Economic strain pushes motorists to hybrid insurance options
BY MOTOLANI OSENI
Faced with mounting economic pressure, many Nigerian motorists are downgrading from comprehensive vehicle insurance to more affordable hybrid or third-party policies, prompting underwriters to develop flexible alternatives to retain policyholders and remain competitive.
Rising inflation, reduced disposable income, and a high cost of living have forced many vehicle owners to reassess their insurance needs. Investigations reveal that motorists who once maintained comprehensive coverage are now opting for hybrid policies, an emerging product that blends elements of both extensive and third-party insurance at a lower cost.
Hybrid motor insurance, introduced by insurers as a cost-effective solution, typically comes with an annual premium of N25,000 to N30,000 and provides limited own-damage cover of up to N200,000.
This contrasts with full comprehensive coverage, which costs 5 to 10 per cent of a vehicle’s value, and third-party insurance, which is priced at N15,000 annually and offers no protection to the policyholder’s vehicle.
Of Nigeria’s estimated 12 million vehicles, only about 3.5 million are currently insured. The remaining 8.5 million are either uninsured or have lapsed coverage, despite increased enforcement of third-party insurance compliance by the police.
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While enforcement has driven some uptake, existing policyholders are actively reducing their coverage levels due to financial constraints.
Industry operators confirmed the trend at a recent forum in Lagos. Mr Kunle Ahmed, Chairman of the Nigerian Insurers Association (NIA) and Managing Director of AXA Mansard Insurance Plc, stated that motorists have largely adjusted to the increase in third-party policy rates from N5,000 to N15,000.
However, he acknowledged that many former comprehensive policyholders are now switching to hybrid or third-party options.
Despite the shift, Ahmed noted that the increase in third-party premiums has helped keep insurers afloat, allowing them to properly price risk and maintain solvency in a volatile economy.
Similarly, Dr Jeff Duru, Managing Director/CEO of Universal Insurance Plc, confirmed a noticeable drop in the uptake of comprehensive motor insurance.
He said the hybrid policy is one of the industry’s innovative responses to evolving market realities, aimed at ensuring continued access to risk protection despite economic constraints.
He added that while policy preferences are shifting, insurers remain committed to honouring genuine claims and developing more customer-centric products that reflect market demand.
Meanwhile, the growing adoption of car-pooling practices within corporate and family settings has also contributed to a reduction in the number of comprehensively insured vehicles, as many households are downsizing their fleets.
Despite the insurance sector recording over N1.5 trillion in gross premium income in 2024, industry observers believe that the figure could have been higher had purchasing power remained stable. With the economic strain persisting, insurers are under pressure to innovate and adapt to protect both their revenue streams and customer trust.
