The increasing economic issues in the nation may prevent the insurance sector from realizing its plans to produce a premium of N148.30 billion from third-party vehicle insurance by December 31, 2023, as opposed to N56.76 billion recorded in 2022.
Nigerians have been worried that the rise in third-party vehicle insurance prices, which went into effect on January 1st of this year, will make it impossible to restrict the number of phony policies given the country’s existing financial challenges and make the objective too lofty.
Industry watchers pointed out that providing less expensive options would draw in gullible drivers, and that the increased premium rate would become tempting for dishonest operators, especially at car licensing offices around the country.
Indeed, the rise may incite some Nigerians to purchase phony policies, which would be harmful to the expansion of third-party insurance, given the concomitant poverty that forces millions of people in the country to survive on hand to mouth.
The National Insurance Commission (NAICOM) has released a new directive that states that private vehicles that were previously paying N5,000 in premium for the N1 million Third Party Property Damage (TPPD) limit must now pay N15,000 for N3 million; owner-good vehicles must pay N20, 000 for N5 million, and staff buses must pay N20, 000 for N3 million.
In a paper titled “Market Compliance On Tariff Rated Products and The Financial Performance Of Companies,” Director-General of the Nigerian Insurers Association (NIA), Yetunde Ilori, discussed the developments at the 2023 Chartered Insurance Institute of Nigeria – Offices Representatives Committee (CIIN-ORC) Workshop in Lagos. He stated that underwriting firms have based their expectations on the projected 3.68 million insured vehicles as recorded in the Nigerian Insurance Industry Database (NIID).
The 3.68 million insured vehicles, according to her explanation, would be broken down as follows: 3.25 million under third party; 407,871 under comprehensive; and 16,212 under third party fire and theft. She also stated that N48.80 billion in third-party premiums are anticipated, with N93.81 billion coming from comprehensive and N6.69 billion from third-party fire and theft.
She expressed concern about the enormous losses the business has sustained throughout time as a result of fraudulent auto insurance contracts, noting that in 2020 the industry insured 2.78 million automobiles compared to the nation’s 12 million vehicles, resulting in a loss of N48.76 billion.
She claims that the sector insured 3.36 million automobiles in 2021, losing N57.04 billion, and only 3.68 million vehicles in 2022, losing N60.01 billion.
She added that this will end fraudulent insurance and that the industry is working with the Lagos State Government to deploy e-insurance to increase sales of third-party motor insurance through the state’s Motor Vehicle Administration Agency (MVAA) platform.