Economic Challenges May Hinder Nigerian Insurance Sector’s Ambitious Third-Party Motor Premium Target
The Nigerian insurance sector’s plans to generate a premium of N148.30 billion from third-party motor insurance by December 31, 2023, may face challenges due to rising economic difficulties in the country. The increase in third-party motor insurance premiums, initiated from January 1, has raised concerns about the potential surge in fake policies amid affordability issues. The National Insurance Commission (NAICOM) set new premium rates, but industry observers warn that this could attract fake operators, especially at vehicle licensing offices, impacting the growth of third-party insurance.
Key Points:
- Premium Target and Concerns:
- The Nigerian insurance sector aims to generate a premium of N148.30 billion from third-party motor insurance by December 31, 2023, compared to N56.76 billion recorded in 2022.
- Concerns arise about the potential increase in fake policies due to the affordability challenges faced by Nigerians.
- New Premium Rates by NAICOM:
- NAICOM introduced new premium rates, increasing the cost for private vehicles, owner goods vehicles, and staff buses.
- Private vehicles paying N5,000 premium for N1 million Third Party Property Damage (TPPD) limit are now to pay N15,000 premium for N3 million.
- Anticipated Insured Vehicles and Premium Breakdown:
- The insurance sector’s expectations are based on an anticipated 3.68 million insured vehicles as captured on the Nigerian Insurance Industry Database (NIID).
- Breakdown: 3.25 million under third party, 407,871 comprehensive, and 16,212 third party fire and theft.
- Expected Premiums: N48.80 billion from third party, N93.81 billion from comprehensive, and N6.69 billion from third party fire and theft.
- Historical Losses Due to Fake Policies:
- The insurance industry has faced significant losses due to fake motor insurance policies in previous years.
- In 2020, the industry insured 2.78 million vehicles, losing N48.76 billion.
- In 2021, 3.36 million vehicles were insured, with a loss of N57.04 billion.
- In 2022, 3.68 million vehicles were insured, with a loss of N60.01 billion.
- Collaboration with Lagos State Government:
- The industry is collaborating with the Lagos State Government to implement e-insurance to drive third-party motor insurance sales through the Motor Vehicle Administration Agency (MVAA) platform.
Conclusion: The Nigerian insurance sector faces challenges in achieving its ambitious third-party motor insurance premium target due to economic difficulties and concerns about the potential rise in fake policies. The collaboration with the Lagos State Government on e-insurance is seen as a strategy to address these challenges and enhance the authenticity of insurance policies. The industry’s focus on compliance and leveraging technology reflects efforts to mitigate risks and promote growth in the sector.
