

The insurer realized N15.68 billion from premium income from Non-Life Business, which is 39.75 percent higher than 2020’s N11.22 billion. Premium income from the Life Segment stood at N36.76 billion in September 2021, which is 21.72 percent of 2020’s N30.20 billion.

Custodian Investment Plc’s gross premium income rose by 11.80 percent to N50.78 billion in September 2021 from N45.50 billion the previous year.

Premium income from Non-Life Business was up 5.69 percent to N25.05 billion as at September 2021 while income from the Life Segment increased by 18.44 percent to N25.82 billion in the period under review.

AXA Mansard Insurance Plc gross premium income increased by 18.38 percent to N40.47 billion as at September 2021. Revenue from Life Business was up 34.40 percent to N22.23 billion in September 2021 from N16.54 billion the previous year. Income from HMO was up 18.53 percent to N18.87 billion in the period under review from N15.92 billion as at September 2020.

Mutual Benefits Assurance’s gross premium income spiked by 41.81 percent to N19.89 billion in the period under review from N14.02 billion as at September 2020.

The insurer generated N14.40 percent from the Non-Life Business, which represents a 75.61 percent surge from 2020’s N8.20 billion. Also, it realised 21.78 percent from the Life Segment, which represents 21.78 percent to N8.05 billion upticks from 2020’s N6.61 billion.

 While insurance premiums are seemingly strong, analysts at AM best said that when viewed in real terms the market has been contracting due to rising inflation.

The analysts attribute the low real gross premium income to volatility in the country’s real gross domestic products, along with uneven enforcement of mandatory retail insurance lines.

“Low retail penetration can be partly explained by the low level of awareness and trust in insurance, as well as the absence of strong financial literacy across large parts of the population,” AM Best analysts said in a report.

“Furthermore, the extremely shallow level of economic growth in recent years has affected both the demand for insurance as well as the value of insurable assets across a number of lines of business,” they summed.

Nigeria’s insurance penetration-market gross premium as a percentage of gross domestic premium- is currently at 0.30 percent, according to Swiss Re Sigma.

And that compares with South Africa’s (13.40 percent); Kenya; Namibia, (10.40 percent), and Kenya, (2.30 percent).

There are growing concerns that policy holders do not have confidence in the claims process, and many complain bitterly about delay in settlement, which gives them the impression that some insurance companies are fraudulent.

Again, religious and cultural beliefs are another elephant in the room. Some perceive taking a life cover as a premonition of their own death.

 To help shrink the gap, insurers have to support the government in a sensitisation campaign that involves educating the public on the advantages of taking up an insurance cover.

AM Best suggests that insurers could improve their distribution and premium collection via mobile applications to reach a greater proportion of the population.

Nigeria’s smartphone market grew 2.0% in unit terms quarter on quarter (QoQ) in Q2 2021, according to the latest figures from global technology and consulting services firm International Data Corporation (IDC).

Further analysis of other sector players shows a similar upward growth trajectory in revenue.

NEM Insurance Plc gross premium income increased by 36.50 percent to N21.34 billion in the period under review from N15.63 billion the previous year.

Cornerstone Insurance Plc gross premium income increased by 22.88 percent to N14.65 billion in September 2021 from N11.92 billion as at September 2020.

Consolidated Hallmark Insurance Plc gross premium income was up 30.87 percent to N10.02 billion as at September 2021 from N7.66 billion the previous year.

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