Here what to know, an eye opener about getting yourself and your properties insured in Nigeria.
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Insurance In Nigeria
History of Insurance in Nigeria – A Peep at Olden Times
To understand how insurance operates in Nigeria, it is important to know the history of insurance in Nigeria. The birth of modern insurance in Nigeria is closely associated with the arrival of British Trading Companies. These companies facilitated inter-regional trade in the country. These foreign companies, therefore, needed to deal with some of their risks at a local level. This changed the shape of the insurance sector in Nigeria.
These trading companies were given insurance agency licenses by their foreign authorities from abroad. The licenses allowed the firms to facilitate claims supervision and issue covers.
In 1918, Africa and East trade companies inaugurated the Royal Exchange Assurance Agency. This was the first insurance company in the history of insurance in Nigeria. Other agencies included:
BEWAC’s Legal and General Assurance
Patterson Zochonis (PZ) Liverpool
Law Union and Rock
Due to the tragic effects of the Second World War, trade and commerce suffered both in the United Kingdom and in Nigeria. The initial years of Nigerian insurance companies witnessed slow growth between the 1920s and 1940s. Once the war got over, the insurance industry in Nigeria picked up its pace and made progress that would be embedded forever in the history of insurance in Nigeria.
The first insurance company indigenous to Nigeria was the African Insurance Company Limited. This was established in 1958. On October 1, 1960, the country gained Independence from the British. At the time of Independence there were twenty five insurance companies in Nigeria. Only four of these were owned by Nigerians. In 1961 the J.C. Obande Commission report, a milestone in the history of insurance in Nigeria, was released. This led to the formation of the Nigerian Department of Insurance as part of the Federal Ministry of Trade. This department was later transferred to the Ministry of Finance. The Insurance Companies Act of 1961 made it necessary for insurance businesses to be grouped into various classes for registration.
According to provisions of the Act, the office of the Registrar of Insurance was created. The purpose was to manage insurance practice in the country. Minimum capital requirement and other regulations for registration, monitoring, and control of insurance operations- these are some other provisions that fall under the other provisions of the Act.
In 1976, an Insurance Decree was released. This gave authorization to insurers, transfers, modes of operation, administrative, enforcement guidelines and penalties. By this time, the number of indigenous companies had outnumbered the foreign insurance companies.
In 1997, the National Insurance Commission was established. It was given the duty of overseeing and organizing insurance in Nigeria. This body is functioning as the main insurance regulator in Nigeria. An Insurance Special Supervisory Fund was set up in 1989, which made it compulsory for insurance companies to give in 1 percent of their gross earnings to the fund. This also strengthened the Insurance Supervisory Board.
The insurance industry in Nigeria has been steadily growing ever since.
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Policy Comparison Between Popular Insurance Companies In Nigeria
There are quite a number of insurance companies offering same types of policies while some are slightly different from the other. This comparison was polled across five (5) different insurance companies.
The different car insurance policies offered by these companies include; comprehensive, third party theft and fire, third party only and goods in transit.
The companies used for this comparison were randomly chosen and they are as follows:
AIICO (American International Insurance)
Industrial & General Insurance (IGI)
Consolidated Hallmark Insurance
Mutual Benefits Assurance
The policy information according to the individual companies listed above have been provided in a tabular format below (please note that this information is in no way conclusive. Policy information change from time to time likewise.
Please get a FREE quote first by using the blue form to your right if you need the FREE services of the Insurance companies and licensed brokers working with us):
Historical evolution of insurance in nigeria
Are you accustomed to entrusting your life to insurance companies?
See the history of insurance in Nigeria right here. Insurance is a service that allows you, your family and colleagues have peace and confidence in the future.
Currently, there are various kinds of insurance – life, property, health, goods, enterprises etc. But how did all this begin to function? What contributed to the appearance of insurance companies in Nigeria? Follow the evolution of insurance in Nigeria below.
Development of insurance took place long before Nigeria became the independent country. Since that period, Nigeria has overcome a long path filled with different changes.
As years went by, the evolution of insurance became more and more visible, though, in comparison with other world countries, insurance in Nigeria is developed quite poorly. The reasons for this come not only from insurance services but also from economic sector.
