In the first half of 2023, Nigeria’s leading insurance firms grappled with a significant surge in net claims payments, amounting to N49.158 billion.
This marks a substantial 25.47% spike compared to the N39.178 billion recorded in 2022.
The upswing in claims has reverberated throughout the insurance sector, exerting pressure on both premium growth rates and overall profitability.
Several factors have contributed to this trend, including the nation’s economic challenges, persistent inflation, and an upsurge in fraudulent claims.
This is according to data compiled by Nairametrics, drawing from the financial reports of prominent industry players.
This roster includes Custodian Insurance, NEM Insurance, Sovereign Trust Insurance, AXA-Mansard Plc, AIICO, Mutual Benefits Assurance, and Cornerstone Insurance.
These firms collectively represent a significant share of the insurance market and feature prominently on the Nigerian Exchange.
Cumulatively, they earned a total of N200.515 billion in gross premium income representing a 21.1% increase when compared to N165.626 in 2022.
A noteworthy metric is that in H1 2023, insurance companies disbursed 24.52% of their premium income as claims.
This figure signifies a modest increase from the 23.65% reported during the corresponding period in the previous year, reflecting a marginal rise of 0.87%.
What you should know
According to experts, insurance companies have grappled with soaring claims, impacting their premium growth and profitability, in recent years.
A myriad of economic challenges such as difficulties accessing forex became increasingly pronounced as the year progressed, compounded by the security challenges in the country.
Also, global economic headwinds occasioned by the ripple effects of Russia’s and Ukraine’s war played a significant role.
Inflation, another key factor, placed significant pressure on the wallets of Nigerian households throughout the year. This inflationary environment exacerbated the preexisting challenges faced by insurance companies in the country.
Furthermore, shrinking government revenues at both the federal and state levels, coupled with the devaluation of the Naira and rising energy costs, added to the array of challenges confronting insurance companies in Nigeria.
Nigerian insurance companies and their claims
Highlighted below are the seven Nigerian insurance firms by claims, based on published financial statements.
- NEM Insurance – N3.516 billion
- NEM Insurance Plc trailed with a claim payment of N3.516 billion from N4.311 billion reported in 2022, marking an 18.44% decrease. Its gross premium income stood at N26.554 billion in 2023, a 44.79% increase over the N18.339 billion reported in 2022. Notably, 13.24% of its total gross premium income was incurred on claims in the review half year.
- However, it reported a profit after tax of N3.499 billion in 2023, a 38% increase from N2.534 billion recorded in 2022.
- Cornerstone Insurance Plc – N4.262 billion
- Cornerstone Insurance incurred a total of N4.262 billion in claims for half year of 2023, a 166% increase from N1,602 billion paid in 2022. Meanwhile, gross premium income rose by 24.93% to N13.324 billion from N10.66 billion in 2022.
- It should be noted that 31.98% of the total gross premium income was incurred as claims in the period under review.
- Cornerstone Insurance’s Profit after tax, however, rose to N11.251 billion a 2,567.6% increase resulting from net gains on financial assets when compared to N408 million in 2022.
- AIICO Insurance Plc – N5.730 billion
- AIICO Insurance followed with a net claim payment of N5.730 billion in 2023 a 56.51% increase from N3,661 billion paid in 2022. Similarly, the gross premium income for the period was N49.997 billion as against N40.574 billion in 2022, a year-on-year increase of 23.22%.
- This indicates that the company paid 11.46% of its gross premium income as claims in the half year.
- AIICO Insurance reported a profit after tax of N5.301 billion, a 0.13% increase from N5.294 billion in 2022.
- Mutual Benefits Assurance Plc – N7.290 billion
- Mutual Benefits Assurance Plc recorded net claims of N7.290 billion in 2023, a 16.36% increase from N6.265 billion paid in 2022. The insurance firm recorded a gross premium income of N17.992 billion from N15.637 billion, accounting for a growth of 15.06%.
- Profit came under pressure from growth in claims as the firm reported a 2.71% drop in net earnings to N3.442 billion from N3.538 billion recorded in 2022.
- Sovereign Trust Custodian Insurance – N7.559 billion
- Sovereign Trust Insurance Plc saw its claims rise to N7.559 billion in 2023 from N4.331 billion in the same period of 2022, a growth of 74.53%. Its gross premium rose by 33.35% to N12.234 billion from N9.174 billion recorded in 2022.
- Meanwhile, 61.78% of its gross premium income was used as claims during the review period.
- The company recorded a 10.39% increase in profit after tax to N427.330 million in 2023 as against N387.086 million posted in 2022.
- AXA Mansard Plc – N9.389 billion
- AXA Mansard paid a whopping claim of N9.389 billion during the half year as against N8.529 billion in 2022 an increase of 10.08%, Its gross premium income stood at N39.003 billion in the review period from N34.716 billion in the comparable period 2022, an increase of 12.35%.
- Notably, 24.07% of the gross premium income was spent as net claims in the review period.
- The insurance firm buoyed by net exchange gain reported a 582% growth in net earnings to N13.124 billion for 2023 from N1.923 billion recorded in 2022.
1. Custodian and Allied Investment Plc – N11.412 billion
- Custodian and Allied Investment Plc saw its claims rise to N11.412 billion in 2023 from N10.479 billion in the same period of 2022, a growth of 8.90%. Its gross premium rose by 13.39% to N41.411 billion from N36.521 billion recorded in 2022.
- Meanwhile, 27.55% of its gross premium income was used as claims during the review period.
- The company recorded a 33.07% increase in profit after tax to N6.285 billion in 2023 as against N4.723 billion posted in 2022.
What operators are saying
The Managing Director of Tangerine General Insurance Plc, Mr Mayowa Adeduro, reacted to the development in an exclusive chat with Nairametrics.
He said that the sustainable high claims were due to the incidences of the economic downturn which made people ask for claims even for minor things.
- “We noticed that people’s maintenance culture has gone down due to the high cost of living spiked by inflation.
- The impact of inflation has made the number of claims go higher. Inflation is a factor because the imported items have gone up due to a hike in the exchange rate and this affected the maintenance culture in Nigeria.
- “Disposable income has gone down, and people are struggling to maintain what they have.
- For instance, if vehicles are not maintained very well and an accident occurs, the insurance firm will still pay the claims.
- “Social vices such as armed robbery, kidnapping, and setting houses ablaze, among others are on the increase. All of these are having a negative economic impact on the economy.
- Due to economic hardships, fraudulence insurance claims are also on the rise. There are incidences where some people set their houses ablaze and come for insurance claims.
- “Low maintenance culture, job infidelity, theft of goods on transit, and breakdown of vehicles on the roads due to bad roads, all combined to help spike the increase in claims,” Adeduro said.
Speaking at its 12th Annual General Meeting held in Lagos, Adetola Adegbayi, Chairman of the Nigeria Liability Insurance Pool, said that hyperinflation has significantly increased living costs and insurance claims in Nigeria due to high dependence on importation.
She noted that the incidence of fraudulent claims is also on the increase due to the impact of inflationary trends and unemployment.
- “To abate this, the industry is advised to be proactive and more dynamic in its claims management, especially with the increased cover granted under the motor policy due to recently released rate review guidelines.
- “The need for the industry to be more dynamic and pro-active in its claims management and administration is therefore of the essence,” Adegbayi stated.
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