Economic headwinds may scuttle insurers’ N148.3b premium target

Plans by the insurance sector to generate a premium of N148.30 billion from third-party motor insurance by December 31, 2023, as against N56.76 billion recorded in 2022, may not be realised owing to the rising economic challenges in the country.

With the increase in third-party motor insurance premiums, which took off from January 1 this year, there have been concerns among Nigerians that the incidences of fake policies may become uncontrollable amidst affordability issues with the current realities, making the target overly ambitious.

Industry observers noted that the new premium rate could become appetizing for fake operators, particularly at vehicle licensing offices nationwide, and offering cheaper alternatives would attract undiscerning motorists.

Indeed, with the accompanying poverty forcing millions of Nigerians to live from hand to mouth, the increase may encourage some Nigerians to take fake policies, which would be detrimental to the growth of third-party insurance.

In the new directive, according to the National Insurance Commission (NAICOM), private vehicles that were paying N5, 000 premium for N1 million Third Party Property Damage (TPPD) limit are now to pay N15, 000 premium for N3 million; owner good vehicles are to pay N20, 000 premium for N5 million and staff buses are to pay N20, 000 premium for N3 million.

Speaking on the development at the 2023 Chartered Insurance Institute of Nigeria – Offices Representatives Committee (CIIN-ORC) Workshop in Lagos, Director-General of Nigerian Insurers Association (NIA), Yetunde Ilori, said in a paper, titled, ‘Market Compliance On Tariff Rated Products and The Financial Performance Of Companies’, that the underwriting firms have hinged their expectations on anticipated 3.68 million insured vehicles as captured on the Nigerian Insurance Industry Database (NIID).

She explained that the breakdown of the 3.68 million insured vehicles would be 3.25 million under third party; 407,871 comprehensive and 16,212 third party fire and theft, adding that N48.80 billion premium is expected from third party; N93.81 billion from comprehensive and N6.69 billion from third party fire and theft.

She worried about the huge losses the industry has experienced over the years, owing to fake motor insurance policies, stating that in 2020, the industry insured 2.78 million vehicles as against 12 million in the country, losing N48.76 billion.

According to her, in 2021, the industry insured 3.36 million vehicles, losing N57.04 billion and in 2022, just 3.68 million vehicles were insured with N60.01 billion lost.

She said the industry is collaborating with the Lagos State Government to implement e-insurance to drive sales of third-party motor insurance through the Motor Vehicle Administration Agency (MVAA) platform of the state, adding that this would eradicate fake insurance.

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