If the moves by insurance technology (Insurtech) companies are anything to go by, there are glimmers of hope for the insurance industry, which has suffered neglect over the years.

While insurance has not been embraced fully in Nigeria owing to several challenges, including poor awareness and commitment to premium payments as and when due, Insurtech firms are eyeing fresh business opportunities in the sector with modern technology to drive insurance services to under-served Nigerians to expand the sector’s N726.2 billion premium financial gains.

Using innovation to find cost savings and efficiency from the current insurance industry model to improve product sales and simplify the claims process for consumers in the market, Insurtech is a combination of the words “insurance” and “technology,” inspired by fintech.

Insurtech is premised on the belief that the industry is ripe for innovation and disruption. They have expressed readiness to explore avenues that underwriting firms have less incentive to exploit, such as offering ultra-customised policies, social insurance and using new streams of data from Internet-enabled devices to drive price premiums according to observed behavior. They are also targeted to bridge the long poor insurance penetration rate of 0.5 per cent, which makes the total assets of the sector, at N2.33 trillion, remain stagnant in the last decade.

While the industry assets managed to grow at an average of 12 per cent for the same period, from an asset base of N827.5 billion in 2014 to N2.33 trillion in 2022, industry premium income between 2014 and 2022 grew at an average of 13.6 per cent, from a premium income of N282 billion to N726.2 billion as of today.

Over the years, Nigeria’s insurance market has lagged in the adoption of modern technology to drive services and to improve on the contribution of its quota maximally to the country’s Gross Domestic Product (GDP). The industry has always depended significantly on manual processes and paperwork. Insurance companies, on the other hand, are progressively penetrating the market, bringing innovation to underwriting, claims processing and consumer engagement. Insurtech businesses use data analytics, Internet of Things (IoT) devices and artificial intelligence to improve risk assessment, enabling more personalised insurance plans to streamline claims procedures, reduce fraud and increase transparency among underwriting firms.

Currently, the narratives surrounding making a purchase of insurance products and making claims requests through social media platforms in Nigeria have drastically changed, with the emergence of Insurtech firms, who are emerging with bold ideas.

Before, the insurance industry had a poor public image, negative perception and lack of consumer trust due to companies’ inability to provide adequate services (poor claims management). Perceived as being quick to collect premiums but slow/unwilling to respond to claims, a demonstration of a lack of professionalism by some underwriting firms, agents, and brokers, these and many more make consumers averse to insurance, leading to a negative perception of the industry. Also, low disposable income makes the household’s expenditure on insurance rank low on the scale of preference.

Cape Town-based Insurrection Company, recently said it has sold over 100,000 policies via its proprietary chatbot since inception, with 85 per cent of sales concluded without any human intervention. According to a global insurance market report, insurance penetration for Nigeria and South Africa stands at 0.5 and 12.2, respectively. While economies like Kenya (2.9) and Ghana (1.2) have low insurance penetration rates, Nigeria has the lowest figure comparatively, despite being the largest in Africa.

Speaking with The Guardian, General Manager, Turaco Nigeria and Turaco Inclusive Limited, Toba Obaniyi, said while the banking system was disrupted by fintech, that type of evolution is just starting within insurance.

He said most underwriters and microinsurance intermediaries still use clunky systems that cannot be integrated with those of external partners, with some still using paper-based processes.

According to him, as an insurtech, the firm leverages technology to increase access to insurance by unlocking new distribution channels to the mass market, cost-effectively. Importantly, he said technology can dramatically reduce the cost of administering and servicing insurance which helps keep premiums low and affordable for the mass market.

Commenting on the projection about the penetration in the next decade, he said as a mass-market insurance provider, coverage is key. According to him, the fact that few Nigerians have insurance is not a reflection of demand but rather access and affordability.

“When we call potential customers in Nigeria, we see conversion rates of upwards of 50 per cent. This demonstrates the high demand for products that are affordable, simple and demonstrate value by paying claims and paying them quickly. People want to buy insurance but do not have the right products available in easy-to-buy ways. Insurance products have to be designed and distributed differently to unlock the under and unserved market, ultimately increasing coverage.”

Reacting to claims payment likely affecting Insurtech operations, he said that claims are processed directly and materially impact the trust customers have in insurance. According to him, gaining and retaining customer’s trust is important as most are first-time insurance holders, saying: “To ensure effectiveness, we leverage technology to process and facilitate payment of claims in less than three days, enabling customers to manage the entire claims process via WhatsApp. Leveraging our fraud-scoring algorithm, most claims are paid within hours.”

Speaking on why penetration remains low in Nigeria, Assistant Director, Complaint Bureau Life at the National Insurance Commission (NAICOM), Augustina Onojake Steve, in a paper delivered at an industry forum, ‘Re-awakening the Nigerian Insurance Industry Through Claims Settlement’, presented an overview of the challenges insurance firms face in dealing with prompt claims settlement.

While she tracked the key issues associated with late claims settlement, she also maintained the need for companies to provide leadership through integrity and ensure the industry’s image is intact.

According to her, loss awakens the minds of the insuring public towards their insurer, as many consumers pay little attention to their insurance coverage until they have a loss.

Also commenting, Head of Heir’s Life Insurance, Michael Kalu, said there needs to be an investment in ‘the systems that enable the industry to meet innovation’s demands.’ He maintained that insurance should be more user-friendly through technology applications that people use every day. He also gave examples of how insurance can be sold via WhatsApp.

Insurance experts who converged at the just concluded Insurance Meets Tech Conference 2023 (IMT 2.0) held in Lagos, agreed on the need to drive financial inclusion, bringing together the forces of tech guys and insurance. Delegates advised regulators to collaborate with innovators to identify barriers to innovative solutions within the industry. Calling for stringent regulations for underwriting firms, they stressed the need for tech service providers to be fearless in developing sales channel solutions that facilitate market penetration.