Micro-insurance in Nigeria – What you should know

Microinsurance in Nigeria

While insurance is commonly adopted by industries with high-risk operations, many small to medium-sized enterprises (SMEs) struggle to afford conventional insurance. This gap has led to the development of microinsurance in Nigeria.

Understanding Microinsurance

Microinsurance aims to protect low-income earners from specific risks, functioning similarly to regular insurance but with premiums tailored to the affordability of the target market.

Overview of Microinsurance in Nigeria

Despite being in its nascent stages in Nigeria, a 2016 survey conducted by Enhancing Financial Innovation and Access (EFInA) revealed that only 0.3 million out of 96.4 million adults utilized microinsurance products. However, the study indicated a potential interest from 32.1 million adults, highlighting significant untapped market potential.

Regulatory Framework

Since January 1st, 2018, the National Insurance Commission (NAICOM) has enforced guidelines and regulations governing microinsurance operations, signaling the country’s commitment to expanding insurance coverage to low-income individuals.

Factors Influencing Microinsurance Emergence

Several factors hinder the growth of microinsurance in Nigeria:

1. Low Awareness: Limited knowledge among individuals and businesses about microinsurance necessitates extensive awareness campaigns to boost adoption rates.
2. Inadequate Market Understanding: Insufficient analysis of the low-income market’s needs has led to suboptimal product designs.
3. Sustainability Challenges: High operational costs relative to the purchasing power of the target market pose viability concerns for microinsurance schemes.
4. Weak Product Offerings: Microinsurance products must be attractive, affordable, and backed by testimonials to resonate with the target demographic.
5. Distribution Limitations: Inefficient distribution channels hinder access to microinsurance services.

See also: 7 Common Mistakes in Insurance

The Rise of Microinsurance Providers

In February 2019, GOXI Microinsurance Company Limited became the first fully licensed microinsurance operator in Nigeria, authorized to function as a state composite microinsurance company. Additionally, CHI Micro Insurance Limited obtained approval from NAICOM to operate as a micro life assurance subsidiary of Consolidated Hallmark Insurance before the end of 2019. The Central Bank of Nigeria reported that 12 companies applied for microinsurance licenses between 2018 and 2019, demonstrating growing interest in microinsurance ventures.

Benefits of Microinsurance Patronage

Microinsurance offers low-income earners and SMEs access to insurance coverage that may otherwise be unattainable. As microinsurance gains traction in Nigeria, individuals and businesses can secure their assets affordably through licensed providers.

Conclusion

Efforts are underway to address challenges hindering microinsurance growth in Nigeria. Embrace the opportunity to safeguard your assets by patronizing one of these licensed microinsurance companies without straining your finances.

See also: Employer’s Liability Insurance in Nigeria Explained