Insurance – Weakening Purchasing Power Affects Individual Life Policies

At the backdrop of significant declines in the purchasing power of most Nigerians, the insurance sector is recording higher preference for group life policies with declining interest in individual life policy.

According to the first half 2023, H1'23, report for the insurance sector released by the National Insurance Commission, NAICOM, group life insurance increased Year-on-Year, YoY, by 37.6 per cent to N70.2 billion in H1'23 from N51 billion recorded in H1'22.

However, individual life insurance merely increased by 6.5 per cent to N67.1 billion in H1'23 from N63 billion recorded in H1'22.

Further findings show that premium income on group life insurance increased by 66.4 per cent to N48.6 billion in Q1'23, from N29.2 billion recorded in Q1'22.

Meanwhile, premium income on individual life insurance declined by 23.5 per cent to N34 billion in Q1'23 from N42 billion recorded in the corresponding period of Q1'22.

Group life insurance is a single contract that provides coverage to a group of people, while individual life insurance is coverage purchased to apply to a specific person's life.

Analysts are of the opinion that as inflation continues to rise leading to reduced purchasing power of many Nigerians, many are switching to group life covers which are usually less expensive than individual life covers.

They stated that the trend would continue as the harsh economy persists.

But they also noted that the quick settlement of claims in recent times by insurance operators will continue to attract many corporate organisations and associations into the group life sector of the market.

Speaking on the development, Managing Director of Achor Actuarial Services, Mr. Pius Apere, noted that the rising inflation is impacting the purchasing power of the average Nigerian.

Apere said: "We all know that inflation has been on the rise in recent times and this is affecting the purchasing power of most Nigerians. Many people that work in various organisations and that belong to one association or the other choose to embrace group insurance, thereby leaving behind individual covers as part of measures to beat inflation. If you notice, the insurance sector has improved on its claims settlement ability, hence more people are being attracted to the sector as they believe that their claims will be settled when their risks crystalises."

Also speaking, Managing Director of Boof Africa Insurance Brokers, Mr. Olumide Fatogun stated that more Nigerians are going for group life which is more affordable than individual life policies.

He said: "As more Nigerians transfer their risks to insurance, especially now that inflation is hitting the rooftop, the preference for group life insurance is on the increase. This is part of measures to beat the rising prices of things."