We already know some statistics for insurance in Nigeria:
- Only 1.9 percent of our adult population had some form of insurance in 2018 (National Financial Inclusion Strategy Report);
- The insurance penetration of our gross domestic product (GDP) was 0.3 percent in 2019 (National Bureau of Statistics);
- Of the 11.7 million vehicles registered (NBS 2018), only 2.5 million have real insurance coverage as evidenced in the Nigerian Insurance Industry Database (NIID), based in the Nigeria Insurers Association (NIA).
- Over 80 percent of the gross premium (GWP) recorded in 2019 was attributable to companies (NIA);
- The state of Lagos accounts for around 83 percent of the total gross written premium in the insurance industry (NIA) in 2019.
- Brokers and agents accounted for around 78 percent of the GWP of N473b in 2019 (NIA).
These and other statistics have often been interpreted to reflect the enormous growth potential of the insurance industry in Nigeria.
However, a very large number of Nigerians have remained unmoved and have been slow to acquire insurance, despite obvious threats to their health, wealth and increasing reports of insecurity.
Recent attempts through random interviews to determine the reasons for this persistent apathy towards insurance have revealed three main reasons:
1. Poor insurance knowledge versus cultural and religious beliefs;
2. Low purchasing power and disposable income given essential needs;
3. Complete confusion about how to start the journey and who to rely on.
In my view, the first two reasons were probably as old as the insurance industry in Nigeria and were unlikely to go quickly, but the last one seemed new and unusual and therefore required more attention.
Another attempt to identify the reasons why someone should be confused revealed three main problems these Nigerians have, namely:
1) Nigerians love to copy, but haven’t seen those who get insurance and feel cool that they could copy.
Only one in 200,000 Nigerians has an insurance policy and hardly discusses it. Word of mouth is still the most powerful vehicle of awareness, and unfortunately, those who have insurance policies only talk about it when something goes wrong.
The confusion is, if it was a good thing, how come certain respected people and influencers don’t talk about their own politics?
2) The premium that insurance companies charge would likely not allow them to deliver on their promises when the time comes for claims to be paid.
For many it is confusing how a vehicle worth N 10 million is insured for a premium of N 200,000 or N 300,000 with the assurance that the insurance company will pay even if it is stolen. Discerning individuals who do not understand the insurance company and the place of reinsurance argue that it is almost impossible to meet claims when they arise.
I agree with them and believe that the increasing problems of delay in claims settlement and payments are due to poor pricing. This is made worse by the ill-funded efforts in marketing and selling insurance, that is, where the products meet the needs of potential customers.
Insurance is not one of the products that people will buy because it is cheap, but rather they expect it to be expensive until more people sign up to bring the price down. Certainly tough but necessary work for the insurance industry in Nigeria.
3) The approaches of the actors in the insurance industry do not correspond to those of their colleagues in the banking industry.
Nigerians are best placed to compare themselves to other people by using any basis of sight. Their confusion arises from the perceived inability of insurance companies to offer and provide the kind of services that banks provide. For many people who are touched by their banks on a daily basis, it is so difficult and confusing to understand why insurance companies cannot be as strategic, aggressive and customer-centric as banks.
Indeed, some acknowledge that even banks need to do more, but don’t understand why the gap between the two industries should be so great.
They hope that with digitization and insurtech we will likely see positive changes in the insurance industry quickly, but these changes have to come faster.
The days when the insurance premium is only paid annually and not heard from your insurance company until the next renewal are areas where we expect faster action.
Given the depth of mistrust, the awareness-raising campaign must also be credible and consistent.
The insurance industry in Nigeria needs to recognize the fact that their products and services are often confusing and take this into account when reaching out to people regardless of their position or calling.
If you simply let your prospects tell you their insurance stories, you are more likely to be successful with them and create opportunities for more sustainable relationships.
Please don’t let your negotiation confuse you anymore.
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