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Analysts predict positive outlook for insurance sector

By on March 19, 2015

Contrary to fears that the decline in national revenue occasioned by fall in oil price and depreciation in the Naira value would spell hardship for insurance industry as expressed recently by insurance chieftains, economy analysts said the insurance sector has the potential to grow volumes and enhance shareholders’value .

The analysts who spoke at the insurance sector 2015 outlook organised by the Chartered Insurance Institute of Nigeria (CIIN) in Lagos however said this would require insurance companies to device means of taking advantage of growth opportunities around it that would not only increase its penetration but enhance awareness and contribution to GDP.

Insurance sector in Nigeria currently contributes barely 0.65 per cent to GDP and less than 1 per cent in penetration, making it third largest in Africa with premium size of about N300 billion as at the end of 2014 financial year.

Speaking at the seminar,Bismarck Rewane, Chief executive officer Financial Derivatives Company Ltd ) said in the mist of challenges facing the insurance industry, there are also opportunities.

Rewane, who spoke on the topic: “Economic Policies of Government Issues, Challenges, Prospects and Implications for Insurance Sector” said young and growing population of approximately 170 million people like Nigeria presents a huge growth opportunity,  adding that even at 2.6 percent annual growth rate, it would have accommodated 4 million of the population.

“Stable economic growth projected at 6.2 percent is favourable for business growth and insurance as an important arm of the financial services market would benefit”, he stated.

He also emphasised on opportunities in the country’s technological advancement, where mobile telecommunication phone ownership currently stands at 84.9 percent in urban areas and 55.6 percent in rural areas.

“Sale of life insurance using mobile phone network to 126million active lines would definitely boost insurance penetration, Rewane stated.

Also speaking at the event, President, Chartered Insurance Institute of Nigeria, Bola Temowo said the institute has provided this platform annually to empower industry operators with the required knowledge on economic fundamentals to guide their business decision during the year and going forward.

He said there is no doubt that businesses are facing hard times, therefore the relevance of the forum at the beginning of every financial year cannot be over emphasised.

According to him, the seminar is more apt particularly in the present financial year in which the economy faces difficult times as a result of dwindling oil prices, falling government revenue and depreciating value of the naira.

Recently, Business Monitor International, a renown international business assessor said the Nigerian insurance market remains at an embryonic stage of development with the combined assets of the country’s insurers comprising only a tiny percentage of GDP and total premiums lagging behind more developed markets such as South Africa.

It however noted that the past few years have seen considerable expansion in the sector as rapid economic/population growth and rising prosperity have boosted demand for life and non-life products.

It added that future growth of the industry would be mitigated by currency market movements linked to falling oil prices.

Records show that by all measures insurance remains a relatively undeveloped segment of Nigeria’s financial services sectors comprising just 0.3 per cent of overall GDP in 2014 in terms of the value of gross premiums written. This low rate of penetration is reflective of a number of factors, which have combined to undermine purchases of insurance coverage.

From a very low base, the past few years have seen a steady increase in the value of premiums written. This has been particularly apparent in the life insurance market where gross premiums increased by just under 14 per cent a year on average over 2012-2014.