Joy Agwunobi

Nigeria’s insurance industry is entering a make-or-break moment. Sweeping reforms, including the passage of the Nigerian Insurance Industry Reform Act (NIIRA) and fresh regulatory directives from the National Insurance Commission (NAICOM), are reshaping the sector. But at the centre of it all looms a July 2026 recapitalisation deadline that will compel insurers to meet new minimum capital thresholds. For many operators, this means rethinking balance sheets, restructuring operations, or seeking new investors to stay afloat.

The reforms are designed to modernise the industry, repeal outdated laws, and build stronger operators capable of earning trust in a market long plagued by low penetration and scepticism. Yet, while regulatory frameworks and capital requirements are critical, industry stakeholders warn that the biggest challenge extends beyond legislation and lies in the urgent need to capture the imagination of Nigeria’s youthful population, who remain largely absent from insurance coverage despite driving adoption in fintech, e-commerce, and entertainment across Africa.

Regulation and pressure for change

The NIIRA, widely described as a landmark reform, updates the legal foundation of insurance practice in Nigeria. NAICOM has reinforced this push by tightening guidelines around claims settlement, and the law has significantly strengthened the commission’s capacity to oversee and enforce compliance across the industry.

The new legislation gives the regulator teeth to act decisively, providing clear legal backing for enforcement actions and allowing it to intervene effectively whenever there is a breach. But the recapitalisation directive, which raises capital floors for insurers, is proving to be the most pressing development. By July 2026, firms must comply or risk losing their licences, sparking fears of consolidation, mergers, or outright exits.

While some industry experts argue that stronger capital bases will stabilise the sector by ensuring companies can absorb shocks and honour claims more reliably, others warn that without parallel strategies to improve awareness, affordability, and accessibility, recapitalisation could simply reduce the number of operators without resolving the deeper trust deficit that keeps insurance penetration below two percent of GDP.

The youth paradox

This trust deficit is particularly common among Nigeria’s youth, who make up the continent’s largest demographic force. Over 65 percent of Nigerians are under 35, spanning millennials and Gen Z, a group that is digitally savvy, entrepreneurial, and globally connected. They are powering fintech adoption, shaping music and film industries, and embracing digital marketplaces. However, they remain largely distant from insurance coverage, in part because many young people find insurance simply unrelatable.

At the Insurance Meet Technology (IMT) 4.0 event in Lagos, speakers agreed that bridging this gap is vital. Odion Aleobua, chief executive of Modion Communications and convener of IMT 4.0, emphasised the need for generational inclusivity in shaping the sector’s future. “Sixty-five percent of Nigerians are millennials and Gen Z. If we are thinking of strategy, we want young people to help shape it. Over 100 million of them are online, connected, and entrepreneurial. Insurance must innovate with them to remain relevant,” he said.

But how can insurers design solutions that resonate with a generation accustomed to seamless digital experiences and instant value?

Behavioural technology and co-creation

Per Lagerstrom, chief executive officer of Yellowspot, argued that the answer lies in behavioural technology. Speaking at the event, he described it as a tool that allows insurers to engage with customers in real-time, capturing their thoughts, feelings, and expectations. 

“What behavioural tech does is that it allows us to truly listen to consumers for the first time,” he said. “If we can have conversations with millions of them and hear how they think and feel, we can co-create and innovate directly with consumers instead of guessing. That makes insurance more relevant and trusted.”

According to Lagerstrom, consumers rarely buy insurance for the sake of having a policy. Instead, they respond to solutions that address tangible needs. “The current models are outdated. Consumers don’t buy insurance products; they buy solutions,” he stated. In his view, future distribution will be dominated by data-rich and trusted platforms, rather than legacy intermediaries.

This is a call to move beyond transactional policies toward embedded, lifestyle-integrated coverage. In a follow-up televised interview, Lagerstrom expanded on this vision: “Insurance tends to be a grudge purchase; people don’t want to pay for something before a risk event happens. But when insurance is embedded within solutions  like a phone subscription that includes airtime, data, and device protection  it becomes easier for consumers to accept. That is a far stronger proposition than pushing a standard policy.”

