Why Insurance is Still Confusing to Many Nigerians

Tuesday, March 30, 2021 / 09:35 AM / OpEd By Ekerete Ola Gam-Ikon / Header Image Credit: Getty Images

We are already familiar with some of the statistics forinsurance in Nigeria:

Only 1.9 percent of our adult population had one form ofinsurance policy as at 2018 (National Financial Inclusion Strategy Report);
Insurance penetration to our Gross Domestic Product (GDP)was 0.3 percent in 2019 (National Bureau of Statistics);
Out of 11.7m registered vehicles (NBS 2018), only 2.5mhave genuine insurance cover evidenced in the Nigerian Insurance IndustryDatabase (NIID) domiciled in Nigeria Insurers Association (NIA);
Over 80 percent of the Gross Written Premium (GWP)recorded in 2019 was attributed to corporate businesses (NIA);
Lagos State accounts for about 83 percent of the TotalGross Written Premium of the insurance industry in 2019 (NIA);
Brokers and agents accounted for about 78 percent of theGWP of N473b in 2019 (NIA).

These statistics and more have often been interpreted asreflecting the huge growth potentials of the insurance industry inNigeria.

However, a very large population of Nigerians have remainedunmoved and very slow at taking up insurance despite obvious threats to theirhealth, assets and rising reports of insecurity.

Recent efforts through random interviews to ascertain thereasons for this persistent apathy against insurance revealed three keyreasons:

1. Poor knowledge of insurance, as compared to cultural andreligious beliefs;

2. Low purchasing power and disposable income in view ofessential needs;

3. Outright confusion regarding how to start the journey andwho to rely upon.

In my view, the first two reasons were probably as old asthe insurance industry in Nigeria and unlikely to go quickly but the last oneseemed new and unusual, thus requiring more of my attention.

A further attempt at ascertaining the reasons why anyoneshould be confused revealed about three major concerns these Nigerians havenamely:

1) Nigerians love to copy but have not seenthose that have taken up insurance and feeling cool that they could copy.

Only one in every 200,000 Nigerians has an insurance policyand hardly discuss it. Word of mouth is still the strongest means of awarenessand, unfortunately, it is only when something goes wrong that those holdinginsurance policies talk about them.

The confusion is, if it was a good thing to have, how is itthat certain respected people and influencers are not talking about their ownpolicies?

2) The premium that insurance companieschargee would unlikely enable them fulfil their promises when the time to payclaims come.

It is confusing to many how a vehicle worth N10m is insuredfor a premium of N200,000 or N300,000 with an assurance that even if it isstolen, the insurance company will pay. Discerning persons that do not howeverunderstand insurance and the place of reinsurance argue that it is almostimpossible to meet up with claims when they occur.

I agree with them and consider that the rising problems ofdelay in claims settlement and payments are traceable to the poor pricing. Thisis worsened by the ill-equipped efforts at marketing and selling insurance,that is, where the products suit the needs of potential customers.

Insurance is not one of those products that people will buybecause it is cheap, rather they expect that it should be expensive until morepeople have subscribed to force down the price. Certainly, a hard but necessarywork for the insurance industry in Nigeria.

3) The approaches of the insurance industryplayers are not like those of their colleagues in the banking industry.

Nigerians are best at comparing one with other people usingany basis on sight, so their confusion arises from the perceived inability ofthe insurance companies to offer and deliver the kind of services the banks do.It is just so difficult and confusing for many people who are touched by theirbanks daily to understand why insurance companies cannot be as strategic,aggressive and customer-focused like the banks.

Indeed, some acknowledge that even the banks need to do morebut are at a loss on why the gap between both industries should be so wide.

They hope that with digitization and Insurtech, we willlikely see quick positive changes in the insurance industry, yet those changesneed to come faster.

The days of paying insurance premium only on annual basisand not hearing from your insurance company until the next renewal are areas weexpect faster actions.

Also, the enlightenment campaign needs to be believable andconsistent, considering the depth of mistrust.

The insurance industry in Nigeria must acknowledge the factthat their products and services are often confusing and bear this in mind whenpitching to people irrespective of position or vocation.

Simply letting your prospects tell you their insurancestories could more likely enable you achieve success with them and provideopportunities for more sustainable relationships.

Let their trial not leave them confused anymore please.

About The Author

Ekerete Olawoye Gam-Ikon, MNIM,CPP, is a management consultant with a specialization in Strategy andInsurance. You can contact him via e:mail ola[email protected] and mobile +234-806-648-1111