Joy Agwunobi
A Nigerian financial expert, Johnson Chukwu, has attributed the low level of public trust in the country’s insurance sector to the complexity and lack of transparency in insurance contracts, calling for a complete overhaul in the way policies are written and communicated.
Chukwu, who is the founder and managing director of Cowry Asset Management Limited, stated this during a televised programme while reacting to President Bola Tinubu’s recent assent to the Nigerian Insurance Industry Reform Act (NIIRA) 2025. According to him, simplifying insurance contracts would go a long way in enhancing public confidence and increasing insurance uptake nationwide.
He emphasised that many Nigerians remain sceptical about insurance due to the complexity and ambiguity of policy documents, especially the hidden exclusion clauses that are often difficult for the average policyholder to understand.
“What is most important is that insurance contracts are simplified in such a way that a layman can understand the terms,” Chukwu said,adding “One of the major challenges we face with insurance in Nigeria is the abundance of exclusion clauses embedded in policy documents—clauses that the average holder may not even notice or understand.”
Using a car insurance scenario to illustrate the point, Chukwu explained how such exclusion clauses could lead to unexpected denial of claims. “Take, for instance, you have a car insurance policy and you’re unaware that it excludes coverage if a minor drives the vehicle. You give the car to your 17-year-old son to fetch groceries, and he gets into an accident. You inform the insurer, only to be told the policy is void because your son is underage. If that exclusion clause had been clearly presented, you would never have handed the vehicle to him in the first place.”
Chukwu recommended that insurers present policies in simpler formats, possibly as bullet-point summaries on a single page, outlining the key dos and don’ts in plain language. “Policies should be driven by bullet points and presented in a one-page document that anyone can read and understand,” he said.
His remarks come on the heels of President Bola Tinubu’s assent to the Nigerian Insurance Industry Reform Act (NIIRA) 2025—a major legislative overhaul aimed at modernising the country’s insurance sector, enhancing regulatory oversight, and fostering economic growth.
According to Chukwu, the enactment of the new law holds significant potential for transforming the insurance industry by addressing core challenges such as claims disputes and undercapitalisation. “This new Act will go a long way in improving policyholders’ confidence. One of the biggest limiting factors to growth in the industry is the issue of claims payment. Many people who purchase policies struggle to get their claims paid. The new Act addresses this by providing for more robust capitalisation of insurance companies,” he noted.
He further explained that stronger capital bases would not only make insurers more resilient but could also enable them to play a more significant role in Nigeria’s capital market. “If this Act leads to the growth of insurance firms’ retained earnings and reserves, then over time, they will become major investors in the financial market. That, in turn, will further build their capacity,” Chukwu added.
The Nigerian Insurance Industry Reform Act 2025 repeals outdated laws and consolidates existing insurance regulations into a modern legal framework designed to ensure effective oversight of insurance and reinsurance operations in the country.
Among the key features of the new legislation are stricter capital requirements for operators, compulsory enforcement of certain types of insurance, digitisation of market processes, expedited claims settlement, and the creation of policyholder protection funds. The Act also facilitates Nigeria’s participation in regional insurance frameworks such as the ECOWAS Brown Card System.
The legislation is aligned with the Federal Government’s broader economic agenda of building a $1 trillion economy by promoting financial inclusion, innovation, and investor confidence. It is expected to enhance transparency, foster innovation, and improve the global competitiveness of Nigeria’s insurance industry.
The National Insurance Commission (NAICOM) has been given the mandate to enforce the Act’s provisions. By doing so, NAICOM is expected to unlock the full potential of the sector, boost insurance penetration across the country, and attract both local and international investment into the industry.
Industry stakeholders have described the reform as a turning point that could rebuild public trust, drive innovation, and position Nigeria as a major insurance hub in Africa.