Raising literacy and digital engagement

For Abimbola Onakomaiya, president of the Professional Insurance Ladies Association (PILA), raising financial literacy among young Nigerians is critical to unlocking insurance growth. She argued that digital tools must be central to this effort. “We must equip them to manage risks using digital platforms, data analytics, and personalised solutions that enhance customer experience,” she said. 

Onakomaiya urged insurers to leverage growing internet penetration and smartphone adoption not only to sell policies but also to expand savings, investments, and wealth creation opportunities. This will strengthen businesses and ensure insurance takes its rightful place in Nigeria’s financial ecosystem,” she added.

Her perspective underscores a broader truth: Nigeria’s youth are not resistant to financial services; they are selective. They embrace what speaks to their aspirations  whether digital banking, ride-hailing, or e-commerce and experts have stressed that insurers must find ways to make risk protection equally appealing.

Technology, AI, and the reshaping of the value chain

If behavioural insights and literacy are the immediate tools, artificial intelligence (AI) is the long-term force that could redefine the industry. Lagerstrom sees AI as both an efficiency driver and a catalyst for structural change. “Incumbents have realised that they need AI for both productivity improvements and new growth opportunities. That means we are going to see a wave of M&A activity in Nigeria in the coming years, with established insurers acquiring startups and scale-ups to remain competitive,” he said.

While AI stirs concerns about job displacement, Lagerstrom argued that history suggests more transformation than net losses. “Whatever can be automated will be automated administrative roles will change, but history shows us that innovation creates new opportunities. Some roles will disappear, but this is more of a shift than a net reduction,” he noted.

Looking ahead, Lagerström projected a seismic transformation in Nigeria’s insurance landscape within the next few years, driven largely by technology and structural shifts in the industry.

According to him, two key forces will redefine how insurers operate. First, the deployment of artificial intelligence (AI) is revolutionising risk assessment, enabling insurers to price risks with far greater accuracy at the individual level than was ever possible in the past. This shift, he explained, will reshape underwriting and customer engagement, creating opportunities for more personalised products and competitive pricing.

The second force, Lagerström noted, is the unbundling of the insurance value chain. Traditionally, the industry operated under a vertically integrated model, where product manufacturing, distribution, and servicing were all housed within one entity. That structure, however, is being dismantled. “The reshuffling of these building blocks is going to lead to a fundamentally different insurance landscape,” he stated, adding that the rise of specialised players and digital platforms is accelerating this shift.

Beyond these changes, Lagerström also pointed to the growing convergence of insurance with other sectors, such as telecommunications, retail, and banking. He suggested that this cross-industry bundling will further disrupt the traditional insurance model, opening the door to innovative partnerships, integrated services, and expanded distribution channels that bring insurance closer to consumers.

In Nigeria’s insurance landscape, the looming recapitalisation deadline may be the immediate catalyst, but the longer-term transformation is being driven by behavioural insights, digital innovation, artificial intelligence, and the demographic realities of a youthful population. However, a fundamental issue remains whether these reforms and technologies will translate into real penetration and trust. For decades, Nigerian insurers have carried reputational baggage, marked by delays in claims settlement, opaque terms, and limited reach. New laws and higher capital thresholds may strengthen institutions, but the real measure will be whether they succeed in bringing more uninsured Nigerian youth under the insurance net.

As Aleobua cautioned, outdated regulations cannot simply coexist with modern technology. To unlock innovation while protecting consumers, Nigeria needs sandbox environments and forward-looking frameworks that encourage experimentation without compromising trust.

“We need sandbox environments where new models can be tested,” he said. “If you blend outdated regulations with modern technology, you get a problem. The goal should be to protect consumers while allowing innovators to thrive,” he said.

Ultimately, the future of Nigeria’s insurance sector will not be measured by how well companies comply with capital thresholds or how many mergers. Its true test will be whether insurers succeed in embedding themselves in the lives of young Nigerians,not as abstract policies on paper, but as practical solutions woven into daily experiences. For an industry facing its most disruptive moment in decades, that challenge also represents its greatest opportunity.