Reasons why Nigerians shun insurance

Joy Agwunobi

For millions of Nigerians, the word “insurance” remains shrouded in misunderstanding, distrust, and inaccessibility. Although stakeholders in the sector have frequently lamented the low penetration rates, insurance still carries a perception that it’s designed solely for the wealthy.

In reality, the majority of Nigerians, particularly at the grassroots level, lack even the basic knowledge of how insurance could protect them from everyday risks and secure their financial futures. This widespread unawareness, combined with affordability and trust issues, has deepened a divide that leaves most Nigerians uninsured and unprotected.

Despite Nigeria’s population exceeding 200 million, only a small fraction is covered by any form of insurance. According to a 2022 industry survey by Agusto and Co., Nigeria’s level of insurance penetration rate stood at less than one per cent, one of the lowest rates in Africa.

For years, stakeholders in the insurance sector have voiced concerns over this statistic, attributing it to a variety of factors ranging from poor public understanding to cultural misconceptions and economic barriers, but for the average Nigerian, the message remains unclear or simply out of reach.

Many Nigerians at the grassroots level have no understanding of what insurance truly means or how it functions. The absence of widespread educational efforts on insurance has left a gap in understanding, where most people view insurance as an exclusive privilege of the wealthy. For them, insurance is associated with corporations and the elite class, something designed to protect high-value assets.

Recently, Business a.m. took to the streets to gauge local Nigerians’ perspectives on the insurance sector. Many expressed a mix of unfamiliarity and scepticism, highlighting some of the industry’s long-standing challenges.

Naimot Oke, a point-of-sale (POS) operator, shared that although she had heard the term “insurance,” she wasn’t sure what it truly meant. “I’ve heard of the word insurance, but I don’t know what it is about,” she said.

Without a clearer understanding, she couldn’t see herself signing up and expressed doubt that insurance was intended for people in her class. “I can’t subscribe to what I don’t know. I don’t even think it’s for people like me,” she added.

The perception of insurance as a service meant only for the affluent is not the only issue. In many communities, cultural beliefs discourage the adoption of insurance, particularly life insurance. Some believe that planning for accidents or death invites misfortune. This cultural view has left many resistant to even the idea of buying insurance, feeling that doing so would attract negative outcomes.

Furthermore, deep-seated mistrust toward insurance providers compounds the problem. Many Nigerians worry about claims not being honoured, a sentiment rooted in a few high-profile cases where beneficiaries faced difficulties in receiving payments. This perception has fueled scepticism, leading many to believe that insurance companies are quick to collect premiums but slow to pay out claims.

Another Nigerian by the name of Ozioma Oluebube, who had a negative experience with an insurance provider, shared how her initial optimism turned into disappointment. “During my service in 2021/2022, I subscribed to an insurance package after a company educated us at the orientation camp. I committed to paying 20k monthly for a year, expecting to withdraw the amount after service. But when I tried to collect my money, they said I had to wait five years, which wasn’t stated at the start. I only got my money after threatening to call them out on Twitter. After that experience, I stopped. I didn’t renew because I feared they would pull the same trick again.”

“Some of these companies aren’t honest, and that’s why most people don’t trust them,” she noted.

Beyond cultural perceptions and mistrust, affordability remains a critical barrier. With over 56 per cent of the population living below the poverty line according to the World Bank, most Nigerians prioritise basic needs like food, shelter, and clothing over non-essential expenses like insurance. Even when affordable micro-insurance options exist, their availability in rural or remote areas is limited, and many in these regions are not even aware of such products.

Chidire Okafor, a businessman, also shared his perception with our correspondent, noting, “I am very much aware of what insurance is. I used to think they were just out to take people’s money until my account officer explained its importance.

According to him, insurance is valuable, especially for my business, but affordability is a big issue not everyone can afford. People are hungry, and you’re telling them to come and get insurance when they barely have enough to eat.

Okafor pointed to the challenge of reaching rural and impoverished communities, stressing that insurance providers need to expand awareness in a way that resonates with everyday Nigerians.

“Go to the North and villages in Nigeria you would be shocked to find that many have never heard of insurance. There should be proper orientation, and it should be preached in languages people understand, and be affordable just like opening a bank account,” he added.

Experts in the insurance sector have emphasised the need for extensive reforms and educational initiatives to make insurance a trusted and familiar concept in Nigerian households.

Ayokunle Olubunmi, Head of Financial Institutions Ratings at Agusto & Co., highlighted Nigeria’s alarmingly low insurance penetration rate, which remains one of the lowest in Africa. According to him, “Religious beliefs play a significant role. Some people think subscribing to insurance is like inviting bad luck or predicting that they will face the risks they are insuring against.”

Even among educated Nigerians, Olubunmi observed, there is a lack of understanding about insurance. “You’d be surprised by how many educated people don’t truly grasp what insurance is or what it covers,” he said, adding that this knowledge gap is a significant barrier to growth in the sector.

Olubunmi further identified economic challenges as a major contributor to low insurance. He noted that with many Nigerians struggling financially, insurance is often deprioritised. Additionally, negative experiences with insurers—whether firsthand or through others—have deterred people from embracing insurance policies.

Despite these challenges, there are ongoing efforts to improve awareness and accessibility. The National Insurance Commission (NAICOM) is leading campaigns to educate the public, particularly in regions with low adoption rates. “NAICOM has been proactive in helping people understand what insurance is about,” Olubunmi stated. He also highlighted that individual insurance companies are stepping up by introducing innovative products tailored to previously uncovered risks.

The introduction of microinsurance which allows for insuring low-value assets and enables premium payments in instalments is expected to bridge gaps for low-income earners. “Microinsurance provides a window of opportunity for the industry to reach underserved populations,” he said.

However, Olubunmi cautioned that the increased scrutiny of claims by insurance companies, driven by concerns over fraudulent activities, could further harm the sector’s image. “While efforts to curb fraud are important, the way claims are scrutinised must not worsen the already negative perception Nigerians have about insurance,” he warned.

To rebuild trust, he suggested that insurance companies prioritise transparency and communication. “Insurers must educate the public on what insurance covers, what it doesn’t, and how to file claims properly. Clear communication will go a long way in restoring confidence,” he noted, adding that  “and that’s why at times some people prefer going through a broker.”

Additionally, he emphasised the role of insurance brokers in bridging the knowledge gap. “A broker can guide clients by understanding their needs and recommending the most suitable policies,” he added.

Olubunmi further noted that the future of Nigeria’s insurance sector depends on addressing these barriers with urgency and innovation. Only then can the industry unlock its potential and play a pivotal role in the nation’s socio-economic development.

The low penetration of insurance in Nigeria is not simply a result of poverty or lack of awareness; it’s a multi-layered issue tied to distrust, inadequate outreach, cultural biases, and the structural rigidity of the sector itself. Changing these perceptions will require a concerted effort from insurers, regulatory bodies, and even local community leaders to educate Nigerians on the importance of insurance and make it accessible and transparent.

Insurance companies could benefit from adopting more transparent practices, lowering premium costs, and designing products that meet the needs of the average Nigerian. Additionally, partnering with community influencers to spread awareness and reduce cultural stigma could make insurance feel less foreign and more relevant to daily life and help transform the sector from being perceived as a luxury, but rather as a practical tool that addresses the everyday needs of Nigerians, regardless of income level or location.