Nigeria: NAICOM Warns of Inflation’s Impact on Insurers and Policyholders

The National Insurance Commission (NAICOM) has highlighted inflation as a significant challenge facing the insurance sector, with rising costs adversely affecting both insurers and policyholders.

During the Insurance Meets Tech (IMT) 2024 event held in Lagos, themed “Revitalizing the Insurance Industry to Risk-Manage Nigeria’s One-Trillion-Dollar Economic Aspiration,” Commissioner for Insurance and CEO of NAICOM, Olusegun Omosehin, emphasized that inflation complicates profitability for insurers, particularly when claims costs escalate.

In August 2024, Nigeria’s headline inflation rate eased to 32.15%, down from 33.40% in July, marking a reduction of 1.25 percentage points. This decline represents the second consecutive monthly slowdown in inflation, as reported by the Consumer Price Index (CPI) from the National Bureau of Statistics (NBS). However, year-on-year figures show that the August 2024 inflation rate is 6.35 percentage points higher than the 25.80% recorded in August 2023, indicating a significant annual increase.

Julius Odidi, the Head of NAICOM’s Lagos Control Office, represented Omosehin at the event. He urged insurers to manage their investment portfolios prudently, adapt pricing strategies, and maintain sufficient reserves to mitigate the challenges posed by inflation.

Omosehin stated that NAICOM plays a crucial role in fostering innovative business solutions that tackle urgent economic and social issues in Nigeria’s insurance landscape. He highlighted the Commission’s commitment to ensuring the prompt settlement of legitimate claims, promoting market growth through innovation, and enhancing commercial value within the industry.

“To revitalize the insurance industry, stakeholders must address several fundamental issues, including low insurance penetration, lack of public trust, market fragmentation, regulatory reforms, and the need for digital transformation,” he noted.

He further remarked on the lessons learned from the COVID-19 pandemic, which underscored the necessity for digitalization in the insurance sector. While traditional distribution channels faced challenges during lockdowns, the crisis prompted insurers to develop digital offerings, demonstrating that investments in technology, online platforms, and mobile applications can enhance customer experience and accessibility.

Omosehin reiterated that revitalizing Nigeria’s insurance industry is vital for managing risks associated with the nation’s projected $1 trillion economy. He called for the insurance sector to adapt to rapidly changing technologies and economic conditions, emphasizing the importance of responding to the current realities and expectations within the industry.