Insurance industry comes under pressure from rising cost, claims

…Profit declines 40% in Q1’25

…As claims rise 56%, expenses up 72%

·Experts explain the new development, chart way forward

By Rosemary Iwunze

At the backdrop of rising cost of doing business Nigeria’s insurance firms are recording significant declines in profits.

Financial Vanguard’s findings also reveal that the insurance firms are now battered by rising claims payments.

Consequently, aggregate profits recorded by the leading insurers dropped by 40 percent in the first quarter of 2025, Q1’25.

The plunge in profitability which was in spite of a 38 per cent jump in revenue was in sharp contrast to the 550 per cent rise in profits enjoyed by the insurers in the corresponding period of 2024, Q1’24.

Breakdown of data from  the 2025 first quarter financial results, Q1’25, of the leading 14 insurance companies show that   Gross Premium Written, GPW, went up by 38.2 per cent to N294.5 billion from N213.1 billion recorded  in the corresponding period of 2024.

Meanwhile, claims payment went up by 56.6 per cent to N167.4 billion in Q1’25 from N106.9 billion recorded in the 2024 corresponding period.

Claims

Aiico Insurance claims payment rose by 11.8 per cent to N19.9 billion from N17.8 billion. Axa Mansard claims payment went up by 46.8 per cent to N27.3 billion from N18.6 billion.

  Consolidated Hallmark claims payment rose by 48.9 per cent to N7.3 billion from 4.9 billion. Cornerstone claims payment rose by 57.4 per cent to N7.4 billion from N4.7 billion.

Coronation claims payment went up by 82.9 per cent to N12.8 from N7.0 billion.

Custodian claims payment rose by 145.5 per cent to N29.7 billion from N12.1 billion. Guinea claims payment declined by 174.5 per cent to N94,117 million from N342,902 million.

Lasaco claims payment increased by 72.1 per cent to N7.4 billion from N4.3 billion. Linkage claims payment declined by 4.9 per cent to N3.9 billion from N4.1 billion. Mutual Benefits claims payment went up by 78.9 per cent to N19.7 billion from N11.01 billion. Nem claims payment increased by 61.9 per cent to N22.5 billion from N13.9 billion.

Sovereign Trust claims payment went up by 43.6 per cent to N5.6 billion from N3.9 billion.

Sunu claims payment went up by 43.8 per cent to N2.3 billion from 1.6 billion.

Veritas Kapital claims payment declined by 76.1 per cent to N644,397 million from N2.7 billion.

Profit

Aiico Insurance’s profit declined by 49.5 per cent to N4.7 billion from N9.3 billion. Axa Mansard’s profit declined by 51.9 per cent to N6.2 billion from N12.9 billion. Consolidated Hallmark profit declined by 76 per cent to N359,307 million from N1.5 billion.

Cornerstone’s profit declined by 90.5 per cent to N1.6 billion from N16.9 billion.    

Coronation’s profit declined by 38.6 per cent to N2.7 billion from N4.4 billion.

Custodian profit rose by 1.9 per cent to N10.9 billion from N10.7 billion.

Guinea profit increased by 39.6 per cent to N130,314 million from N93,365 million.

Lasaco’s profit increased by    27.5 per cent to N1.3 billion from N1.02 billion.

Linkage’s profit increased by 0.3 per cent to N732,943 million from 730,907 million.

Mutual Benefits’ profit increased by 13.9 per cent to N4.1 billion from N3.6 billion. Nem’s profit rose by 21.9 per cent to N12.8 billion from N10.5 billion.

Sovereign Trust profit went up by 37.1 per cent to N871,874 million from N635,984 million.

Sunu’s profit declined by 69.8 per cent to N754,426 million from 2.5 billion.

Veritas Kapital’s profit declined by 71.9 per cent to N1.6 billion from N5.7 billion.

Operating expenses

Aiico insurance operating expenses rose by 541.6 per cent to N3.5 billion from N545.5 million. Axa Mansard operating expenses rose by 10.5 per cent to N2.1 billion from N1.9 billion.    Consolidated Hallmark operating expenses declined by 3.9 per cent to N773,360 million from N805,361 million. Cornerstone’s operating expenses increased by 64.7 per cent to N2.8 billion from N1.7 billion.

Coronation’s operating expenses increased by 16.8 per cent to N1.46 billion from N1.25 billion. Custodian’s operating expenses increased by 7.3 per cent to N4.4 billion from N4.1 billion.

Guinea operating expenses increased by 58.2 per cent to N418,844 million from N264,690. Lasaco’s operating expenses increased by 16.7 per cent to N1.4 billion from N1.2 billion.

