Nigeria’s insurance industry is grappling with a deepening trust deficit and widespread circulation of fake third-party motor insurance policies, a development stakeholders say is stalling growth despite ongoing regulatory interventions.
Industry data show that insurance penetration in Nigeria currently stands between 0.4 per cent and 0.6 per cent of Gross Domestic Product (GDP), far below the global benchmark of 6 per cent to 7 per cent. The figure also trails behind several African peers, including Kenya at 1.2 per cent and South Africa at 11.3 per cent.
Operators say the gap reflects structural weaknesses in the sector, worsened by a thriving informal market for counterfeit insurance certificates that has spread across major cities and transport corridors.
According to underwriters and sector players surveyed in Lagos, Abuja and parts of northern Nigeria, the illicit trade in fake third-party motor insurance has evolved into a coordinated network involving unlicensed agents, roadside vendors and, in some cases, compromised enforcement channels.
Although third-party motor insurance is compulsory in Nigeria and regulated by the National Insurance Commission (NAICOM), fake versions of the policy are reportedly sold at significantly lower prices in motor parks, licensing centres and roadside locations.
Industry sources say this practice has resulted in significant revenue losses for legitimate insurance companies, while also exposing motorists to serious financial risk in the event of accidents.
An insurance agent in Lagos, who spoke anonymously, said affordability and lack of awareness are major drivers of the trend.
“People buy these fake policies because they are cheaper and easily accessible. Some motorists only want documents to show law enforcement officers. They don’t realise the implications until claims arise,” the agent said.
Another operator in Abuja alleged that unlicensed vendors often work in coordination with touts around vehicle licensing offices and traffic enforcement points, targeting motorists seeking quick documentation for their vehicles.
“They approach drivers renewing papers and offer fake insurance certificates at very low rates. The documents often look real,” the source said.
Stakeholders argue that weak and inconsistent enforcement has allowed the illegal market to thrive over time, despite periodic regulatory crackdowns.
A senior insurance practitioner noted that enforcement efforts often lose momentum after initial interventions.
“The problem over the years has been inconsistency in enforcement and compliance. There is usually one raid, media attention follows, and after some time enforcement disappears. The fake operators return because they believe nothing serious will happen,” the practitioner said.
The growing concern over fake insurance products has prompted renewed regulatory action from industry stakeholders.
Rising from its 21st meeting, the Insurers Committee announced a fresh coordinated crackdown targeting fake motor insurance operators and unethical pricing practices within the sector.
Chairman of the Communication and Stakeholders’ Management Sub-Committee of the Insurers Committee and Deputy Chairman of the Nigerian Insurers Association, Ebelechukwu Nwachukwu, said regulators and industry operators are intensifying efforts to sanitise the market.
“NAICOM and ARIAN have taken over the industry fight against rate cutting and fake third-party motor insurance. Insurance companies have been called upon to establish offices in underserved areas across the country to reduce the spread of fake insurance products,” she said.
She added that the absence of legitimate insurance providers in several communities has created opportunities for illegal operators to flourish.
The National Insurance Commission (NAICOM) also confirmed recent enforcement successes, including court victories against unlicensed operators.
Spokesperson for NAICOM, Abba Inuwa, said a case filed by the Nigerian Cooperative Insurance Society was dismissed in favour of the regulator.
He also disclosed that the commission’s powers had been strengthened under the Nigerian Insurance Industry Reform Act 2025, enabling more aggressive enforcement actions.
According to him, recent joint operations with security agencies in Abuja led to arrests and the seizure of fake insurance materials.
“This time around it was a huge success because a lot of things were confiscated from the people red-handed,” Inuwa said, adding that some Vehicle Inspection Officers were also implicated.
He further stated that internal vulnerabilities that previously hindered enforcement have been addressed, while additional operations are being planned for Lagos and Abuja.
Industry stakeholders believe that sustained enforcement, combined with digital verification systems, could significantly improve compliance and restore confidence in the sector.
They argue that a real-time insurance authentication platform, accessible to motorists and law enforcement agencies, would help eliminate fake policies, plug revenue leakages and strengthen claims protection for genuine policyholders.
If effectively implemented, operators say such reforms could help Nigeria’s insurance sector break through the long-standing sub-one per cent GDP penetration barrier and align more closely with continental benchmarks.
