Introduction

What happens when a market trader loses their goods to fire? Or when a roadside mechanic is hospitalized after an accident? For millions of Nigerians in the informal sector, such events can be financially crippling.

In a country where over 80% of the workforce operates in the informal economy, insurance is often viewed as a luxury. But in reality, it’s a powerful tool for financial protection, business continuity, and long-term security.

This blog post explores why insurance matters in Nigeria’s informal sector, the types of coverage available, and how traders, artisans, and small business owners can benefit from affordable insurance options tailored to their unique needs.

Understanding the Informal Sector in Nigeria

Nigeria’s informal sector includes small-scale traders, artisans, roadside service providers, market women, tailors, carpenters, hairdressers, drivers, and other micro-entrepreneurs. These individuals often work outside the formal economy, with no pension, job security, or health benefits.

According to the National Bureau of Statistics (NBS), the informal sector contributes more than 50% to Nigeria’s GDP and employs over 60% of the country’s labor force. Despite its significant impact, the sector is highly vulnerable to risks such as:

• Illness or accidents

• Fire outbreaks or floods

• Theft or loss of goods

• Legal liability

• Business interruption

Without insurance, a single unfortunate event can wipe out years of hard-earned income and assets.

Why Insurance is Essential for the Informal Sector

1. Financial Protection Against Unexpected Loss

Whether it’s a fire in a market or a burglary at a roadside shop, informal workers typically lack the savings to recover from such losses. Insurance helps cushion the impact by covering the cost of damages, thereby preventing total financial ruin.

Example: A tailor whose sewing machines are stolen can receive a payout to replace them, allowing her to continue working.

2. Access to Quality Healthcare

Many artisans and traders delay or avoid medical treatment due to the high cost. Health insurance offers affordable access to hospitals, drugs, and emergency care, reducing out-of-pocket expenses and improving quality of life.

3. Business Continuity and Resilience

Insurance provides a safety net that allows small businesses to bounce back quickly after disruptions. With the right coverage, they can repair damaged shops, replace stolen goods, and resume operations without prolonged downtime.

4. Encourages Savings and Better Financial Planning

Microinsurance plans often combine low premiums with simple savings schemes. This encourages informal workers to plan for the future while protecting against present-day risks.

5. Boosts Economic Growth and Credit Access

Insured businesses are seen as lower-risk borrowers. This increases their chances of accessing microloans, grants, or partnerships with formal institutions, thereby boosting business growth.

Types of Insurance Relevant to the Informal Sector

There are several types of insurance policies tailored to meet the needs of informal workers and microenterprises:

✅ Microinsurance

Microinsurance refers to affordable, simplified insurance products designed for low-income individuals. It offers protection against common risks like illness, death, fire, or theft.

• Premiums are low (as little as ₦500 per month)

• Coverage is specific and limited but practical

• Can be offered individually or through cooperatives or trade associations

✅ Health Insurance

Health plans—either through NHIA (formerly NHIS) or private HMOs—offer basic medical coverage, including:

• Outpatient consultations

• Hospital admission

• Surgery and emergency care

• Drugs and laboratory tests

Some HMOs have special packages for informal sector workers.

✅ Life and Accident Insurance

• Covers the policyholder in case of death or permanent disability

• Provides financial support to family or dependents

• Essential for breadwinners, traders, and transport workers

✅ Property and Fire Insurance

• Protects small shops, stalls, kiosks, or goods in transit

• Covers losses from fire, theft, or weather-related damage

✅ Third-Party Motor Insurance

For commercial drivers, keke riders, and motorcycle couriers, this is mandatory under Nigerian law and covers damages to third parties in an accident.

Common Challenges Preventing Insurance Adoption in the Informal Sector

Despite its benefits, insurance penetration in Nigeria’s informal economy remains low. Why?

❌ Lack of Awareness

Many people are unaware of how insurance works or how to access it.

❌ Mistrust and Past Scams

Fake insurers and unresolved claims have made people skeptical.

❌ Low Income Levels

Some workers believe insurance is too expensive or unnecessary.

❌ Complex Terms and Processes

Policies often contain confusing language or complex conditions that discourage sign-up.

❌ Limited Distribution Channels

Many insurers still focus on urban centers, leaving rural or remote communities underserved.

Innovative Insurance Models for the Informal Sector

To improve adoption, insurers are adopting new models that better fit the realities of informal workers:

🌐 Digital Microinsurance Platforms

Mobile apps and USSD-based insurance allow users to register, pay premiums, and make claims without visiting a physical office.

Example: Reliance HMO, Curacel, and other insurtech startups in Nigeria are making health coverage accessible via smartphones.

🤝 Partnerships with Cooperatives and Trade Groups

Insurers collaborate with market associations, savings groups, and cooperatives to offer group plans at discounted rates.

💼 Bundled Insurance Products

Some microfinance banks or mobile lenders offer built-in insurance with loans or savings products.

🔁 Flexible Payment Options

Daily, weekly, or monthly payment options make premiums affordable for workers with irregular income.

How Informal Workers Can Get Insured: Step-by-Step

1. Identify Your Risks: Consider what financial setbacks you’re most vulnerable to (e.g., illness, theft, death).

2. Choose an Insurance Type: Select from health, life, fire, accident, or microinsurance.

3. Research Trusted Providers: Look for NAICOM-licensed insurers with good reviews and clear terms.

4. Compare Plans and Premiums: Match your budget with available plans. Some insurers offer coverage from as low as ₦1,000 monthly.

5. Register and Pay Premiums: You can enroll via agent, mobile platform, or cooperative group.

6. Understand the Terms: Ask questions. Know what’s covered, exclusions, and how to file a claim.

7. Renew and Stay Consistent: Keep your policy active to enjoy continuous protection.

Real-Life Stories: How Insurance Changed Lives

Amaka, a Trader in Onitsha
Her shop was gutted by fire, but her cooperative-based fire insurance paid ₦150,000 for repairs and new stock. She resumed business in 2 weeks.

Isa, a Keke Rider in Kano
He enrolled in a micro health plan that saved his life after a road accident. His emergency surgery was fully covered, and he’s now an advocate for insurance.

Final Thoughts

The informal sector is the lifeblood of Nigeria’s economy. Yet, it’s also the most vulnerable to financial shocks. Insurance is not just for the rich or employed—it’s a vital tool for protecting your hustle, your health, and your family’s future.

As insurers continue to design more inclusive, digital, and affordable products, it’s time for traders, artisans, and small business owners to embrace the protection and peace of mind that insurance offers.

Don’t wait for disaster—prepare ahead. Insurance is not an expense; it’s a safety net.

Are You an Artisan or Small Business Owner?

Let us know in the comments which type of insurance you think would benefit you most. Need help choosing the right plan? We’ve got you covered—reach out today.