Empirical Analysis of Insurance Premium Pricing and Market Competitiveness in Nigeria

This study empirically analyzes insurance premium pricing practices and their effect on market competitiveness among Nigerian non-life insurance companies. Premium adequacy, defined as the alignment between charged premiums and the actuarial cost of assumed risk, is a fundamental measure of market health and insurer sustainability. Evidence of chronic premium under-pricing in competitive motor and fire insurance markets has raised concerns among regulators about market stability and potential insolvency exposure. This research employs an empirical design using financial data from twenty non-life insurance companies covering 2017 to 2023. Combined ratio, loss ratio, and premium rate indices derived from NAICOM market data are used to assess premium adequacy trends across major product classes. The study applies vector autoregression (VAR) analysis to model dynamic interactions between competitive pricing behavior, market concentration (using Herfindahl-Hirschman Index estimates), and profitability outcomes. Granger causality tests assess the directional relationship between price competition intensity and profit margin compression. Preliminary findings are anticipated to confirm that intense price competition, particularly in motor and fire insurance, is associated with combined ratios exceeding 100 percent for sustained periods, indicating structural under-pricing. The study recommends NAICOM-supervised minimum rate frameworks for motor insurance and transparent rate disclosure standards. Keywords: Insurance Pricing, Market Competitiveness, Premium Adequacy, Combined Ratio, Nigeria.