Why Nigeria’s insurance penetration remains low despite high population

Nigeria’s insurance industry penetration remains low at 0.4 percent of the gross domestic product (GDP) despite the country’s over 200 million population.

With South Africa posting an insurance penetration rate of 11.3 percent, followed by Namibia at 7.4 percent, Morocco at 2.1 percent and Kenya at 1.2 percent, questions continue to mount over why years of reforms in Africa’s most populous nation have failed to translate into stronger insurance uptake.

Industry operators say insurance penetration, which is measured as total gross premiums as a share of GDP, remains weak in Nigeria due to low public awareness, widespread mistrust, limited access, and low purchasing power, particularly among households and the informal sector.

Nigeria’s insurance industry at the end of second quarter (Q2) 2025 stood at a gross written premium of N1.21 trillion, indicating a 49.3 percent growth rate compared to the same period in 2024.

The non-life segment – including businesses in oil and gas, marine, aviation, fire, motor and personal accident – retained its relative dominance in the market, contributing 67.2 percent to the total premium pool.

On the other hand, the life insurance segment comprising businesses such as group life, individual policies and annuity accounted for 32.8 percent of the premiums generated during the same period.

Factors affecting penetration

Mayowa Adeduro, managing director/CEO of Tangerine General Insurance, said factors affecting insurance penetration in Nigeria include cultural barriers, prevalence of illiteracy, inadequate financial education, lack of law enforcement, inadequate technology, and a cumbersome judicial system.

He said cultural barriers relating to religious beliefs that insurance is not Islam-compliant or that purchasing insurance is like praying for something bad to happen are also hitting hard on penetration.

He suggested that if all churches and mosques insure their members for a token monthly contribution, nearly 100 million Nigerians could be covered against death and accidents, which could eventually expand to healthcare and education.

Illiteracy is another major hurdle. “With over 30 percent of the population unable to read or write, the capacity to understand the importance of insurance is severely limited,” he explained.

“A cumbersome judicial system means civil matters can remain in court for years. So, people tend to ‘pray for or against’ things rather than taking action,” Adeduro stated.

On the power of technology, he said insurers need to invest in and rely on technology to deepen insurance penetration.

Adetola Adegbayi, founder/ chief executive of Mutual Specialists, said there is strong concentration on penetration rate as a measurement when insurance density should equally be in focus.

Adegbayi, former executive director at Leadway Assurance, noted that with the enforcement of compulsory insurances under the Nigerian Insurance Industry Reform Act (NIIRA) 2025, both penetration and density are likely to improve.

NIIRA, she said, includes provisions to fund enforcement agencies, ensuring better compliance and collaboration against defaulters.

She further stated that, “To sustain the legislative and regulatory efforts, Nigerians have to willingly see the value of insurance for themselves and our communities as a way of financing emergencies and building/maintaining infrastructures.”

Adegbayi said life annuities supply capital to fund national developments. “Once our industry represents value to the individual person, including their enterprises, and shows relevance for infrastructure development, both penetration rates and density value will increase in sustainable ways.”

South Africa’s comparison

Compared with Nigeria, South Africa’s insurance market is broader, encompassing life, general insurance, and pensions. It is the largest in Sub-Saharan Africa, with a turnover of approximately R944.9 billion (around $51.47 billion) in 2024, driven mainly by life insurance. Health insurance also forms a significant part of the market, while pensions are a core component of the financial sector, often offered by the same life insurers.

Many large insurance companies such as Sanlam, Old Mutual, Liberty, and Discovery are major players in both life insurance and retirement fund administration spaces.

Why nations have high penetration

Jude Mbonu, insurance broker, said disposable income plays a very significant role in the uptake of insurance, which is why most advanced economies such as the US and the UK see high penetration.

“I think it has to do with the state of the economy because people will need to take care of basic needs before thinking about protecting what they have. Though this is not the case with life insurance policies, particularly health and annuity.”

Mbonu however noted that insurance in Nigeria will get better when more people get out of poverty and begin to see the need to protect what they have or plan for children’s education, noting that insurance is a financial tool to achieve all of these.

Tope Adaramola, executive secretary of the Nigerian Council of Registered Insurance Brokers (NCRIB), said reasons for low penetration in Nigeria are multifarious.

Adaramola stated that foremost amongst them is poor public awareness, noting that most Nigerians have a better understanding of banking and its proceedings than insurance.

He also highlighted the poor regulatory environment, which did not enable adequate legislation for professional practice and expansion.

“We also have poverty, which leaves most Nigerians with little for insurance. But narratives are changing with more pragmatism by the regulator and the operators. The 2025 Nigerian Insurance Reform Act (NIIRA) is the most welcome move to change the industry’s narratives,” Adaramola said.

Ada Ufomadu, analyst at Financial Institutions Unit at Agusto & Co Nigeria, had in a report on insurance, said the Nigerian insurance industry, like most other industries, is affected by the macroeconomic environment.

“We need to take a cue from countries like Kenya and South Africa who have adopted various strategies, including the support of other sectors such as telecommunications, to drive penetration of insurance.”