Nigeria’s insurance industry is trying to bring millions more people into the market, but the sector’s own assessment points to a problem that goes beyond the size of people’s incomes: many Nigerians still do not understand insurance well enough to make it part of their financial lives.
The Insurance Sector Strengthening Programme (ISSP), a 36 to 60-month initiative designed to expand insurance coverage, says 78 percent of Nigerians lack a basic understanding of insurance products, even as insurance penetration remains at about 0.5 percent of GDP.
The programme wants to raise penetration to 10 percent by 2031, reach 25 million Nigerians with insurance literacy and financial education, and bring 250,000 small and medium-sized businesses into insurance coverage.
The concerns identified by the programme also reflect challenges that industry players have previously pointed to, including trust, claims experience, product design and the difficulty of reaching Nigerians outside the formal economy.
In an interview conducted before the launch of the ISSP, Babatunde Fajemirokun, managing director and chief executive officer of AIICO Insurance Plc, said low penetration was a symptom rather than the industry’s central problem.
“Looking at our industry, low penetration is really a symptom. It’s not really the problem,” Fajemirokun said in a televised interview.
He said research conducted by his organisation suggests that trust remains a major barrier to insurance adoption, particularly perceptions around claims.
“In my experience and based on some direct research that we have done with quite a few Nigerians, the issue appears to be trust,” he said.
According to him, some potential customers believe their claims could be rejected or that getting paid after a loss could involve a difficult process.
That perception can make it harder for insurers to convince consumers to pay for protection before a loss occurs.
Growing premiums, limited reach
Nigeria’s insurance market has recorded strong growth in premium income in recent years, but Fajemirokun said the increase should not automatically be interpreted as a broad expansion in insurance coverage.
He noted that industry premiums had risen from less than N800 billion to about N2.3 trillion in the previous year, while penetration remained low.
“So it’s growing but not deepening,” he said.
He said part of the premium growth was being driven by oil and gas business, dollar-denominated premiums and higher rates across areas such as motor, group life, fire and property insurance.
Fajemirokun’s earlier comments also connect with an issue Business A.M. examined in July: why rising premium income has not translated into deeper insurance coverage across the country.
Paschal Emeka Egerue, a Lagos-based insurance consultant and law scholar, told Business A.M. that Nigeria’s penetration problem was partly rooted in the structure of the market, particularly the limited inclusion of the country’s large informal economy. While Egerue focused on who the market is reaching, Fajemirokun’s argument points to what happens between the consumer and insurer, including whether people understand the products, trust insurers to honour claims and can access protection that fits their lives.
The distinction is important because the ISSP is not simply targeting higher premium income. Its objective is to increase the number of Nigerians participating in insurance and widen access among groups that have historically been less represented.
The programme identifies limited awareness, weak product innovation, gender disparities, low youth participation and inadequate MSME coverage among the barriers holding back the market.
Its targets include increasing female participation to 40 percent and youth customer participation to 30 percent.
A younger generation is changing the insurance question
The youth target comes as the next generation of customers is entering an economy that looks different from the one around which many traditional insurance products were designed.
The ISSP document says Nigerians aged 18 to 35 currently account for less than 20 percent of insurance customers.
Fajemirokun said this generation is increasingly made up of people working independently, including freelancers and gig economy workers, rather than employees receiving insurance through their employers.
“The kind of customers we’re dealing with over the last few years bought insurance either through their employer, so you have group life insurance, you have health insurance and so on,” he said.
“But the kind of generation we’re dealing with now, we’re looking at the gig economy. We’re looking at people that are a lot more independent.”
He does not believe the problem is necessarily that younger Nigerians do not understand risk.
“I actually believe that the generation understands risk. We’ve had to deal with COVID. We’ve had a volatile economy. This generation understands risk more than we know,” he said.
The challenge, he argued, is that insurers have not necessarily adapted their products and distribution models to that understanding.
For a young developer, freelancer or other gig worker, buying an insurance policy may require a different proposition from the traditional model of an employer purchasing group cover on behalf of employees.
Fajemirokun said younger customers are likely to pay attention to the ease of using a digital platform, onboarding and making claims rather than the age or history of an insurance company.
“They will easily use a new banking platform compared to an old brand. So, what matters to them? Oh, that app works really well. Oh, the process for onboarding is really simple,” he said.
That creates an opening for InsurTech, which the ISSP identifies as one of the tools for increasing youth participation.
From selling policies to embedding protection
Fajemirokun believes insurers need to rethink how insurance reaches customers instead of simply pushing conventional products at them.
One approach, he said, is embedded insurance, where protection becomes part of a transaction a customer is already making.
He gave the example of someone purchasing a ticket to Abuja who could pay a small additional premium for protection against baggage loss or travel delays.
“You buy that ticket and a small premium is there for N2,000, N3,000 easily and that will cover you for baggage loss, delayed flights, and so on,” he said.
The same approach could extend to other everyday transactions, allowing customers to pay smaller premiums monthly or purchase cover alongside products and services they already use.
“People need to be able to pay per month. People need to be able to pay small, small premiums embedded into their rent, embedded into their phone purchasing, embedded into their travels,” Fajemirokun said.
For an industry trying to reach younger Nigerians, that represents a shift from asking consumers to seek out insurance to placing protection closer to the point where a risk occurs.
The distinction matters because the ISSP’s goal of increasing youth participation from less than 20 percent to 30 percent will require more than simply educating young Nigerians about existing products.
It may require insurers to reconsider what is being sold, how it is paid for and where customers encounter it.
Trust still has to be earned
Yet digital distribution and simpler products may not be enough if consumers remain unconvinced that insurers will deliver when they need them.
Fajemirokun said insurers need to communicate more clearly about claims that have been paid and make the claims process easier to understand.
“Insurance companies pay claims. I’m not sure the market is really aware of that,” he said.
He said the industry needs to tell that story more effectively.
The emphasis on claims also features in the wider regulatory changes affecting the sector. Fajemirokun pointed to the Nigerian Insurance Industry Reform Act and the new capital requirements as developments that could influence how insurers operate and engage with customers.
For the ISSP, the challenge is therefore broader than increasing awareness.
If 78 percent of Nigerians lack a basic understanding of insurance, education can help explain what policies cover and why protection matters. But if consumers remain concerned about affordability, claims or whether a product reflects their circumstances, awareness may not automatically lead to purchases.
Reaching Nigerians where they live and work
Fajemirokun said the industry has historically provided considerable protection through the formalised employed economy, while a much larger population operates outside that structure.
“At some level there’s a lot of protection but it’s focused on the formalised employed economy rather than the informal where most people in Nigeria actually sit,” he said.
That leaves insurers with a customer base that cannot necessarily be reached through traditional employer-sponsored products.
The ISSP is responding to part of this challenge through its plan to connect 250,000 MSMEs to affordable and relevant insurance solutions, while also strengthening distribution and technology integration.
For Fajemirokun, however, the starting point should be understanding the customer before designing the product.
“We actually need to learn from our customers and build products based on their own needs,” he said.
