Competition in the Insurance market

Competition in the market Based on responses to the survey questions, the Nigerian insurance market is overall moderately competitive. Specific segments identified to be intensely competitive include investment products, life risk products, general insurance and health insurance (not medical scheme business). Large established broad-based financial institutions were identified to be the greatest competitive threat in the industry.

The responses come on the back of a market which has seen significant consolidation over the past decade. Currently, the industry consists of approximately 57 companies compared to 140 registered insurers in 1994. Revised capital requirements which were first introduced by NAICOM in 2005, were a major driver behind this move. It is believed that there is further scope to consolidate the market and that mergers with and acquisitions by foreign companies will help to achieve this.

Industry failing to attract talent Actuarial, risk management, capital management and underwriting skills shortages were noted during the survey. IT skills, or perhaps more appropriately digital skills, are also in demand as the industry attempts to keep pace with emerging technologies.

Major drivers changing the Insurance market

As with the global insurance industry, the African market is also in a state of flux, with a series of far reaching changes occurring at the same time. These include:

1. Social networks which are shifting the balance of power towards customers;

2. Technological advances, which are disrupting the entire insurance value chain from distribution, underwriting, pricing and loss control. Advances in embedded devices, sensors, software and hardware are also enabling the transformation of big data into actionable insights;

3. Environmental changes, including the increasing severity and frequency of natural and man- made catastrophes; 4. Rising economic significance of emerging markets, including Africa. High growth economies like Nigeria and Kenya are increasing in significance for insurance; and

5. Political changes, including geo-political risks, terrorism and major regulatory overhaul may be unfortunate stumbling blocks at a time when Africa is ready to take its place in the global economy.

6. Demographic changes and shifts

7. Regulatory developments such as tax reforms and emergence of new risks These changes may present disruptions to businesses but also present opportunities for those insurers who can turn these changes to their competitive advantage and reposition their businesses for the future. Ability to handle change Participants were asked to assess the level of preparedness of their organisations to deal with these changes. Most were well organised at the board and executive level and in certain functional areas, such as finance, sales and customer service, HR and internal processes. However, the majority were genuinely less well prepared in IT, actuarial risk and compliance and marketing/brand management.

Overall it was clear that most insurers were focussed on dealing with the short term effects of the changing environment. What is needed though is a radical rethink of how to build a future in an increasingly competitive and rapidly changing African insurance market.

Social outlook and changes

Nigeria is the most populous African country with the Worldbank estimated population of 174 million inhabitants as at 2013. A growing middle class was identified by participants as the most significant demographic change to emerge in recent times. Growth in the middle class together with improvements in education and literacy levels are likely to drive growth in the insurance market as offerings become more affordable and better understood. These education and literacy trends are promising for increased insurance take up as approximately 90% of insured individuals in Africa are secondary and tertiary education graduates. Increases in life expectancy in Nigeria, also identified as an important demographic change, has put pressure on insurers particularly in the life annuity segment. 44% of Nigeria’s estimated population of 174 million is under the age of 15 while about 3% are over retirement age. This implies that there is only slightly more than one adult of working age available to care for each dependent in the population. The Nigerian population has consistently been growing by approximately 3% over the last few years though the workforce has remained a constant 53% of the total population between 2010 and 2013. If Nigeria is able to harness this growing workforce arising from its growing population to accelerate economic growth and further focus on improving health standards, there is potential for average income to triple by 2030 with over 30 million people lifted out of poverty. Hindering this ideal scenario is the low health and education standards resulting in young Nigerians being ill-equipped to productively participate in the workforce. Furthermore for the fit and equipped workforce there is a shortage of jobs.


Leave a Reply