Projecting Insurance Penetration Rate in Nigeria: An ARIMA Approach

Abstract

Insurance industries' market penetration level is revealed by the premiums paid as a proportion to overall economic output. Nigeria's insurance penetration rate is 0.33 per cent despite its population advantage of about 200 million people. This rate is far below the average African rate of 2.98 per cent, and the lowest compared to some Sub-Sahara African countries like Kenya, Zimbabwe, Namibia and South Africa. The paper uses annual data on insurance penetration (IP) for the period 1981 to 2018. Autoregressive Integrated Moving Average (ARIMA) model was used to projects the insurance penetration rate for 12 years (2019 to 2030). The result shows that the insurance penetration rate keeps decreasing but at a slower rate. The paper recommends that the national regulatory bodies of insurance such as National Insurance Commission of Nigeria (NAICOM) should innovate and implement policies. This action will pave ways for the insurers to design insurance coverage, which will meet the specific needs of heterogeneous societies in order to spur insurance penetration rates.