This analysis aimed to provide a snapshot of the Nigerian population based on the EFInA Access to Finance in Nigeria 2010 survey findings to gauge the potential for insurance market growth. The survey provides a wealth of information that could assist the market to better understand who their target market is, what their profile is and what innovation would be needed to reach them.
Current insurance reach is extremely low and the market is plagued by a number of challenges, many of them relating to distribution. The current reach of the insurance market is limited to the higher-income, formally employed male market and even those who are supposed to have compulsory insurance (e.g. vehicle owners) do not have it. The credit life insurance market is also underdeveloped. On the demand side, large numbers of the population are generally poor, many of them live in rural areas and financial literacy, awareness of and trust in insurance is low.
Given the low insurance penetration and myriad of challenges highlighted in this report, it may be more prudent to follow a phased approach whereby insurers focus first on expanding into the rest of the middle to higher income formally employed and banked market, then start to think of ways to reach those who are banked but not formally employed (most notably the strong entrepreneurial class), and only then to move on to segments requiring more innovative distribution channels. This means that microinsurance for the low-income market becomes a second priority over the short-term – of necessity rather than by choice. This in no way negates the need and potential value that insurance holds for the low-income market, but simply makes it a more long-term ambition.
Further, research will be required to better understand the realities of trying to reach out into the untapped mass market to form a clearer picture of opportunities and challenges and drivers of market development. Such research will need to scope the insurance market from a demand and supply perspective, as well as outline the regulatory framework and its interplay with market development
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