Insurance Contribution to GDP Still too Low --Study

 Going by the current performance indicators in the insurance industry, the slow pace of penetration into the market appears to be facing serious attention but not yet enough to equate our growth rate with the developed world or even with South Africa where insurance penetration is over 6 percent. Nigeria insurance penetration is currently less than 3 percent. When we compare insurance growth with the sectorial gross Domestic Product (GDP) of other sectors, it is clear that insurance is on the lowest rung of the ladder.  For instance, from 2004 to 2008, agriculture contributed 28.89 percent to the GD in 2005 it contributed 29.50, 29.73% in 2006, and 29.65% and 28.99% respectively in 2007 and 2008. While insurance contributed 1% in 2004, the pace of growth did not show any improvement in subsequent years. In 2005, it contributed 1.01%, same in 2006, 1.04% in 2007 and 1.23% in 2008. Another example is manufacturing, mining and quarrying which accounted for 44.895 in 2004, even though it went down to 42.27%,43.84%,43..90% and 42.80% respectively between 2005 to 2008.However, the underwriting experience in the period under review, shows that there has been a marginal growth, but still low compared with some African country. The Nigerian Insurance Industry appears to be on the threshold of a new dawn but from a slow perspective.  The total insurance industry’s gross premium is estimated at N164..5 billion as against a gross premium of N100.6 billion in 2007 in spite of the crippling effects of the global economic melt-down, which forced many companies to report losses in their annual accounts in Year 2008 and 2009.
According to figures released by the Nigerian Insurers Association (NIA), out of the N164.5 billion, fire contributed N16.976 billion, motor N41, 234 billion, General accident N40, 870 billion, marine and aviation, N39, 66 billion and Life Insurance, N25, 805 billion.  Also, the industry paid claims totaling N53.3 billion in the year 2008. The figures increased substantially in 2009.
Mr. Wole Oshin, chairman of the Nigeria Insurers Association (NIA), while appreciating the situation said: “I expect that this performance will be exceeded in subsequent years and I urge member companies to continue to devise strategies to overcome the ravaging effects of the global financial melt.”  It is interesting to note that the performance of the sector has already started positive moves. The NIA report stated that the insurance industry “has continued to be the toast of investors as insurance stocks have led severally on the floor of the Nigeria Stock Exchange even though there was a crash in the third quarter of 2008.
Other indicators are that the NIA is working well with the National Insurance Commission (NAICON) I in achieving the full implementation and compliance with the various provisions of the Insurance Act, especially in the areas of Nigerian content on oil and gas, compulsory insurance of public buildings and enforcement of third party motor vehicle insurance cover and all other compulsory insurances that will be in line with rapidly changing industry. But with all these in place, will Nigerian insurance comes out of the woods.