The Insurance Market consists of the buyers of insurance, sellers, and intermediaries (agents and brokers). The market further includes the regulators, representative bodies or organizations, consultants, and technical advisers.
Anyone who has a valid insurable interest, i.e., a legally recognized relationship with property or pecuniary interest, can insure their interest. The relationship may arise through ownership, part-ownership, responsibility for goods, or liability to pay damages or certain benefits.
In Nigeria, the buyers of insurance can be segmented as follows:
For marketing purposes, the buyers can further be segmented to suit the strategy of the insurer, or the insurance agent.
The sellers or suppliers of insurance are the insurance companies and the reinsurance companies. Presently, there are 57 registered insurance companies and 2 registered reinsurance companies.
Most of the insurance companies are incorporated pursuant to Companies and Allied Matters Act 1990. Out of the 57 insurance companies, about 14 companies underwrite life assurance business. The reinsurers provide technical security and capacity for the insurance companies and do not supply insurance directly to the consumers.
The intermediaries are mainly insurance brokers and agents. There are 460 registered insurance brokers and about 15,000 insurance agents. The Nigerian insurance market has been described as a broker’s market because brokers control over 90% of the premium income, leaving less than 10% for insurance agents and direct marketing by insurers. However, insurance agents dominate the individual life insurance market.
The banking industry is a formidable channel for distributing insurance services, not necessarily as intermediaries, but by facilitating a form of direct marketing by insurers through the bancassurance model. Participation by banks has also made mass merchandising of those insurance products possible. To enrich some of the financial products, banks offer certain insurance protections as additional benefits.
For example, an investor is promised three or four times the capital amount invested in case of death, payment of benefits in the event of an accident, payment of children’s school fees, and insurance cover for goods bought on credit. To meet such obligations, they apply part of the interest due to the investors to purchase insurance on their behalf from insurance companies. This is, however, different from universal banking, which implied direct involvement in insurance broking and underwriting.