Evolution of insurance: Beginning The prerequisites of the current situation with insurance were born in the colonial period. Until the 1960s, the leading role in the Nigerian insurance market was played by European companies.
They insured goods sent to centers of the empire. After colonies gained political independence, African branches of these companies were nationalized, the government tried to form their own insurance markets to avoid currency outflows abroad. And they managed to do this with the support of the UN.
In the 1960s, UNCTAD officially recognized the importance of insurance in the newly liberated countries to accelerate their economic development and free trade.
It also facilitated the adoption of a number of bills by the parliaments of African countries formalizing insurance relations. In 22 countries, including Nigeria, the state monopoly on insurance was introduced.
In particular, everything started from the appearance of the Nigerian department of insurance, which occurred after the report by The J. C. Obande Commission.
Appearance of reinsurance companies: State ownership At the same time, some reinsurance companies appeared in Africa. Firstly, they were created in Egypt, Kenya, Morocco, and Cameroon, and later in Ghana, Sudan, Tunisia, Algeria and, finally, in Nigeria
The shares of these organizations were fully owned by the state. Private ownership of insurance companies in Nigeria In the early 90’s, the African and Nigerian economy faced opposing trend: under the pressure of the World Bank, insurance markets began to move towards liberalization. The form of ownership began to shift from state to private.
Until recent times, they maintained the state monopoly in the insurance industry, but eventually, they abandoned it. This has undermined relatively effective activities of local reinsurers. Many of them could not stand the competition and were eliminated. What is the oldest insurance company in Nigeria? 1918 – was the time of the creation of Royal Exchange Assurance Agency. This was the first insurance company in the history of insurance in Nigeria.
The oldest insurance company in Nigeria (indigenous to Nigeria) was called African Insurance Company Limited. It appeared and started providing its services in 1958. European influence What has happened as a result? European insurance companies have brought their own standards and certain insurance practices, which served as a role model for local insurers and connected Nigerian insurance market with the world reinsurance market.
In 1997 , the National Insurance Commission was formed By 1998, development of insurance market became much more liberal. By that time, there were 580 African insurance companies, including 157 in Nigeria. FAIR contribution to the history of insurance in Nigeria FAIR or Federation of Afro-Asian Insurers and Reinsurers made a great contribution to the functioning and development of the insurance market in Nigeria.
It began functioning in 1964 in order to strengthen collaboration between Afro-Asian insurers and reinsurers. Currently, FAIR consists of 188 insurance and reinsurance organizations. Liberalization of insurance markets should not be understood as the government’s refusal to regulate this sphere. It means only a relative simplification of the procedure for entering the market and pluralism of forms of ownership.
At the same time, control over the activities of insurers can be quite stringent. 1976 Nigerian Insurance Act In 1976, the Nigerian Insurance Act was signed. There were no regulatory requirements for the insurers’ solvency. However, the situation is changing: in 2003 a new Insurance Act came into being and by early 2007 all insurers and reinsurers were required to increase authorized capital to new and higher standards.
Local National Insurance Commission (NAICOM) – no longer accepts borrowed funds from banks and real estate property. Thus, the development of insurance in Nigeria was influenced by the following factors: – Colonial heritage in the form of branches of European insurance companies; They brought their own standards and regulations, which, of course, served as a good impulse and an example.
European branches initially connected African insurance market with the world reinsurance market, which consequently increased the capacity of the domestic market. – Prevention of the emergence and activity of local competitors; – Voluntary self-isolation; Insurance market has now been narrowed to a few insurers, losing the ability to self-regulate through competition, as well as through professional associations. So, you have seen main periods in the development of insurance market in Nigeria and know how its functioning has begun.
The development of insurance in Nigeria economic sector
The Role of Insurance in Nigeria economy can be read HERE!
The importance of insurance in economy
Article can be read HERE!
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Custodian Insurance plc.
