Nigerian market in context The National Insurance Commission regulates the Nigerian insurance industry and is governed by the Insurance Commission Act 1997 and Insurance Act 2003. The insurance industry in Nigeria is still growing and developing.
However, it only contributes 0.7% toward Gross Domestic Product (GDP). This is very low compared to other markets such as South Africa with penetration levels of around 12%. 3 The Nigerian insurance industry players are structured into four players: insurers and reinsurers, insurance brokers, agents and loss adjusters.
The insurance and reinsurance companies underwrite risks while the insurance brokers and agents act as intermediaries between the underwriters and the policy holders in the sale of insurance products and the collection of premiums.
The loss adjusters, on the other hand, determine the appropriate valuation of the loss incurred in the event of a claim. Brokers are thought to control about 70% of all insurance premiums in Nigeria To put things into perspective, in a global context, the total African insurance market only accounted for 1.52%* of the global premiums in 2013, at $69.938billion compared to the world total premiums of $4.6 trillion. Insurance penetration, measured as a percentage of premiums to GDP was 3% for Africa.
This is relatively higher than the average emerging markets average of 2.65%, but much lower than the advanced markets of 8.07% and a global average of 6.13%. The average premium per capita for Africa was $63.7 in 2013, relative to the world average of $645 and advanced markets at $3579. The above numbers indicate the low level of development in the African insurance market, but also the immense potential to grow the market as Africa’s affluence and financial literacy increases. South Africa is the largest insurance market on the continent with premiums of $51.6 billion and is ranked 17th in the world.
On the other hand, Nigeria is ranked 62nd in the world and has a total premium volumes of $1.64 billion. Insurance premium penetration rates of 0.7% of GDP, ranked 87th in world terms, and average premium per capita of $9.4, reflect a market that is in development.