The topic of insurance is a broad one that has got many people wondering “What is insurance market?” Basically, the insurance market is the exchange that happens between consumers and insurance companies.
Here’s everything you need to know about the insurance market and how it works here in Nigeria.
What is Insurance Market?
The insurance market can be defined as the “buying and selling of insurance.” Basically, it consists of consumers (individuals or groups) that purchase insurance from insurers. This insurance they buy offers coverage for special risks.
How does the Nigerian Insurance Market work?
Basically, the Nigerian insurance market is consist of the buyers (consumers) and sellers (insurers) of insurance. Also, there are intermediaries (brokers and agents) who help to bring the two together. Additionally, there are the regulators, representative organizations, technical advisers, as well as consultants which are all part of the market.
1. The Buyers
Anybody who has legal insurable interest can insure their interest. Basically, this means that anyone who has a relationship with property or pecuniary interest by the law can insure their interest. The buyers are people who go to purchase insurance from insurance companies. A buyer should remember to ask for an insurance cover note when necessary. Here in Nigeria, the buyers of insurance are classified as follows:
- Individuals and families
- Governments (could be federal, state, or local) and their agencies
- Manufacturing industrial concerns
- Also, small and medium-scale industries
- Banking industry
- Health institutions
- Tourist and hospitality industries, hotels
- Transport industry
- Other corporate bodies
- Educational institutions
- Lastly, oil and energy industry
However, these buyers can further be classified to suit the policy of the insurer, for marketing purposes.
2. The Sellers
The sellers, also called the suppliers of insurance, are made up of both the insurance companies and the reinsurance organizations. Presently, there are approximately 57 registered insurance companies in Nigeria. Also, the country has 2 registered reinsurance companies. Out of the 57 insurance companies, 14 companies underwrite life assurance businesses. The reinsurers only offer capacity and technical security to the insurance companies. However, they do not supply insurance to the consumer directly.
3. The Intermediaries (Agents)
The intermediaries are majorly insurance brokers and agents. In Nigeria, there are 460 registered insurance brokers and 15,000 insurance agents. Basically, the Nigerian insurance market is characterized as a brokers’ market. This is because currently, brokers manage more than 90 percent of the premium income, leaving smaller than 10 percent only for insurance agents. However, insurance agents control the individual life insurance market.
Who Controls Insurance Markets?
To ensure that insurance companies function properly, the State regulates them. They regulate some of their activities, such as the training of their employees, their economic dimension, their financial guarantees, etc. Also, the state audits, monitors, and controls the functioning of insurance companies. Feel free to compare insurance costs from time to time too.
Answering the question “What is insurance market?” is an easy one. Just like a conventional market consists of the exchange of goods and services, the insurance market involves the buying and selling of insurance. Everything you need to know about the insurance market and how it works has been provided for you above.
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