Nigeria’s auto insurance industry is under pressure over soaring costs of vehicle spare parts replacement, driven by recent naira depreciation and inflated claims expenses.

Insurance companies said the increasing cost of replacing damaged parts has led to a surge in claims settlements, particularly in comprehensive motor insurance, putting pressure on their underwriting margins and policy pricing.

During a visit to Ladipo Market at the weekend, one of West Africa’s largest automobile parts hubs, it was revealed just how steep the prices of spare parts have increased in the past.

Speaking with The Guardian, a spare parts dealer with over 12 years in the market, Emeka Eze, said, “We used to sell a Corolla bumper for N35,000 last year. Now, it is N70,000 to N85,000 today, depending on the model.”
For him, it is not just the prices that have changed. He said it is also difficult to get dollars to restock.

Eze noted that most of the parts are imported. With the naira now exchanging at over N1,500/$, he said, costs have doubled or tripled in some cases in less than three years.

Vehicle owners are equally frustrated, complaining that underwriting firms are struggling to meet claims in real-time or are adjusting settlement offers below market value.

“I renewed my comprehensive insurance last year for N120,000. After my car was hit last month, the insurer said they could only approve N60,000 to fix a front fender that now costs almost N100,000,” lamented Mrs. Tayo Ogunleye, a Lagos-based banker.

“I am now considering switching to third-party cover. What is the point if they can’t keep up with reality?” she asked.

An underwriter who spoke on the development over the weekend confirmed that the rising costs are affecting how claims are paid.

“We are seeing a significant increase in the average claim size,” said an underwriter at a leading composite insurance company who requested anonymity.

“We are now reviewing premiums for certain vehicle categories, especially high-value and imported models,” he added.

The Nigeria Insurers Association (NIA) recently stated that the motor insurance segment has one of the highest claim ratios in the industry. As more Nigerians lean toward used cars (Tokunbo) due to high import duties on new cars, the demand for quality second-hand parts has also surged.