Nigeria’s compulsory third-party motor insurance market is on the verge of significant expansion. Reforms introduced under the Nigerian Insurance Industry Reform Act (NIIRA) 2025 have exposed a vast but underutilised market, currently constrained by poor claims awareness, weak service delivery, and low consumer confidence.
A new industry report by Leenkaz Insurance Brokers Limited suggests that while NIIRA 2025 has strengthened the capital base of insurers, expanded policyholder protections, and introduced statutory claims timelines, the next growth phase will depend on converting compulsory policyholders into active users. The report, titled "The Protection Paradox: Nigeria’s Motor Insurance Reality and the NIIRA 2025 Reform Agenda," surveyed vehicle owners across 24 states and the Federal Capital Territory.
The Protection Paradox in Figures
The report highlights a significant disconnect between compulsory insurance compliance and actual consumer protection. While 61.2% of respondents reported that their vehicles had been damaged by another driver, only 21.6% of those affected received compensation through the at-fault driver’s third-party policy. Conversely, 77% of motorists never benefited from the cover.
Consumer awareness remains a major obstacle for the industry. Only half of the respondents knew that third-party insurance covers damage to another person’s property up to N3 million. Furthermore, fewer than one in five respondents had ever filed a claim under their own third-party policy.
Additionally, 76% of motorists regarded the product as nothing more than a compulsory licensing requirement. Over half of the respondents stated that their experience with motor insurance discouraged them from purchasing other insurance products.
Rebuilding Trust Through Claims Administration
Industry experts at a stakeholder webinar warned that the current premium structure remains sustainable only because claims frequency is unusually low. As awareness improves and policyholders begin pursuing legitimate claims under NIIRA 2025, insurers will require stronger reserves, more sophisticated risk pricing, and enhanced capital management.
The panel identified two primary reasons motorists fail to seek compensation. Many are unaware of their entitlement to claim against another driver’s insurer, while others abandon the process because claims handling is slow, cumbersome, and lacks transparency.
To unlock the market's potential, Leenkaz Insurance Brokers recommended a fundamental shift in customer engagement. Insurers must simplify policy documents, digitise claims administration, provide real-time status updates, and communicate settlements openly. The report also advocated for a national claims and loss database to enable risk-based pricing.
Capital Alone Cannot Drive Penetration
Although the ongoing recapitalisation exercise under NIIRA 2025 has strengthened the financial capacity of insurers, experts stressed that stronger balance sheets alone will not increase penetration. The report noted that capital addresses solvency but does not, by itself, pay claims.
Customer experience, prompt claims settlement, and operational efficiency will determine whether compulsory motor insurance evolves into a trusted financial product. The industry is expected to undergo significant transformation over the next 12 to 24 months as risk-based supervision, digitalisation, and recapitalisation reshape underwriting practices.
Leenkaz urged insurers to treat claims settlement as a growth strategy rather than a cost centre. It also called on regulators to strictly enforce statutory claims timelines and expand consumer education, while urging brokers to strengthen policyholder advisory services.
