Despite the extremely large population, insurance has yet to leave its mark in Nigeria. However, as international players see the sector's potential, industry experts are calling for more government efforts to change mindsets and grow the industry.

Blessed with a population of over 180 million, it would be natural to think that insurance companies in Nigeria have it all. However, Nigeria has one of the lowest penetration rates in the world, standing at a paltry 0.3%. To put this in context, insurance penetration in South Africa is over 15%.

There have indeed been signs of growth in Nigeria's insurance sector: between 2005 and 2015, insurance premiums in the country increased from NGN75 billion to NGN300 billion, though such growth is insignificant when compared with penetration levels of other countries such as Cote d'Ivoire and Kenya.
According to a 2015 report by PwC, only 1.5% of Nigerian adults are covered by insurance, whereas uninsured Nigerians resort to the informal sector to mitigate their challenges.
An estimated 86.6 million Nigerians have no form of insurance, and are completely unaware of the notion of insurance. Meanwhile, even those who know what insurance entails see it as a scam benefiting insurance companies. The general public—and more often than expected this includes the better-off and rising middle class—does not trust the idea of paying a relatively small premium and then receiving a conspicuous sum in the event of filing a claim.
And if misfortune strikes, a common reaction is relying on family and other informal support. In some cases, among the poorer and less literate population, being uninsured or reverting to the informal sector to provide for less fortunate times can translate into withdrawing their kids from school or incurring significant debt. Ganiyu Musa, Group Managing Director of Lagos-based insurance company, Cornerstone Insurance, told TBY in an interview, “The ones who need insurance the most are the ones who are not even aware that they need insurance, ironically."
As stated by Cameron Murray, head of Lloyd's for Middle East and Africa, “It can be challenging for insurers to explain their relevance and the importance of the insurance product directly to African consumers," blaming “lack of trust in institutions, reliance on the informal economy, underdeveloped financial markets, and poorly capitalized domestic insurers."
To solve this problem, the government launched various compulsory insurance schemes but to no avail. Enforcement of insurance policies can be challenging, particularly in countries with inadequate government infrastructure and screening measures. Consequently, these policies have had little impact on actual insurance rates.
Nigeria's dynamic and resilient economy coupled with a rapidly growing population translate in obvious lucrative opportunities for insurance companies, and international players have started to see this as a number of global insurers have entered the market to tap this potential. Following America's Prudential and South Africa's Old Mutual and Sanlam, in September 2017 Germany-based Allianz acquired a 98% stake in local Ensure Insurance to expand its footprint in Africa. Allianz regional CEO for Africa, Coenraad Vrolijk, said, “Nigeria is one of the most dynamic economies in Africa. The acquisition of Ensure Insurance Plc. gives us full access to this key insurance market in Africa and marks a major milestone for Allianz's long-term growth strategy on the continent."
Nigeria, despite its low insurance penetration, is the fifth-largest insurance market in Africa, and Africa as a whole is a land of opportunities for insurers. The extreme under-penetration of insurance coupled with a growing Nigerian middle class and increasing literacy levels present enormous growth opportunities on a silver platter to both local and international insurers. To best capitalize on these opportunities, stronger efforts from the government are needed to enforce mandatory insurance policies and to help the industry's players educate the general public on the benefits and trustworthiness of insurance as a necessary risk management tool targeted at improving lives.