Data Revolution: How ready are Nigeria insurers?  

By Zainab Iwayemi

The world has gradually evolved into a digitalization tage, putting information at fingertips of people. This has impacted our everyday life as technology has made it possible to acquire a certificate without stepping within the four walls of a classroom, and sales transactions could be completed within the comfort of homes. What’s more? As data revolution continues to grow, the use of technology has eased work for people in various professions – medical practitioners, journalists, insurance professionals, and others.

 Data Revolution and how it has improved sectors

Basically, Data Revolution means an opportunity to improve the data that is essential for decision-making, accountability as well as solving development challenges such as: exploring new technological possibilities with the aim to produce statistics; enhancing data accessibility and openness; capacity building in the system of national statistics; and building the baseline and monitoring framework for the future agenda.

In recent times the world has witnessed growth in data revolution which has led to speed in data production, the number of data producers, data quality, data dissemination and receivers of data, and growing demand for data. This development has triggered growth in many sectors of the economy for many nations who are able to utilize the essence of it.

Data Revolution makes it possible to forecast the future through available information. Without data, we cannot know how many people are born and die, how many citizens suffer from poverty, the number of mal-nutrient children, how many people are dying of HIV; and this would make it impossible to calculate how much we need to stress on awareness and campaign for education, need for healthy environment, and determine the progress of government and individual efforts.

With the availability of data online, it is quite easy for a law enforcement agency to verify the criminal history of an individual without having to check through files. Medical practitioners could get more information about their patients; banks also utilize this to fast-track customer transactions.

Data revolution in the insurance industries

Over the years, the wave of revolution in data has gradually swept across the insurance sector, thus improving the customer-insurer relation.

In terms of car insurance, the traditional insurer has no form of evaluating speed, vigilance, responsibility of car drivers on the road and the implication is that the most careful person is tasked the same premium amount as a reckless driver. This is even worse for businesses with a fleet of cars, as a small increment in price would equate large amount of money as premium. Most traditional insurance follows a generalization made about their personal background as an approximate proxy for risk which includes – age, gender, and their nationality.

In developed countries, however, the advent of telematics has put an end to worries of car drivers as insurance premiums are no longer based on generalization. Now, the industry can provide customers with an accurate and fair policy, which is based on their true risk on the road and how they really drive.

Telematics helps to monitor and gather vehicle location and activity data through GPS. This enables insurers to track speed, hours spent in the vehicle, customers driving period, including the routes they take.

Advance in technology can also help shape the way that claims are managed. By using data collected following an accident, claims handlers will have access to an unbiased, factual account of the incident, enabling them to reach an informed decision quickly and fairly. The faster a claim is closed, the more cost savings for both the driver and insurer.

How Covid-19 has contributed to accelerating the insurance industry

As much as Covid-19 has dealt with the global economy, the pandemic has also opened the eyes of industries to implementing working-from-home pattern. Insurance companies at this time had to key into the trending style, thus accelerating its digitization plans as paper-based processes and in-person meetings were hardly an option.

For insurance, companies like Zurich Insurance Group, which was already in the process of digitalizing insurance before the pandemic broke out, the lockdown compulsion served as a trigger to stepping up their games. Others have, however, learned and digested the key take home – in order to build operational resilience, businesses must be able to operate from anywhere.

In the aspect of life insurance, for many, the lockdown mandate has taken off the table, medical life insurance exams, as insurers are gradually imbibing accelerated underwriting, a process that uses algorithms instead of exams to evaluate applicants.

A study by the Society of Actuaries shows that although accelerated underwriting is not a new one, more than a third of life insurers have tapped into it due to the pandemic as life insurance exams appeal to not so many people. Everyone likes it to be fast and easy.

The traditional buying of life insurance is a lengthy process involving bloodwork, urine samples, and long waits for approval. This changed as the world grows in big data. What insurers need to do now is to check your prescription drug history and data.

Algorithms combine other non-medical data such as, credit history, driving record, and shopping habits, to determine quickly, eligibility and cost of coverage; although, it is still expected that the data trend would continue to grow.

How prepared are Nigeria insurers to embrace Data Revolution?

The Nigerian insurance industry has recorded low performance in the insurance sector. This is obvious in the Insurance Penetration Rate (IPR), which represents a country’s total gross premium income as a percentage of its gross domestic product.

Record shows that despite Nigeria, being the largest economy in Africa, the insurance premium penetration, rate is 0.7% of GDP, a position which ranks the country 87th in the world. This shows that there is a need for Nigeria to focus on policies that would improve the insurance sector, part of which is to enhance data revolution in the industry. But the big question is: Does Nigeria have what it takes to fuel growth in the insurance industry?

The condition for successful adoption of telematics calls for favourable networks and government policies, good roads, advancement in technology, better atmosphere and a host of other things, which Nigeria still struggles to attain.

Pius Apere, an insurance expert and the chief executive officer of Achor Actuarial Services Limited, asserts that Nigeria still uses the traditional broker focused strategy rather than the clients’ focused, as a result of inadequate capital resources and backward technological advancement. He also highlighted the need for innovative product and staff recruitment training as a push factor for growth in the industry.

“The main reason for adopting the brokers’ focused marketing strategy could be attributed to the lack of adequate capital resources to fund clients’ focused marketing strategy which requires a simple, creative, and value-added insurance product range.

“The later strategy also requires the use of technology (telemarketing, online marketing, social media, etc.) to eliminate the sales of fraudulent insurance products (e.g. fake third party motor policies) and/or use a large direct salesforce for the mass market, with the overall effect of improving the insurance penetration rate.

“It is noteworthy that acquiring the necessary technology will not automatically translate to efficient service delivery, as financial inclusion requires attending to the needs of the lower end of the pyramid through innovative products and the right staff recruitment, training and retaining policy,” Apere said.