Exclusion Clauses Frustrating Insurance Penetration In Nigeria—Chukwu

Financial analyst and Managing Director, Cowry Asset Management Limited, Johnson Chukwu, has called for a comprehensive simplification of insurance policies in Nigeria to boost public confidence and drive growth in the sector.

He made the call during an interview on Channels Television, following the signing of the Nigerian Insurance Industry Reform Act (NIIRA) 2025 by President Bola Tinubu.

Chukwu noted that one of the key barriers to insurance uptake in the country is the complexity of policy documents, particularly the prevalence of exclusion clauses that are often hidden in fine print and difficult for the average policyholder to understand.

“What is most important is that insurance contracts are simplified in such a way that a layman can understand the terms,” Chukwu said. “One of the major challenges we face with insurance in Nigeria is the abundance of exclusion clauses embedded in policy documents—clauses that the average holder may not even notice or understand.”

Citing a typical car insurance scenario, he explained that policyholders often unknowingly violate terms due to lack of clarity, only to discover exclusions when filing claims. He recommended that policies be presented in a concise, one-page format using bullet points to highlight key terms and conditions, including exclusions.

Chukwu expressed optimism that the newly enacted NIIRA 2025 could help address some of these long-standing issues by enhancing transparency, enforcing stronger regulation, and improving claims settlement processes.

“This new Act will go a long way in improving policyholders’ confidence,” he said. “Many people who purchase policies struggle to get their claims paid. The new Act addresses this by providing for more robust capitalisation of insurance companies.”

He added that if effectively implemented, the reforms could position insurance firms as stronger players in Nigeria’s capital market. “If this Act leads to the growth of insurance firms’ retained earnings and reserves, then over time, they will become major investors in the financial market,” he said.

Signed into law on Tuesday, the Nigerian Insurance Industry Reform Act 2025 repeals outdated regulations and consolidates existing laws into a single modern framework. According to presidential spokesman Bayo Onanuga, the legislation is designed to improve regulatory oversight, promote innovation, and make the sector globally competitive.

Key provisions of the new law include stricter capital requirements, mandatory enforcement of compulsory insurance, market digitisation, quicker claims settlements, and the establishment of a policyholder protection fund. The Act also encourages Nigeria’s integration into regional initiatives such as the ECOWAS Brown Card System.

The National Insurance Commission (NAICOM) has been mandated to implement the reforms, which are expected to attract increased investment, enhance consumer trust, and support the Federal Government’s ambition of building a $1trn economy.

Chukwu emphasised that for the reform to have its intended impact, simplifying and clarifying insurance policies must remain a top priority.

Exclusion Clauses Frustrating Insurance Penetration In Nigeria—Chukwu is first published on The Whistler Newspaper