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Nigeria: Covid-19 pushed insurers towards digitalisation

By David Whitehouse, Ruth Olurounbi
Posted on Monday, 3 May 2021 15:47

Cars drive past an MTN advertisement in Lagos. (AP Photo/Sunday Alamba).

Covid-19 has slowed the Nigerian government's plan to have insurers raise their capital, but it is pushing the sluggish sector towards adopting more technology and innovation.

Industry players say they are already seeing changes, such as cutting down turnover time by as much as a day. Jide Taiwo, an insurance broker by day and Uber driver by night, says that with the global pandemic that forced businesses to shut down for months, his company had to strategise and innovate.

“It will surprise you how much growth we saw during the pandemic. I think our success is due to our offerings via tech and also because people were worried and wanted to provide for their loved ones,” he said during a ride in Lagos, Nigeria’s biggest tech hub.

“Covid-19 has made insurers rethink how to drive their operations through information technology (IT). They have spent so much in procuring IT software to make insurance subscriptions seamless. This has reduced claims turnover time as claims are now being paid between 24 hours to 72 hours,” says Zaka Khalid, an analyst in Lagos.

According to him, “this is a revolution on its own. About three insurance firms have shut down all their offices and are still doing business virtually. Apart from the convenience that comes with it, it will cut down operating cost, thus, allowing companies to accrue more profit. While some of the firms are struggling with this reality, the long term effects will revolutionise the industry for the better.”

He continues: “The negatives there is that more insurance agents, staff and brokers will begin to lose jobs in the long run as IT takes over the functions that were previously being handled by humans.”

‘The industry has to invest handsomely in technology’

The National Insurance Commission (NAICOM), the regulatory agency that supervises Nigeria’s insurance industry, says it wants operators to invest in technology to drive growth and help take advantage of payments in the aviation and oil sectors: “The industry has to invest handsomely in technology, which is one of the key drivers for developing the market. Institutions should prepare to digitalise their processes, procedures and systems to make their operation seamless and real-time.”

Paul Donnelly, executive vice-president for Europe, the Middle East and Africa at Munich Re Automation Solutions, says that the German insurer is also rolling out new technology in the Nigerian market. He says that this year it plans to use artificial intelligence to help it make underwriting decisions.

The system requires good data on the market, which is a challenge, but “the technology can do some of the heavy work” for making decisions efficiently.

Analysts at the consulting firm PwC say insurers “will need to innovate and use new distribution methods in order to target the un(der)insured. They will also need to do so at reduced distribution costs, to attract customers with drastically different expectations.”

Microinsurance

While the rate of insurance uptake is low in Nigeria, an EFiNA study showed that at least 32.1 million adults are interested in using microinsurance, presenting a “significant opportunity for microinsurance operators to develop products.”

This might be why Africa’s biggest telephone company – South Africa’s MTN – partnered with Momentum Metropolitan Holdings to found the aYo joint venture and grab a share of the insurance market nearly four years ago. Nigeria and Côte d’Ivoire are aYo’s next targets. Since they launched their partnership, MTN says it has signed up more than 10 million customers.

Others are also active on the mobile scene, using the nearly ubiquitous technology to expand access to insurance. Nigerian payments provider CoralPay is in talks with mobile operators to have them accept payments for health insurance via mobile phones. CoralPay aims to allow Nigerians to access services by making insurance payments by phone using a digital wallet. They can also pay in cash at a banking agent’s without a digital wallet by using their phone numbers to identify payments.

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