Low average earnings and widespread poverty in Nigeria are among factors weighing on insurance affordability and the growth of the sector, according to Fitch in its Nigeria Banking and Financial Services Report for the third quarter of 2020.
These factors have continued to limit the outlook for premium and even the more affluent middle-class consumers tend to avoid purchasing insurance, which also hampers the growth of compulsory basic insurance lines such as motor vehicle insurance, reported This Day, citing the commentary.
“Nigeria’s potential consumer base needs to be educated more about the benefits of both life and non-life insurance coverage to support more robust growth in the sector,” Fitch added.
It, however, predicted that with a market supported by the country’s steady economy and large population, Nigeria’s insurance sector will enjoy a period of growth and development over the medium and long term, albeit interrupted by a slower pace of growth in 2020 due to the effects of the COVID-19 pandemic.
“We forecast premiums in the smaller, life insurance market to increase by a downwardly revised 4.8% in 2020 to reach a level of NGN179.81bn ($463.5m) amid a weaker economic backdrop and higher inflation.
“We see strong growth in life premiums over the medium term to reach NGN217.96bn by 2024. We forecast premiums in the larger non-life insurance market to increase by a revised 2.9% in 2020 to reach a level of NGN248.85bn.
“We expect this trend in growth trajectory to continue over the medium term with non-life premiums reaching NGN321.53bn by 2024,” it stated.
According to Fitch, in spite of Nigeria’s large population, only a small proportion purchases life insurance whose premium currently accounts for 41.9% of the overall insurance spending in the country. Low income and a lack of understanding of the benefits of life insurance remain the most important obstacles facing life insurers, it stated.
On the other hand, Fitch anticipated that Nigeria’s non-life insurance market was set for a strong performance over the medium term. However, Nigeria’s motor vehicle and property insurance lines dominate the overall non-life segment, it added.
The Fitch report said, “Nigeria’s insurance market is highly fragmented in both the life and non-life segments, with just four companies holding over 5% market share in the life sector and six within the non-life sector. The market is highly competitive and we expect this to continue as more foreign players capture more market share.”
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