8 insurers paid N71.bn in claims in 2018

No fewer than 8 insurers have paid N71.01 billion to policy holders in 2018, representing a 14.53 percent increase a year ago, as companies continue to incur more expenses in generating each unit of revenue despite an economic recovery.

Rising claims expenses means insurers are committed to honouring their obligations and delighting customers, but they have to be consistent in meeting obligations to allure more customers.

The average claims expense ratio or loss ratio of the 8 firms under coverage increased to 51.18 percent in December 2018 from 50.34 percent the previous year.

This means that for every N100 of premium collected by insurers during the year, N51 was paid out in claims.

Many insurers manage claims expenses because if it eats deep into revenue, it can bloat combined ratios and result in deteriorating underwriting performance.

A breakdown of the figures shows Firstbank Insurance Limited’s net claims ex

penses were up 9.50 percent to N4.71 billion in December 2018 from N4.30 billion the previous year.

Loss ratio fell to 16.91 percent in the period under review from 21.52 percent as at December 2017; this means the company is spending less on claims expenses in generating each unit of revenue.

Custodian and Allied insurance Plc’s claims expenses increased by 10.0 percent to N15.30 billion in the period under review from N13.90 billion the previous year.

Loss ratio fell to 74.27 percent in the period under review from 73.93 percent as at December 2017; this means that for every N100 of premium income collected by the insurer during the year, N74.27 was paid out in claims.

Aiico Insurance Plc paid claims of N23.86 billion in the period under review; this represents a 14.89 percent increase from a year ago. Loss ratio rose to 74.90 percent in the period under review from 74.32 percent the previous year.

This means for every N100 collected in premium, the insurer paid out N74.90 in claims. Efficient underwriting capacity helped Aiico revert to underwriting profit of N3.21 billion in December 2018 from a loss of N4.02 billion the previous year.

AXA Mansard Insurance Plc’s claims expenses were up 27.18 percent to N12.13 billion in the period under review from N9.53 billion as at December 2017.

However, the company has spent less on expenses in generating revenue as loss ratio fell to 61.57 percent December 2018 from 69.17 percent as at December 2017.

Consolidated Hallmark Plc’s claims expenses increased by 26.48 percent to N1.80 billion in the period under review as against N1.42 billion as at December 2017. Loss ratio moved to 42.12 percent in the period under review from 38.63 percent the previous year.

Continental Reinsurance Plc claims expenses were flat N10.7 billion in the period under review, but loss ratio increased to 46.34 percent in the period under review from 46.0 percent the previous year.

Sovereign Trust Insurance Plc’s claims expenses moved by 37.15 percent to N1.78 billion in December 2018 from N1.30 billion the previous year while loss ratio increased to 35.31 percent in the period under review from 33.82 percent as at December 2017.

Prestige Assurance Plc claims expenses surged by 1.32 billion in December 2018 from N655.73 million the previous year while loss ratio moved to 58 percent from 45.27 percent as at December 2017.

Analysts say the economic recession of 2016, rising inflation, and fraudulent claims are responsible for a surge in industry claims.

For instance the replacement cost of assets has risen due to time value of money. For instance if a vehicle was insured when inflation as 9 percent, then the vehicle got damaged 2 years later when inflation had risen to 14 percent, then the insurance company would pay more to compensate the customer.

The economy of Nigerian has been relatively stable since the central bank introduced a new foreign exchange policy in 2017 while a rebound in crude oil price helped the country exist its first recession in 25 years.

Nigeria’s Gross Domestic Product (GDP) growth rate increased to 2.38 per cent (year-on- year) in the fourth quarter of 2018 (Q4, 2018), indicating a 0.55 percentage rise compared to the 1.81 per cent growth recorded in the preceding quarter, according to the National Bureau of Statistics (NBS).

Nigeria’s Consumer Price Index (CPI) report for March published this morning showed headline inflation eased for the third consecutive month by 6bps to 11.25 percent yoy from 11.31 percent yoy in February.

The cost of replacing an insured asset has risen. So, the replacement cost is not the same any more. It is easy for insurances that are designed on replacement values, but for those that are not designed on replacement values, they will be hoping that they will get replacement values and this puts some pressure on both the brokers and the underwriters because most time, you are pursuing some unknowns”.