The increasing hardship in the economy worsened by high inflation, foreign exchange gap and high cost of living is affecting businesses’ quest for uptake of insurance in the New Year.
This is becoming increasingly common in the renewal period for 2024 where corporate businesses as well as small and medium scale enterprises (SMEs) have adopted different strategies to cut cost of insurance without going out of cover.
Gbenga Olawoyin, a top executive officer in one the brokerage firms said business renewal for the current year is in progress but slow as quite a number of the clients are struggling to take up their covers due to challenges in the economy.
He said, “The renewals are coming in trickles but at the same time in reduced premiums”.
Olawoyin said some institutions are asking for premium cut, some are asking for review of cover, some are asking for scattered payments and all that. And that is the reflection of the economy, he said.
Making a joke of it, he said. ‘Is it the way you spent your Christmas last December the way you have been spending it in the past few years. The answer is no, so it’s a general situation of the economy”.
Mayowa Adeduro, managing director/CEO, Tangerine Insurance said there is no doubt that it has been harsh for everyone in Nigeria.
Adeduro said , with the current situation people are reducing the value of their assets in order to stay protected with their insurance, while others are reducing their insurance coverage.
But sadly enough, some insurance clients have left the country, for instance, the International Oil Companies (IOC’s) who are selling off their assets.
“Some others have resorted to only third-party covers instead of comprehensive insurance, so in one way or the other, the issuance industry has been impacted by the economic trend.”
Adeduro however noted that several other clients have realised that insurance remains almost the only hope they have in case of any incident that happens to their assets, so they know that it is only the insurance they can call to get them out.
According to him, some of these clients particularly the corporates reviewed their insurance to mark inflation. They probably know that betting under a very high-risk situation and high-risk environment is dangerous with adequate insurance cover, Adeduro said
“But all in all, the economic situation has affected several clients, especially the small and medium scale clients who are struggling under the heavy burden of inflation, exchange rate challenges here and there to reduce inflation cost. We empathise with them, sincerely, Adeduro said.
Adeduro said the insurance industry will see a lot of positive developments in the new year, stating that the industry would have crossed the N1 trillion premium at the end of 2023, given third third-quarter performance which was around N729 billion
“On average that shows about a 15 percent year-on-year increase in premium, and that is a positive development.”
But looking at the inflation rate, you will realise that the industry needs to do more to curb the growth rate of inflation and its impact on the value of insurance.
The Nigerian insurance industry’s total assets rose to N2.8 trillion at the end of Q3 2023, according to the National Insurance Commission (NAICOM).
NAICOM in its document titled: “Nigerian Insurance Market at a Glance shows that total assets for non-life stood at N1.74 trillion, while total assets for life business stood at N1.07 trillion.
This is as the the industry paid a total of N365.5 billion as claims to policyholders that suffered losses during the review period, while total assets stood at N2.8 trillion.
