Yemisi Izuora
The insurance industry have been advised to make a fair adjustment of premium to properly align with claims made from insured public.
Consulting Actuary, TAF Consulting Group, Debo Ajayi, who made the call observed that the gap between the claims incurred by the Nigerian underwriters and premiums earned is wide compared to some other countries.
While making a presentation themed ‘Making insurance friendly in Nigeria’.
Ajayi said, “We can argue to dispute these figures or even justify the low loss ratio. I am aware that some incorrectly consider that low loss ratio is reward for good underwriting.
“Such underwriting gains, if shared with the customers in reducing premiums would have increased the loss ratio. This would suggest that low loss ratio situation over a long period is not good for the customer and invariably not good for the industry.”
He defined loss ratio as the ratio of incurred claims to premiums earned over a period.
Loss ratio, he explained, is the primary measure of the financial value of an insurance product to the customers.
To calculate loss ratios correctly, he said, paid claims figures must be adjusted for change in outstanding claims, and premium income must be adjusted for change in unearned premiums.
He said the loss ratio was about claims incurred versus premiums earned to support those claims.
According to him, loss ratios captured the returns to the customer for the premiums paid for insurance coverage.
In Nigeria according to GIZ and FSS2020 reports, he said the loss ratio varied from two per cent to 58 per cent, most being in the range of 10-30 per cent, and averaging around 24 per cent.
In contrast, he added, from OECD 2021 statistics, the loss ratio in USA was 70 per cent, 52 per cent in South Africa, and 43 per cent in Egypt.
He said, the Nigerian situation meant that for every N100 of premiums collected from insurance customers in Nigeria, the industry gave back only N24 in customer benefits.
This was consistent with the insurance value perspective of the Nigerian public that formed the basis of their decision to procure voluntary insurance despite their insurance needs, he said.
