Motor Insurance market experiences strong growth in 2022

•  Premiums by top 10 motor insurers rise 15.3%

Cynthia Ezekwe

Analysts are seeing a surge in motor insurance premiums following the recent increase in rates by the National Insurance Commission (NAICOM), and the growth of the top 10 motor insurers in 2022.

The 2022 financial statements of the top 10 motor insurers in Nigeria, compiled by Finterate Projects, a business fitness consultancy firm, disclosed that total premiums stood at N39.5 billion, while total claims paid amounted to N18.7 billion in the year under review.

The total premiums collected by the top 10 motor insurers in 2021, as reported by Finterate Projects, was N33.6 billion, and the total claims paid were N16.9 billion. In 2022, there was a marked improvement, with the total premiums increasing to N5.9 billion in premiums and N1.8 billion in claims paid compared to the previous year.

According to the report, NEM Insurance Plc, a leading composite insurance company, was the highest premium generator in 2022, generating a total of N10 billion in premiums. Leadway Assurance co.Ltd came in second, with a total of N6 billion in premiums.

The report shows some interesting changes in the rankings of the top 10 motor insurers. Custodian and Allied Insurance Plc, with N4.2 billion in premiums, rose to third place, while Mutual Benefits Assurance Plc, with N3.5 billion, fell to fourth place.

AXA Mansard Insurance Co. and Consolidated Hallmark Insurance Plc emerged as the fifth and sixth highest premium generators, respectively, in the Nigerian motor insurance market. AXA Mansard Insurance co. generated a total of N2.8 billion in premiums, while Consolidated Hallmark Insurance Plc recorded a total premium payment of N2.7 billion.

AIICO Insurance Plc, Linkage Assurance Plc, Sovereign Trust Insurance Plc, and Cornerstone Insurance Plc rounded out the top 10 motor insurers in terms of premiums generated in 2023. AIICO Insurance Plc generated N2.7 billion in premiums, while Linkage Assurance Plc, Sovereign Trust Insurance Plc, and Cornerstone Insurance Plc each generated N2.7 billion, N2.2 billion, and N1.9 billion, respectively.

In 2022, NEM Insurance Plc led the way in terms of motor claims payments, with a total of N5 billion, or 49.52 per cent of its total motor premium.

Following NEM Insurance Plc, Leadway Assurance Co.Ltd was the second highest motor claims payer in 2022, paying out N3.5 billion, or 53.25 per cent of its total motor premium. Mutual Benefits Assurance Co. ranked third, with a total of N2.3 billion in claims payments, equating to 64.95 per cent of its total motor premium.

Custodian & Allied Insurance Co ranked fourth in terms of motor claims payments, paying out N2 billion in claims, which represented 47.17 per cent of its total motor premium. AXA Mansard Insurance Plc came in fifth, with N1.2 million in claims, which equates to 57.82 per cent of its total motor premium. .

AIICO Insurance Plc and Consolidated Hallmark Insurance Plc ranked sixth and seventh, respectively, in terms of motor claims paid. AIICO Insurance Plc paid N1.1 billion, or 20.83 per cent of its total motor premium, while Consolidated Hallmark Insurance Plc paid N1.1 billion, which represented 23.23 per cent of its total motor premium.

Cornerstone Insurance Plc, Linkage Assurance Plc, and Sovereign Trust Insurance Plc rounded out the top 10 for motor claims payments. Cornerstone Insurance Plc paid N918 million in claims, 52.49 per cent of its total motor premium, while Linkage Assurance Plc paid N798 million, or 33.06 per cent of its total motor premium. Finally, Sovereign Trust Insurance Plc paid N751 million in claims, or 20 per cent of its total motor premium.

Based on the data presented, it appears that the growth in motor insurance claims payments is likely to continue in the coming years. With the increasing demand for motor insurance and the rise in vehicle ownership, insurers will be under increasing pressure to provide coverage and pay out claims. This could lead to further growth in the sector, as insurers look to meet the needs of their customers and remain competitive.

Ekerete Gam-Ikon, a management consultant specialising in insurance, noted that motor insurance is the primary source of premiums for most insurance companies in Nigeria. He noted that, on average, the top 10 motor insurers in 2022 generated 30 per cent of their total gross written premiums from motor insurance. This highlights the importance of this segment of the insurance market, and its potential for further growth.

“You will remember that late December last year, the regulator, NAICOM, announced an increase in premium rates for third party motor insurance regarding private and commercial vehicles while comprehensive motor insurance was pegged at 5 per cent of the value of the vehicle. So, it is expected that the premium generated from motor insurance will continue to dominate the books of many insurance companies in Nigeria,” he said.

Commenting on the 2022 performance, Gam-Ikon said, “Remarkable! It’s exciting to see NEM Insurance Plc increase the gap between them and the next insurer, Leadway Assurance Company Limited, significantly. We are beginning to see shifts that will force actions from insurers that will favour policyholders in this class of insurance whilst creating more innovation amongst the insurance companies.”

Gam-Ikon pointed to NEM Insurance Plc, which topped the list of motor insurers, as an example of a company that has successfully leveraged its ability to provide insurance coverage to both public and private sector organisations. He explained that this ability, coupled with other factors such as strong financial strength and a focus on quality service, has helped NEM maintain its position as the leader in the sector.

“Prompt Claims Payments remain the competitive advantage for these leading insurers as well. As you may know, Motor Insurance attracts claims readily and frequently, so as an Insurer settles and pays, policyholders and insurance brokers want to switch to them at the slightest opportunity,” he said.

Speaking on his expectations for  motor insurers in 2023, he said, “I wish I could say it will be ‘breathtaking,’ considering that the premium rates were increased by NAICOM but you may be aware that many policyholders kicked against it, and most renewals were not fully carried out.”

The insurance consultant noted that the comprehensive motor insurance where the premium was set by NAICOM at 5 per cent of the value of the vehicle  after it had gone down to the ridiculous rate of 1.5 per cent took the biggest hit. Notwithstanding, he expects the results to be better than that of 2022.

Gam-Ikon highlighted the need for insurers to take the right steps to promote motor insurance in Nigeria, noting that all composite and general (non-life) business insurers are authorised to sell motor insurance. However, he noted that many vehicles on Nigerian roads are not covered by genuine insurance policies. In the event of an accident, these vehicles and their occupants cannot be compensated by any licensed insurer.

He further pointed out that while the National Bureau of Statistics (NBS) reported that there were 11.8 million registered vehicles in 2018, only about three million were registered on the Nigerian Insurers Association’s (NIA) NIID platform in 2021. This, he explained, indicates that there is still a significant gap in terms of vehicles that are covered by insurance.

In light of the current situation, Gam-Ikon recommended that insurers make a concerted effort to bring more registered vehicles onto the NIID platform and ensure that they have adequate insurance coverage.