Evaluation of Critical Illness Insurance Product Design and Pricing in Nigeria

This study evaluates the design and actuarial pricing of critical illness insurance products available in the Nigerian life insurance market. Critical illness insurance, which provides a lump sum benefit on diagnosis of specified serious conditions such as cancer, stroke, heart attack, and kidney failure, addresses a significant protection gap in Nigeria's health financing landscape. The high and often catastrophic out-of-pocket cost of treating major diseases motivates demand for this product among middle-income Nigerians, yet market penetration remains very low. This study combines analysis of critical illness product terms and premium rates from seven Nigerian life insurers with incidence data for covered conditions from the Nigerian Institute of Medical Research and selected university teaching hospitals in Lagos, Abuja, and Enugu for 2018 to 2023. Actuarial pricing models are constructed using the incidence rate method and compared against published premium rates to assess pricing adequacy. Findings reveal that cancer, stroke, and cardiovascular disease are the most frequently claimed conditions, accounting for over 80 percent of critical illness claims. Premium rates for products reviewed are broadly adequate for cancer and cardiovascular disease but show potential under-pricing for stroke in older age bands. The study concludes that critical illness insurance is financially viable in Nigeria if supported by improved local morbidity data. It recommends that the Nigerian insurance industry commission a national critical illness incidence study to support evidence-based product pricing.

Keywords: critical illness insurance, product pricing, morbidity, Nigeria, life insurance.