Insurtech is driving direly-needed change in Nigeria’s insurance sector

By Olivia Nnorom

Insurance penetration in Nigeria has for long remained abysmally low at below one percent as a result of, among other factors, the inability of operators in the sector to leverage the huge potentials inherent in the insurance markets. This has continued to be a concern to industry stakeholders.

Due to a risk-averse culture, the insurance sector has mostly stayed unchanged for decades. The sector is perhaps not particularly amenable to change. Some industry watchers say for long it was not a competitive market where new competitors could readily enter.

Despite the many uncertainties inherent in the Nigerian environment which should drive insurance buying, the rigid nature of insurance in the country made insurance policies one of the most difficult items to sell to Nigerians. Added to this is the fact that many young Nigerians struggle financially, making it difficult to offer them insurance, which for some of them is an expensive luxury, especially if the contract is in accordance with the old ways of doing things, where the insured forfeits the premium paid in the event of safety of life or property through the cover period. However, the adoption of insurtech is gradually changing the narrative.

The coming of insurtech, a coinage that combines insurance and technology, is reshaping Nigeria’s insurance landscape, driving competition and challenging traditional structures to significantly improve access to insurance. Insurtech enhances the customer experience, promotes efficiency, emphasises individuality, improves flexibility, and reduces operating costs. Leveraging data, analytics, trend analysis, and machine learning, insurtech companies may also be able to detect fraudulent activities if inconsistencies in data arise.

Insurtech companies are introducing consumer-centred apps into the insurance markets at an unprecedented rate, bettering customers’ experience while also deepening insurance penetration. Analysts say this is laudable, particularly when appraised from the backdrop of the fact that Nigeria’s insurance market has a young population and a rapidly growing middle class.

Insurtech startups are also making inroads into the area of the largest insurance companies, which are starting to alter their business strategies. A number of Nigerian insurtech startups have made significant contributions towards reducing the challenges encountered in traditional insurance.

For instance, Octamile is an insurtech startup that offers infrastructure solutions for the provision of digital insurance in Nigeria. The startup offers an end-to-end claims management solution that can be integrated into the existing systems and processes of insurance providers. This enables organisations to provide a seamless claims experience while reducing administrative costs.

Also, Octamile provides data, sourced from its diverse partners, which providers can leverage for improved risk profiling and pricing of customers’ assets to optimise the profitability of their insurance portfolio.

“Insurance can be easily consumed if provided at the point of particular need. With our APIs, all types of businesses can easily embed insurance as a feature while we do all the backend and paperwork,” said Gbenro Dara, founder of Octamile, stressing that insurance driven by technology and connectivity has the power to elevate Nigeria’s economy.

Last December, Octamile announced the raise of $500,000 in pre-seed funding, after which it exited stealth mode and fully launched to help both insurance and non-insurance businesses protect African consumers from financial losses. The funding round was led by EchoVC with participation from Fiat Ventures, Kesho VC, Trade X, Verraki Partners, Dale Mathias, Kyle Daley (founding team member of Chime), and other local and international angel investors.

Pay-U is another insurtech platform focused on providing affordable, flexible, cheap and honest pay-as-you-use motor insurance for Africans through building trust, by taking off motor insurance onboarding and claim off human intervention. With Pay-U, the value of an individual car determines how much they pay per minute and users could pay as low as 70 kobo per minute and as high as N10 per minute as the minute starts reading once the app is on.

The platform is designed to solve users’ pain points on pricing, control over onboarding and claim, thereby putting full control over where and when to place a cover on a car in the hands of the users.

ETAP, an insurtech startup which thinks insurance shouldn’t be a stand-alone offering, has a goal to make insurance attractive to Nigerians.

“What we’ve done with ETAP is make insurance enjoyable for people by reimagining the entire process. We’ve built ETAP in a way that customers can insure their car in 90 seconds, get their claims settled in three minutes, and more importantly, get rewarded for driving safely,”  said Ibraheem Babalola, ETAP founder and CEO.

To achieve this, ETAP chose to gamify the process, where users can access offerings through a mobile app and see their driving scores for every trip. Scores are weighed by how safely a user drives, observes factors such as risk, phone handling and navigation. The higher the user’s driving score, the lower the renewal premium. This approach aims to reward safe drivers and encourage them to purchase insurance, Babalola said.

Users also earn points for driving safely, which they can use to make purchases on SPAR, Jumia, Shoprite, and other brands on the platform. There is also a leaderboard that shows the platform’s safest drivers. Additionally, users can request emergency services when they get into accidents while they have the option of insuring their cars daily, weekly, or monthly.

To increase adoption, ETAP has partnered big telecommunications companies like MTN Nigeria to allow users access the ETAP website without using their existing data balance.

These are but a few examples.

While insurtech firms have merely scratched the surface of Nigeria’s insurance market potential, the mileage covered so far has shaken up the insurance industry as a whole. Industry observers say regulators and insurance companies are now awake and ready to harness the potential in the industry by partnering insurtech firms and/or expanding to accommodate technological changes themselves.

Quite a significant number of traditional insurance companies in the country are leveraging insurtech apps to improve customer experience across insurance markets. Prominent among there are the FBN Insurance Mobile App, with which customers can access their insurance policies portfolio with ease, report claims, make payments, and carry out other necessary transactions; AllianzNG Mobile App of Allianz Nigeria Limited; Cornerstone Insurance App; Aii Agent owned by AIICO Insurance Plc; Wapic Mobile App of Wapic Insurance Plc; MyAXA Mobile App of AXA Mansard; MyLife+ Mobile App of Leadway Assurance Plc, and many more.

Beyond this, AXA Mansard Insurance Plc, a member of AXA Group, a global insurance and asset management, also launched its insurtech accelerator initiative, tagged ‘The Innovation Exchange Programme’, through which it planned to deepen insurance coverage in Nigeria. The programme was designed to leverage the development of insurtech solutions and extend, commercialise and scale them to support seamless sales, claims management, technical underwriting, customer management, and payment of insurance services in various market segments.

Nigeria’s insurance industry regulator, NAICOM, partnered FSD Africa to organise a 10-weeklong BIMLAB insurtech acceleration programme designed to support Nigerian insurtech startups that are building innovations in micro-insurance and digital brokerages, B2B data analytics supporting the insurance sector, developing ancillary revenues and insurance add-ons to micro, small and medium enterprises (MSMEs), and SaaS solutions addressing verticals such as agriculture, cyber and climate change. The programme saw the participation of 10 insurtechs that are keen on changing the narrative of insurance in Nigeria over the years.

Although some traditional insurance companies are not fully convinced yet about the suitability of insurtech techniques to the sector, they are actively seeking ways to increase penetration in the industry. Analysts say one thing is clear, that with the coming of insurtech, Nigeria’s insurance industry will never remain the same.