Africa’s insurance market projects a robust 7 percent compound annual growth rate from 2022 to 2028, potentially reaching $120 billion. However, the continent’s insurance penetration remains low at less than 3 percent, significantly constraining this potential.
Nigeria’s insurance landscape presents an even more critical scenario. With a population exceeding 200 million and substantial growth potential, insurance penetration is below 1 percent of GDP—lower than the global average of 6 percent. A National Bureau of Statistics and World Bank survey reveals that merely 3 percent of Nigerian households possess any form of insurance, including health, life, or property coverage.
Multiple factors have historically impeded insurance growth in this dynamic market, including trust deficits, cost distribution, cultural barriers, and limited awareness of the benefits of insurance. In this article, I will explore how Nigerian insurers can leverage available technology and regulatory frameworks to deepen market penetration and improve insurance adoption, particularly in underserved communities.
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Market overview
The Nigerian insurance landscape predominantly features established players with comprehensive product ranges. However, these traditional companies confront persistent challenges like market saturation and slow rural penetration. Many have constructed business models around mandatory enterprise insurance in sectors such as oil, gas, and property, prioritising large transactions over mass-market accessibility.
Nevertheless, the convergence of a young population, increasing smartphone usage, and affordable internet access, signals increased the potential of market penetration for insurers who proactively leverage technology.
WhatsApp: Reimagining insurance access
WhatsApp, once only a tool for chatting with friends and family, is becoming a growing trend among African insurers who want to leverage the number of existing users on the platform to streamline their operations, cut costs and improve customer satisfaction by meeting customers right where they chat.
A study by Intelpoint revealed that Nigerian business owners view insurance claims processes as complex, believing they are intentionally designed to deny policyholders their rightful payments. This indicates a lack of trust due to insufficient transparency in policy management and claims processing within the industry. In addition to these transparency issues, traditional methods such as call centres can be quite expensive and inefficient.
Leveraging WhatsApp to address policy claim transparency issues can build trust in insurance while improving premium subscriptions. With WhatsApp being the most popular social media platform in Nigeria even in rural areas (over 95% of internet users from age 16-64 use the platform), it’s easy to understand the immensely untapped benefits that Nigerian insurers can tap into by harnessing WhatsApp as a means of communication.
By integrating First Notice of Loss (FNOL) and claims automation into WhatsApp, clients can submit documents and photos in real-time. This eliminates the need for endless back-and-forth emails or lengthy phone conversations with everything happening right within the chat interface on a platform that clients are familiar with already.
Reaching clients on their favourite platform also allows brands to retarget their clients with educational content that demystifies insurance products, fostering trust among clients (e.g., market women who need to understand the importance of insuring their shops) and eliminating some of the common factors that have impeded insurance growth in the Nigerian market.
“Leveraging WhatsApp to address policy claim transparency issues can build trust in insurance while improving premium subscriptions.”
Web aggregators
Since 2022 when the National Insurance Commission (NAICOM) released the insurance web aggregators’ operational guidelines, web aggregators have emerged as crucial intermediaries in the Nigerian insurance ecosystem. While addressing traditional barriers to insurance adoption through several key innovations, these platforms offer advantages such as:
●Price transparency and comparison capabilities
●Simplified product discovery for several insurance brands
●A digital-first customer experience
●Reduced product distribution costs
●User reviews and ratings to make informed decisions based on comprehensive product information
Research by McKinsey indicates that insurance aggregators can reduce customer acquisition costs by up to 60 percent while increasing conversion rates by 30 platforms.
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Mobile-first distribution and Microinsurance platforms
With internet access in Nigeria reaching up to nearly 84 million internet users in 2022, digital platforms are leveraging mobile technology to reach previously underserved populations, enabling the rise of microinsurance products. Key mobile-first distribution and microinsurance solutions include:
●USSD-based insurance purchase options
●Mobile app-based claims processing
●WhatsApp integration for customer service
●Digital payment integration
●Pay-as-you-go auto insurance
●Micro-health insurance plans
●Crop insurance for small-scale farmers
●Mobile phone insurance
For us in Consolidated Hallmark Insurance, we have continued to leverage on the use of technology to provide easy access to our services by our rapidly growing clientele. Web enabled transaction portals, mobile apps and integration with third party providers have been done for convenience.
Eliminating cultural barriers
Another means of addressing the factors limiting the adoption of insurance including cultural barriers is leveraging popular conferencing platforms to educate the public. From virtual town-halls with short form cross-cultural content utilised to eliminate geographical limitations to insurance-related information, testimonials and Q & A sessions that dispel doubts, technology affords Nigerian insurers a platform to meet directly with stakeholders, listen better, address pain points and clear doubts that clarify clients as valuable stakeholders.
Generally, products like CHI Microinsurance’s Credit Life Assurance plan from a member company of our Group, while incorporated on existing digital platforms should allow for multi-language communication to eliminate cultural barriers. Sales and support teams of insurance brands may also need training to approach claims processing with a digital-first approach.
Regulatory framework and Market development
Finally, NAICOM has played a crucial role in facilitating digital transformation through several key initiatives:
Regulatory Sandbox: Launched in 2021, NAICOM’s regulatory sandbox has provided a controlled environment for testing innovative insurance solutions. For insurance brands looking to deepen their market penetration, this enables:
●Fast-tracked approval for digital insurance products
●Reduced compliance costs for insurance technology startups
●Risk-controlled innovation in distribution channels
Risk-Based capital requirements: NAICOM’s Risk-Based Capital Regulatory framework requires insurance companies to maintain capital levels that match their risk profiles. The goal is to protect policyholders and strengthen the Nigerian insurance sector. The implementation of the risk-based capital requirements has impact both brands and customers by:
●Strengthening insurer solvency
●Enhancing market stability
●Increasing consumer confidence in insurance ultimately improving adoption
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Conclusion
The combination of digital platforms and supportive regulation has shown measurable results in growing market penetration—a 10.2 percent increase in gross written premium to N560bn in 2021 compared to N508bn in 2020—among other growth metrics. Meanwhile, latest results from the industry regulator, the National Insurance Commission (NAICOM) shows an even more remarkable penetration rate in the sector as at September, 2024 with premium income hitting N1.17 trillion, having attained the N1 trillion mark in 2023.
However, harnessing more of the regulatory framework provided by NAICOM and Incorporating technology in the traditional insurance model can significantly enhance customer satisfaction and trust. By leveraging technology to offer seamless policy management, instant claims processing, and personalised services that improve customer satisfaction, Nigerian insurers position themselves to eliminate the barriers to the adoption of insurance in Nigeria while transforming the complex, intimidating concept of insurance to an accessible, understandable necessity for millions of Nigerians.
Mary Adeyanju is the Managing Director of Consolidated Hallmark Insurance Limited, a member of Consolidated Hallmark Holdings Plc and a leader in the underwriting of general insurance and special risks.