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Cost of car insurance in Nigeria
Car Insurance In Nigeria – How To Get A Genuine Policy
Over the years, understanding the importance of car insurance policy has been a complicated one or better put, a hazy idea to most Nigerian motorists. This is mainly due to the activities of many fraudsters parading themselves as motor vehicle insurance companies. Another factor is that most motorists do not really understand how these policies work, how to make their claims in cases of accidents or eventualities. This is where these legitimate insurance companies and bodies should come in; to educate the masses and their potential customers on how to obtain a genuine car insurance policy.
As we wait for the insurance companies to start the publicity, here are simple rules we have put together on how to obtain a genuine car insurance policy in Nigeria:
Decide on what type of Insurance you want:
Do you want a comprehensive insurance policy for your automobile or you just want a third party insurance policy? The comprehensive car insurance policy will include a cover for your car in cases of fire, theft, accident and also includes a third party insurance policy while a third party insurance policy is that which only covers or protects you from the damages caused by your car on other cars in the case of your negligence or your driver’s negligence while driving the insured car. The third party policy is compulsory according to the Nigerian Insurance Act 2003.
Contact a registered Insurance Company
If you want to get a genuine insurance policy, please do not patronize those people flocking around licensing offices for your car insurance. If you do, be sure to get fake papers and when you will need the insurance you have spent your hard earned money to do the job in case of any accident or damage, no one will be there to help because you patronized the fraudsters.
If you just bought a new car from an auto dealer, he may offer to provide you with insurance, note that these car dealers are not insurance companies but some of them do have contact or have good rapport with some insurance companies. First, make sure you verify that the insurance company he is referring you to is legally registered. How do you know that? Some good insurance companies in Nigeria which provide trusted services to their customers include:
AIICO Insurance PLC
Old Mutual Nigeria
Consolidated Hallmark Insurance
Leadway Assurance PLC
Zenith Insurance PLC
Mansard Insurance PLC
These are just a few of the registered insurance companies that operate in Nigeria and they are regulated by the National Insurance Commission (NAICOM). You can visit the NAICOM website on www(dot)naicom(dot)gov(dot)ng to get a comprehensive list of the registered insurance companies in Nigeria. You can check out the websites of these companies, check their ‘contact us’ corner to know if there is any of their branches close to you or better still send them an email or call the contact numbers on their website. A better and faster way to do this is to use the insurance quotes services of insurancequotes.ng to request for cost estimates. Each of your quotes request submission is transferred in real time to relevant insurance companies who quickly reach out to you for discussions. This is far more comfortable. All the same, it is better to take your time to achieve a genuine insurance cover than getting a fast one from illegitimate dealers.
Verify your new Insurance Policy
As soon as you buy your insurance, always endeavour to verify your policy by sending an SMS to 33125 in this format:
Policy number*your vehicle plate number.
On your phone for instance, type AIN/061/310100*AB123YZ and send to 33125. You will receive a message telling you that your vehicle is ‘insured’ if you got a genuine insurance policy or ‘not insured’ if the policy is fraudulent. You can visit to website for the Nigerian Insurance Database Portal, www(dot)askniid(dot)org which is the central record of all insured vehicles in Nigeria. The Nigerian police also use ASKNIID to enforce motor insurance law, so ensure that your vehicle is properly and genuinely insured by verifying through these methods…Visit Cheki…To get the best car Insurance in Nigeria.
Nigerian Insurance Industry: Overview, Challenges and Opportunities
Despite the lingering apathy for Insurance by the Nigerian populace, driven largely by cultural & religious beliefs, the Industry remains resilient, recording a compounded annual growth rate (CAGR) of 10.2% in gross premium Income (GPI) since 2012. In 2016, the Industry’s GPI grew by an estimated 10% to ₦356 billion. Growth was upheld by the enforcement of compulsory insurance policies, particularly in the group life and motor insurance business lines. However, the Industry’s performance was dampened by the downturn in Nigeria’s fortunes which had its roots at declining global crude oil prices since 2014.
