Insurance: 4 Challenges of Doing Business In Nigeria

Insurance acts as a catalyst for business growth, stimulating trade, commerce and industry in different parts of the globe. It is not surprising therefore, that most developed countries across the globe have a robust insurance industry which is capable of supporting domestic growth and development as well as raising the overall standard of living of the citizenry. On the other hand the poor economies are characterized by abysmal insurance penetration, and insurance density levels. The global positive impact of insurance cannot be overemphasized as it is essential for sustainable economic development and supportive of the poverty alleviation aspirations of many developing nations.

Challenges of Doing Insurance Business in Nigeria

In Nigeria, and many other developing economies in Africa, issues pertaining to insurance policies are entirely different form a negative perspective. A critical overview of Nigeria’s insurance sub0sector shows that numerous factors militate against the growth of this very aspect of financial service-insurance. Issues such as image problem and failure of Nigerians to accept insurance as both investment and social security constitute significant obstacles to the growth of insurance subsector of the economy.

Insurance is still alien to an average Nigerian’s way of life. This is because of poverty and unemployment levels in the country. Unemployed people cannot meet their insurance needs and will not see insurance as a product worth trying.

Recent studies have identified four reasons behind Nigeria’s negative attitude towards insurance services. These reasons as articulated by various researchers include: attitude, lack of knowledge, of insurance culture, low level of education, and unemployment issue. Let’s analyze them in details.

  • Attitude: An attitude many be defined as a learned disposition to behave in a consistently favorable or unfavorable way with respect to a given object (Schiffman and Kannuk, 2000). Stated differently, it positions people into a frame of mind of liking or disliking things, of moving toward or away from them. It is acknowledged that people have attitudes toward almost everything religion, politics, clothes, music, food. For insurance, the demand for life insurance in a country may be affected by the unique culture of the country to the extent that it affects the population’s risk aversion (Douglass and Wildavsky, 1982). Also Zelizer (1979) also notes that religion historically has provided a strong source of cultural opposition to life insurance as many religious people believe that a reliance on life insurance results from a distrust of God’s protecting care. But historically, some form of social insurance existed in Nigeria and African society long before the introduction of modern insurance in Nigeria (Osoka, 1992). These social schemes evolved through the existence of extended family system and other unions. The simplest form of the social insurance was practiced by means of providing cash donations, materials or sometimes organized collective labor to assist members of extended family and members of social or communal associations who suffer a mishap.


  • Lack of Knowledge of Insurance Culture: In a recent study of quality of life in developing countries with reference t0 South Africa (Moller, 2004), income and social security (own wages, ability to provide for family, insurance against illness / death and income in old age) have been treated as one of the major indicators of quality of life. This standpoint stresses the significance of insurance to human life. Ironically, insurance series seem not to have been so accepted enthusiastically in developing countries. The abysmal level of insurance culture in developing economies has attracted relative interests among researchers and practitioners alike. Risk has been identified as a central fact of live in the rural areas of less-developed countries. Some of the problems associated with this have been marketing. For example, Omar (2005) assesses consumers’ attitudes towards life insurance patronage in Nigeria and found out that there is lack of trust and confidence in the insurance companies. Other major reason for this attitude is lack of knowledge about life insurance products and services.


  • Low Level Education: educational status of Nigerians has significant influence on their attitude towards insurance. Educated people have more positive attitude to insurance than form les educated ones. In a recent study on insurance conducted in Lagos Nigeria, facts shows that respondents with higher education outperformed others even though no statistical significant difference was observed with vocational education.


  • Unemployment Issues: Employee working status has a significant effect on Nigeria’s attitude towards insurance. Retired and employed Nigerians with denied means of livelihood out-performed their competitors. No significant defiance was observed among retired, employed and self-employed respondents. On the other hand, self-employed people have significantly higher attitude towards insurance than unemployed, students and part time workers. This result is quite similar to findings in most developed countries.


The findings of this study suggest some major implications for marketing insurance services in the Nigerian business environment which is a big market. Given the attitude is strongly liked to behavior, marketers of insurance services targeting Nigerians are confronted with the challenge of encouraging people to embrace insurance institution and its associated benefits.

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