The Nigerian insurance industry is set to witness a substantial rise in premium income following the full implementation of the new third-party motor insurance policy, which was raised from N5,000 to N15,000. Agusto & Co., a renowned credit rating agency, has affirmed that the change in policy will likely boost premium income from N15 billion to N45 billion by the time the 2023 financial results are released next year.
Before the increase in the third-party motor insurance rate, the industry was making approximately N15 billion from three million insured vehicles, with the assumption that these vehicles carried at least a third-party policy. However, the new rate is expected to contribute significantly to insurers’ bottom lines, leading to a growth of N30 billion in premium income, equivalent to a remarkable 200 percent increase.
Moreover, industry stakeholders plan to launch an awareness campaign on motor insurance starting from July 24th, 2023. This initiative aims to encourage more vehicle owners to secure motor insurance, thereby further boosting premium income from the motor insurance sector.
Currently, Nigeria has about 12 million registered vehicles on its roads, but only approximately 25 percent (around three million) have adequate insurance coverage. The remaining nine million vehicles are uninsured, creating a significant potential for increasing motor insurance subscriptions.
Section 38 of the National Insurance Act 2003 mandates third-party motor insurance as part of the minimum amount of auto cover for road users. Non-compliance can result in penalties, including fines of up to N250,000 and/or one-year imprisonment.
The National Insurance Commission (NAICOM) has already commenced the implementation of the new rates and embarked on consumer education initiatives to highlight the benefits of the new third-party motor insurance policy. The campaign will cover various media platforms, including social media, print, radio jingles, and television commercials.
Insurance companies will also focus on engaging relevant stakeholders to increase the adoption of motor insurance coverage. The NAICOM has clarified that the increase in the Third-Party Property Damage (TPPD) cover to N3 million will benefit motorists and protect them from potential financial losses.
Despite the tough economic situation, insurers encourage vehicle owners to obtain motor insurance policies, emphasizing the importance of insurance during challenging times. The increase in premium income is expected to strengthen the insurance industry and provide more confidence to policyholders that insurers will intervene in the event of an incident.