InsurTech: A breath of life into the Nigerian insurance sector?

InsurTech: A breath of life into the Nigerian insurance sector?

According to a report by Mckinsey, more than 200 financial technology (fintech) companies operate in Nigeria as of 2021. This technology is progressively making its way into the insurance sector, introducing innovative business models and digital distribution to appeal to the young, tech-savvy generation.

Nigeria has one of the lowest insurance penetration rates in the world. Despite being the largesteconomy in Africa, the country ranks worst in terms of Gross Premiums as a percentage of GDP, at 0.5 per cent. However, as insurtechs gain traction, that grim picture appears to be changing.

Nigeria is developing as a potential insurtech hotspot for entrepreneurs, driven by secular trends such as increasing mobile penetration and a youthful and more tech-savvy populace, which has supported growth in the broader tech space.

From life insurance to vehicle insurance to crop insurance for farmers, insurtech refers to digital and technology-driven products that protect individuals and organisations against financial loss.

Insurtechs in Nigeria operate across the value chain, providing access to and distributing insurance products and, in some cases, underwriting insurance. For example, Curacel's AI-powered platform helps insurers automate claims and track fraud, waste and abuse (FWA). At the same time, Casava offers income protection insurance to protect workers in the event of job losses.

However, the bulk of insurtechs operates along with the distribution link of the value chain due to the large capital requirements required for underwriting. They design products that assist insurers, banks, and other organisations in expanding current insurance lines or developing new ones that serve as additional income streams, improving product uptake for the core service.

According to a recent survey by Deloitte, incumbent insurance firms continue to dominate in Africa, but insurtechs are being heralded as the new and flexible way ahead. Insurtech promises to shorten the time it takes for innovative goods to reach the market, lower the cost of service, and
open up previously untapped markets.

Against this backdrop, insurtech's growth potential is unmistakable. According to Agusto & Co., the insurance sector's Gross Premiums remained steady at N520 billion in 2021, indicating that the environment desperately needs growth drivers. With the rise of insurtech companies and the vast
possibility for collaboration across the insurance value chain, the sector may be given a fresh lease of life.