Life insurance business recorded significant feats in the last 2 years on the back of growth in annuities following the passage of the Pension Reform Act 2014 which allows pension funds administration (PFAs) transfer funds for annuity purpose to insurance companies. The impact of this Act was particularly evident in the 84% growth in life premiums in 2015. Nonetheless, the performance of the life business segment going forward will be shaped by ongoing discussions between the National Pension Commission (PenCom) and the National Insurance Commission (NAICOM) on the custody of annuity funds. The National Pension Commission in November 2016 released a circular requesting all life insurers providing retiree life annuity under the Contributory Pension Scheme (CPS) to transfer all corresponding assets in their custody to the Pension Fund Custodian (PFC) of their choice within a stipulated timeframe. All new annuities purchased following the release of the circular are domiciled in dedicated accounts with the PFCs. Subsequently, the treatment of existing retiree life annuity funds is to be decided following the issuance of a joint regulation in June 2017.
Figure 1: GPI by Business Line
The Nigerian Insurance Industry continues to record increased claims payments as is typical in periods of recession. In 2016, net claims paid by operators amounted to an estimated ₦100 billion ($327.9 million @ ₦305/$), a 19% growth over the preceding year. This translated to an average loss ratio of 43.7% (FY2015: 43%). We expect this upward trajectory to be sustained in 2017 as the weak macroeconomic climate persists.
Figure 2: Growth in Claims Paid by the Industry (2013-2017f)
The Industry’s performance continues to be upheld by investment income which reached an estimated ₦54.5 billion ($178.7 million @ ₦305/$) in 2016 on the back of favourable yields on government securities. In view of the tight monetary regime adopted by the CBN which is characterized by high interest rates, we expect a marked growth in investment income as operators take advantage of higher yielding government securities. The Nigerian financial market is relatively small and nascent with a limited number of financial instruments to invest in. We believe that investment options of the Industry need to be broadened to take advantage of higher yielding securities while protecting shareholder value.
Overall, the Insurance Industry’s return on equity (ROE) which hovered at around 8.4% in 2016 (FY2015: 8.6%) is expected to weaken slightly in 2017 as the economy recovers from the recession. The Industry’s low ROE reflects its weak profitability compared to the average yield on 364-day treasury bills of 13.7% in 2016. In our opinion, profitability is hampered by weak investment returns, rising maintenance & acquisition expenses as well as increasing claims.
Nonetheless, we project a stable outlook for the Nigerian Insurance Industry in 2017 as the negative impact of the recession will be moderated by the positive factors. The 53% naira devaluation in 2016 increased the value (and subsequently reduced the risk cover) of assets such as motor vehicles. These assets will need to be revalued to accommodate the impact of the devaluation and avoid “underinsurance”. Underwriters are advising clients to increase premiums especially on motor vehicles policies and we believe this will support growth in 2017. We note however that weak consumer purchasing power may moderate expected growth.
Overall, we foresee an 8% growth in GPI in 2017 on the back of a probable further devaluation and a continued growth in the life business.
Emerging threats amidst macroeconomic uncertainty
The Nigerian Insurance Industry, like most other industries, is affected by the macroeconomic environment. The downturn in Nigeria’s fortunes which had its roots at declining global crude oil prices since 2014 has triggered changes in the consumption pattern of insurance products in recent times. While contributions from the non-life business segment have been on a decline (particularly in the oil & gas line), the Industry has seen increased surrenders in the life business segment. The Consumer Price Index (CPI) which measures inflation rose to 18.6% in December 2016 (the highest in over a decade) and impacted the value of long term savings. In a high inflation environment, long term savings loose value over time. As such, at an average inflation of 18.6%, ₦100 saved now is worth only ₦43 in 5 years and ₦8 in 15 years. This discourages savings and consequently, there is a preference to invest in high yielding securities. Rising inflation also has a direct impact on the Industry’s operating costs which in turn reduces profits. In 2016, about 28% of the Industry’s GPI was paid out as underwriting expenses (including acquisition and maintenance costs).
Nonetheless, enormous Untapped Opportunities With an estimated insurance penetration rate 0.4% and only 1% of the population holding any form of insurance policy, the opportunities in the Nigerian market are enormous. The Nigerian economy is expanding and new risks are evolving, hence a growing need for companies and individuals to insure businesses and protect themselves in the event of unexpected losses. By this, the economy is able to rebuild and recover from losses quickly. When we compare the country’s insurance penetration to economies like Kenya and South Africa which boast of insurance penetrations of 2.9% and 14% respectively, we see a clear lag.