Linkage operating expenses remained static at N1.1 billion from 1.1 billion.

Mutual Benefits operating expenses went up by 39.8 per cent to N1.1 billion from N786,982 million. Nem’s operating expenses increased by 58.8 per cent to N2.7 billion from N1.7 billion.

Sovereign Trust operating expenses increased by 28.7 per cent to N1.02 billion from N792,440 million.  

Sunu operating expenses went up by 28 per cent to N813,227 million from 635,292 million. Veritas Kapital operating expenses went up by 34.6 per cent to N1.4 billion from N1.04 billion.

Experts’ opinion

The National Insurance Commission, NAICOM, in its first quarter 2025 report, stated that its focused regulatory measures aimed at market deepening has led to enhanced public awareness regarding policyholder rights and opportunities for claims issues redress, thereby leading to expansion in the rate of claims reported during the quarter under review.

NAICOM maintained that other explanatory factors are improved customer confidence and, the business expansion recorded in the market which goes with increased claims reporting by policyholders.

Speaking to Financial Vanguard on the development, Mr. Obinna Chilekezi, Visiting Lecturer, Risk Management, the University of Gambia, also an Insurance expert said that with rising claims payment and increase in operating costs, profit is bound to be affected.

He stated: “Once the claims payment and operating costs of running the insurance company is high, it will have a negative impact on profit because these expenses are removed from the income generated. “However, the essence of insurance is that companies must pay claims, irrespective of the volume of claims being reported by policyholders.

“In essence, insurance companies should look at other ways through which they can increase their income because the sector is still battling low insurance penetration.

“If you look at our population and the insurance density, it means that the insurance companies still have a large untapped market. If the untapped markets are tapped, it will definitely have a positive impact on their operations. So, insurance operators should look at other ways of boosting income.

“The best way is for insurance companies to introduce risk management methods. This way the insurance company and the insured can work hand in hand in order to see how they can minimize the risk. And when they do that, definitely the amount of claims being paid will reduce. And once such claims payments are reduced, it will definitely impact positively on the operations of the insurance company.

“So I think we should be looking at risk management. Insurers should imbibe stronger underwriting discipline and improved claims management across the market. They should adopt effective risk mitigation and underwriting prowess.”

Also speaking to Financial Vanguard, former Secretary General of African Insurance Organisation, Ms. Prisca Soares, stated that the harsh operating environment is impacting on profit.

She stated: “Unfortunately, because of the rise in the cost of labour, for many companies, expenses have gone up. They have to pay more for services, pay more for utilities and things like that. In most cases, that’s what has affected the companies.

“When you have high expenses, you find that those expenses eat into the profit. Although they have written a higher premium than they did previously, the profit is low. In some cases, too, you might find that maybe some have paid a lot more claims than before.

“But generally, the situation of the economy that we are experiencing is what is impacting on profit. But companies need to still find a way of reducing expenses as much as they can, so that they can have profit.”

On her part, Director General of Nigerian Insurers Association, NIA, Mrs. Bola Odukale, stated that with the growing awareness leading to rising cases of reported claims by policyholders, the insurance sector is committed to claims payment and has been paying huge claims in recent time which is evident in the increase in claims payment.

She said: “Despite the negative perception that some members of the public have about insurance, the fact remains that insurance companies are paying claims and have been paying huge claims in recent times..

“Claims payment is part of image making especially for an industry like ours that everybody claims much of the time that they don’t know much about.   We keep hearing things like ‘we don’t know anything about insurance’ and the feedback is always like everybody seems to lack knowledge of insurance in its entirety. Everybody seems to be in the dark about insurance or what insurance is all about and this has been a recurrent decimal as far as the trajectory of the industry is concerned.

“So what that says to me is that there must be continuous engagement, we must continuously put ourselves in the face of the people. Nobody will say they don’t know what the banks do.   Lot of people doesn’t claim the kind of ignorance about the banking sector like they claim about the insurance sector.”

Also speaking, immediate past President of the Chartered Insurance Institute of Nigeria, CIIN, Mr. Edwin Igbiti, said that the rising claims payment is an indication that people are becoming more insurance conscious.

He stated: “A sense of awareness has started coming in and people are beginning to take insurance more seriously. There is increased awareness and acceptance of insurance in the country. Although, we are still scratching the surface in terms of insurance penetration due to the huge penetration gap, however, this means that there is room for improvement.”

The post Insurance industry comes under pressure from rising cost, claims appeared first on Vanguard News.