Analysts show how AI will shape Nigeria’s insurance, pension sectors

Business a.m. 

Despite recent progress in the Nigerian insurance and pension sectors, the country’s insurance penetration rate remains low, at just 0.4 percent of the population. Meanwhile, the Contributory Pension Scheme (CPS) has only reached around 10.2 percent of the working population. While these figures represent a degree of progress, experts believe that the adoption of AI could lead to a significant leap in penetration rates in both sectors

The potential of AI for the insurance and pension industries in Nigeria was a major topic of discussion at a recent gathering of financial industry experts and stakeholders in Victoria Island, Lagos. While experts at the conference were quick to praise the progress made in these sectors, they also stressed the need to fully explore the potential of AI in boosting growth. The experts highlighted the fact that AI can help insurance and pension providers to reach more customers, offer more innovative products and services, and streamline operations.

Johnson Chukwu, the chief executive officer of Cowry Asset Limited, said that the untapped market potential in the pension and insurance sectors in Nigeria presents a significant opportunity, particularly in the mass market. Chukwu explained that AI is a technology that can simulate human intelligence into a machine, allowing it to perform routine tasks at a faster rate.

Chukwu discussed Access Bank as a case study, highlighting how the bank’s assets and profitability far exceeded that of the entire insurance industry in Nigeria in 2023. He pointed out that the insurance industry could reach a similar level of success in a few years if it adopts AI technology. 

According to the financial markets expert, AI can address the negative perceptions that Nigerians have about the insurance industry, particularly around claims payments. He said that by using AI to make insurance policy subscriptions and claims payments faster and easier, the industry can build trust and confidence among Nigerians, ultimately leading to the growth of the insurance sector. 

The Cowry Asset chief noted that the adoption of AI by the Nigerian insurance industry can have several benefits, including improving customer experience, building trust and confidence, improving service quality, and reducing costs. He stated that AI can transform the industry by addressing key challenges, disrupting the status quo, and optimising risk management processes. 

He also pointed out that the use of AI could support the provision of pension services to the mass market, as the needs of this segment tend to be more uniform.

Chukwu further pointed out that AI would help to increase service efficiency by reducing cycle times, allowing for faster execution, improved accuracy, and increased flexibility and scalability. Additionally, it would help to improve productivity and reduce operational costs. 

Chatbots and virtual assistants, Chukwu noted, can be used to improve the customer experience by providing round-the-clock support for basic advice, billing information, and common questions and transactions. In addition, AI can be used to recapture customer data more effectively, and can even analyse investment portfolios and recommend actions such as buying, selling, or holding. He added that the need for convenience and efficiency is driving the advancement of AI, and that businesses and industries that want to remain competitive will need to embrace AI as an integral part of their operations.

“Micro-insurance and micro pensions are a mass market. AI will cut the cost of selling insurance for underwriters and pension for the Pension Fund Administrators (PFAs) as it will improve customers experience, reduce cost, engender confidence in both industries. It is obvious the Nigerian insurance industry needs disruption through AI,” he said.

Sharing a similar sentiment, Edwin Igbiti, the president of the Chartered Insurance Institute of Nigeria (CIIN), noted that the utilisation of AI in the insurance sector would boost insurance premium growth, improve service delivery, and increase the insurance sector’s contribution to the country’s GDP. Igbiti noted that insurance penetration is still very low in Nigeria, despite the sector’s enormous potential, and called for the adoption of AI-driven innovations to drive growth. 

Nkechi Naeche-Esezobor, managing editor, BusinessToday Communication Limited, had earlier set the tone in her opening remarks by highlighting the importance of the conference’s theme, “Exploring Opportunities for Market Penetration in the World of Insurance and Pension”. She emphasised the need for both sectors to find ways to improve customer value and service delivery, as well as to increase market penetration.

Naeche-Esezobor noted the potential for AI to transform the insurance industry which recently hit a N1 trillion premium milestone, observing that AI can significantly improve underwriting, customer support, advertising, claims processing, and fraud prevention, making the industry more efficient and customer-centric, while also lowering costs and boosting profitability.