In an attempt to ascertain the reasons behind the Industry’s low penetration, Agusto & Co concluded a retail consumer survey on insurance in January 2017. One of our major findings was an untapped female retail insurance market waiting to be served.
– Women are increasingly becoming empowered in Nigeria, enabling them to make spending decisions. About 22% of female respondents from the survey earned above ₦10 million ($33,000 @ ₦305/$). In addition, female entrepreneurs are becoming a growing part of the real sector as 24% of the female respondents were self-employed and managers of various small and medium sized enterprises (SMEs). This highlights the need for insurance products specified to underwrite risks involved in small and medium sized enterprises (SMEs) as well as life policies for female entrepreneurs.
– From our survey, we discovered that 57% of female respondents preferred direct sales agents as an avenue in purchasing insurance policies. This somewhat reflects a knowledge gap as women would prefer to relate one on one with sales agents in order to build trust and be given opportunities to ask questions in order to deepen their understanding of insurance. This point is buttressed by a significant 72% of female respondents who indicated mistrust of insurance companies and policies offered as the reason for not subscribing to insurance policies.
– Operators need to equip their agents to market products with an adequate understanding of the products offered and the needs of clients. Our survey revealed that 42% of respondents had not had any insurance products marketed to them in the last 12 months.
Agusto & Co believes that it is imperative for both operators and regulators to work together to increase awareness and educate the populace on the benefits of insurance. We need to take a cue from countries like Kenya and South Africa who have adopted various strategies including the support of other sectors such as telecommunications to drive penetration of insurance. Industry operators must be more aggressive in their marketing approaches, offering products and services that are bespoke to the Nigerian environment and populace.
The Role and Importance of Insurance – Explained!
The following point shows the role and importance of insurance:
Insurance has evolved as a process of safeguarding the interest of people from loss and uncertainty. It may be described as a social device to reduce or eliminate risk of loss to life and property.
Insurance contributes a lot to the general economic growth of the society by provides stability to the functioning of process. The insurance industries develop financial institutions and reduce uncertainties by improving financial resources.
1. Provide safety and security:
Insurance provide financial support and reduce uncertainties in business and human life. It provides safety and security against particular event. There is always a fear of sudden loss. Insurance provides a cover against any sudden loss. For example, in case of life insurance financial assistance is provided to the family of the insured on his death. In case of other insurance security is provided against the loss due to fire, marine, accidents etc.
2. Generates financial resources:
Insurance generate funds by collecting premium. These funds are invested in government securities and stock. These funds are gainfully employed in industrial development of a country for generating more funds and utilised for the economic development of the country. Employment opportunities are increased by big investments leading to capital formation.
3. Life insurance encourages savings:
Insurance does not only protect against risks and uncertainties, but also provides an investment channel too. Life insurance enables systematic savings due to payment of regular premium. Life insurance provides a mode of investment. It develops a habit of saving money by paying premium. The insured get the lump sum amount at the maturity of the contract. Thus life insurance encourages savings.
4. Promotes economic growth:
Insurance generates significant impact on the economy by mobilizing domestic savings. Insurance turn accumulated capital into productive investments. Insurance enables to mitigate loss, financial stability and promotes trade and commerce activities those results into economic growth and development. Thus, insurance plays a crucial role in sustainable growth of an economy.
5. Medical support:
A medical insurance considered essential in managing risk in health. Anyone can be a victim of critical illness unexpectedly. And rising medical expense is of great concern. Medical Insurance is one of the insurance policies that cater for different type of health risks. The insured gets a medical support in case of medical insurance policy.
6. Spreading of risk:
Insurance facilitates spreading of risk from the insured to the insurer. The basic principle of insurance is to spread risk among a large number of people. A large number of persons get insurance policies and pay premium to the insurer. Whenever a loss occurs, it is compensated out of funds of the insurer.
7. Source of collecting funds:
Large funds are collected by the way of premium. These funds are utilised in the industrial development of a country, which accelerates the economic growth. Employment opportunities are increased by such big investments. Thus, insurance has become an important source of capital formation.
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