Study finds innovation key to insurance profit surge

A study has found that healthy competition and innovation were major drivers of the profitability of insurance sector players.

The study was done by Dr. Toluwa Oladele of the Monetary Policy Department of the Central Bank of Nigeria and published in the April-June 2025 edition of the Bullion, a quarterly publication by the apex bank.

The study collected secondary data from the audited financial reports of 20 insurance firms categorised as general insurers covering a period of 11 years (2013-2023).

The findings of the study concluded that “competition, innovation, and efficient management of insurance-specific risks are the main drivers of the financial performance of insurance companies in Nigeria.

“Claim adjustment may have a further impact on the financial performance of insurance companies.

In contrast, average cost does not affect the financial performance of insurance companies in Nigeria.”

The researcher went on to recommend that greater effort should be put into innovation: “That is, introducing a new product or service to existing and prospective customers can retain existing customers while also attracting new ones.

Similarly, the regulatory authority should implement measures to promote healthy competition among insurance companies. While there may be a need for mergers and acquisitions at some point, the regulatory authority should put measures in place to guard against monopolistic tendencies.”

The study also maintained that efficient management of the companies is key to the survival of the insurance companies in Nigeria.

“Hence, every insurance company in Nigeria should be encouraged to adopt corporate governance practices, and the regulatory authority should continue to conduct periodic and on-site assessments to ensure that companies operate in line with global best practices in corporate governance,” the study concluded.