Fuel costs push motorists towards cheaper insurance cover

Rising petrol and diesel prices are beginning to reshape motor insurance demand as motorists and businesses under pressure from higher vehicle operating costs increasingly consider cheaper third-party policies instead of comprehensive cover.

Executive Director, Finance and Investments, Consolidated Hallmark Insurance Limited, Katherine Itua, said sustained increases in energy costs were likely to have their clearest effect on motor insurance, as customers reassess expenses and opt for minimum mandatory cover where comprehensive policies become harder to afford.

“Motor insurance is more directly affected. As fuel and vehicle running costs rise, more customers are likely to choose third-party cover over comprehensive policies because it is more affordable,” Itua said in an interview.

The shift could have implications for the wider insurance market because a growing preference for third-party cover would change the composition of risks insurers underwrite and could influence future claims patterns and pricing.

Unlike aviation, oil and gas and marine insurance, where regulatory requirements impose minimum levels of cover, motor insurance gives consumers more room to adjust the extent of protection they purchase as household and business budgets come under pressure.

The development comes as petrol prices have risen to around N1,400 per litre in parts of Nigeria, adding to the cost of commuting, goods distribution, field operations and other activities dependent on road transport.

For motorists, the financial squeeze extends beyond fuel. Vehicle maintenance, spare parts, repairs and insurance all compete for the same household or business budget, increasing the likelihood that some owners will prioritise immediate operating expenses over broader insurance protection.

Itua, however, said the higher energy costs had not materially weakened Consolidated Hallmark Insurance’s financial performance because the company had budgeted for petrol prices of about N1,500 per litre for 2026.

She said petrol prices at the time of preparing the budget were around N1,100-N1,200 per litre, while diesel was projected at about N2,000 per litre. The company has responded by increasing its reliance on solar power and upgrading its solar inverter system to reduce exposure to fuel-price volatility.

The strategy reflects a wider shift among businesses seeking to make energy expenditure more predictable as conventional power costs rise.

Itua said insurance companies also face limits in passing higher operating costs directly to customers because insurance is typically a need-driven purchase rather than a discretionary product.

Instead, Consolidated Hallmark is relying on automation and efficiency measures to contain costs, while investing in alternative energy to reduce long-term dependence on generators.

The company is also expanding its marketing workforce, a move expected to increase fuel expenses as more staff travel to generate business. Itua said management expects the additional revenue from the expansion to outweigh the associated operating costs.

The emerging pressure on motor insurance highlights a broader economic effect of rising energy prices: when fuel becomes substantially more expensive, consumers and businesses do not simply spend more on transport. They begin reassessing other financial commitments, changing purchasing behaviour across sectors.

For insurers, that could mean a growing market for basic third-party cover, but a more challenging environment for comprehensive policies as motorists seek to lower the total cost of keeping vehicles on the road.