Effect of motor insurance claims settlement on insurance penetration in Nigeria was evaluated. Motor insurance is a contract that promises to pay financial compensation upon a loss resulting from the use of an insured vehicle. Loss occurrence triggers the claims clause. The policyholder subsequently, request’s the insurer to pay for the financial cost. In Nigeria, third party motor insurance is the minimum compulsory requirement to use a motor vehicle on the public road. The aim of this study is to explore the effect of motor insurance claims settlement on insurance penetration. Data sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin 2017 was used. Regression analytic tool was adopted in the data analysis while Ordinary Least Square (OLS) was employed to test the hypothesis. The investigation discovered that, motor insurance claims settlement affect insurance penetration positively and concludes same that, payment of motor insurance claims deepens insurance penetration. This study recommends that insurers should improve their motor claims settlement strategy through the adoption of modernized technology to guarantee financial security of life and property of the third party.