Insurance in Nigeria: All you need to know (2023)

The fundamental idea of insurance is a financial product that helps people to reduce their risks, protect their assets, and plan for the future.

However, in Nigeria, insurance which is a risk management tool that should be explored has been largely untapped. According to analyses and projections by Augusto & Co., the insurance penetration rate stands at less than one percent (1%) in Nigeria as of 2022, which is quite low compared to other countries in Africa.

This may be due to several factors, which include, lack of awareness, trust, and others, which have made Nigerians skeptical over the years. Irrespective of this, insurance rather than being an afterthought, should be a necessity that everyone should consider.

In this article, we'll be discussing all you need to know about insurance in Nigeria.

What is Insurance?
Insurance is a way to manage your risk. When you buy insurance, you purchase protection against unexpected financial losses. The insurance company pays you or someone you choose if something bad happens to you.

This means that it is a contract between an insurance company and an individual, in which the insurer promises to pay a designated beneficiary a sum of money (the benefit) in the event of a covered loss or liability. In exchange for this promise, the insured pays a premium to the insurer.

Just like every other industry, the insurance industry in Nigeria is regulated by the National Insurance Commission (NAICOM), which is responsible for ensuring that the insurance industry is sound and stable and that consumers are protected.

Why do Nigerians not buy Insurance?
Just like so many Nigerian products, Nigerians are quick to trivialize insurance and insurance policies, due to different factors ranging from traditional and religious beliefs, past experiences and myths and so much more.

1. Traditional and Religious Beliefs:

This is probably one of the biggest barriers to the purchase of insurance by Nigerians. Many still hold the opinion that the Almighty God is the author of whatever is bound to happen to man and as a result, it is anti-God or a complete lack of faith to undertake any form of insurance. Some are of the opinion that God will not allow bad things to happen to his children and buying insurance is like saying that God is not enough to protect them.

On the traditional side of things, some are of the opinion that buying a life insurance policy, for instance, means that you’re dying soon or calling death with your own hands.

2. Lack of proper education:

Another reason why Nigerians don’t buy insurance is that they are not properly informed about what insurance is and what it does for them. These people refuse to buy based on some myths that they have heard, some of which include the fact that only rich people can afford insurance policies or that certain policies are for those who are retired or old. These assumptions stem from the fact that most people don’t have enough information on the policies available to them, the benefits, and the process involved.

3. The Nigerian Insurance Industry:

Nigerians see insurance in Nigeria as a far cry from what is obtainable in other countries due to the cumbersome process involved in getting a policy and the entire paperwork, the difficulty involved in filing claims, and the lack of compassion or care from insurance companies who they see as people who are only interested in getting their money. All this gives them a bad view of what insurance is and deters them from buying.

Another issue is the event of not getting their benefits when the time arrives and the constant battle to get the stipulated benefits in the event of any loss.

4. Experience from Family/Relatives:

Most Nigerians don’t buy insurance because of the experiences that they have heard or watched their family or relatives go through over insurance. With these experiences, they create a mental picture of how insurance is and carry that mark while passing it on to others who are close to them as well.

All these and more have caused Nigerians to have wrong misconceptions or outrightly detest the thought of buying a policy, which has led to the decline of insurance policies acquired in Nigeria.

Read on the different types of insurance policies in Nigeria, the benefits of having insurance, and the factors that affect insurance costs here.