Name
Global FinTech Guide
Country _ Name
Nigeria
SectionTitle
InsurTech
Body
InsurTech is composed of the words “insurance” and “technology”. It is used as a collective term for the application of modern technologies in the domain of insurance services.

Digital and mobile brokers: FinTechs belonging to this category mostly act as digital insurance brokers and provide users with an overview of their insurance contracts with their respective conditions. Some FinTechs offer very short-term insurance contracts to cover specific cases which can be concluded often spontaneously via mobile devices. Oftentimes additional consulting services are offered.

Internet of things: FinTechs belonging to this category collect data by measuring for example the driving style of the customers or through wearables the customers wear to consult on, offer and/or manage the customer’s insurances.

Introduction

Attitude of the country towards InsurTech-services

This suggests that a large portion of the Nigerian population are either unaware of, lack access to, or mistrusting the digital insurance platforms and solutions.

However, the Nigerian regulatory authorities are making innovative efforts to address the challenges in the InsurTech industry and provide further guidance on regulatory compliance. In a bid to increase the InsurTech penetration rate in Nigeria, the National Insurance Commission ("NAICOM") – the primary regulator of the insurance industry in Nigeria – established an innovation sandbox program in 2022 to provide a controlled environment for InsurTech companies like Izanu Africa and Soso Care to freely test and develop innovative insurance solutions using technological tools. Recently, FSD Africa and NAICOM launched the BimaLab as an accelerator programme designed to promote InsurTech start-ups to facilitate the use of digital solutions for the insurance sector. NAICOM also recently issued the Insurance Web Aggregators Operational Guidelines which became effective from February 1, 2022 (the "Operational Guidelines"), applicable to insurance web aggregator services.

While some challenges remain, such as the (i) need for further regulatory clarity; (ii) data privacy and protection concerns; (iii) consumer trust; (iv) affordability concerns; and (v) awareness gaps, Nigerian insurance companies in line with the innovative efforts for the relevant regulatory authorities are continuously leveraging digital and technology innovation to increase InsurTech penetration and positive collaboration with other technology companies.


Legal affairs

Obligations and requirements to provide InsurTech-services
In Nigeria, InsurTech companies are generally subject to the same regulations as other traditional insurance companies. Generally, the type of insurance business (life, general, composite) determines the obligations (including minimum capital requirements and registers/records) to be fulfilled under the Insurance Act. For instance, the current minimum share capital requirement in Nigeria for life insurance company is N8 billion ($5.2 million), for general insurance company N10 billion ($6.5 million), for reinsurance company N20 billion ($13.04 million) and N18 billion ($11.7 million) for composite insurance company. Compliance with such requirements is largely enforced by the NAICOM and the CAC.

First off, to kickstart an Insurtech company, the proposed company must be incorporated as a limited liability company with the CAC and comply with CAC registration requirements such as furnishing of the memorandum and articles of association of the InsurTech company, particulars of directors, evidence of adequate company reinsurance arrangement, etc. After incorporation with the CAC, the company should proceed to obtain the necessary licenses and registrations from NAICOM to operate insurance business, complying with all capital, reserve, and solvency margin requirements set by NAICOM. The Prudential Guidelines for Insurers and Reinsurers in Nigeria, 2022 (the “NAICOM Guidelines”) impose an additional obligation for InsurTech companies to provide a risk management framework to address material risks.

There are also separate application and registration processes for InsurTech companies (directly engaged in insurance services), depending on which of the classes of insurance they provide.

Additionally, all InsurTech companies must be reinsured with the Nigeria Reinsurance Corporation in respect of all reinsurance risks. InsurTech companies must also implement robust corporate governance framework and ensure compliance with data privacy and consumer protection measures as stipulated under the Nigeria Data Protection Act, 2023 (NDPA) and the Federal Competition and Consumer Protection Act, 2018 (FCCPA).

Additional comments regarding the legal situation for InsurTech-services or what InsurTech’s must be aware of in this business area

The insurance industry in Nigeria is highly regulated. As a result, the current regime requires InsurTech firms to explore the expertise of experts and legal practitioners knowledgeable with the legal compliance framework for insurance and technology business in Nigeria. Navigating and complying with the high and bureaucratic legal regulatory requirements in Nigeria presents significant challenges for InsurTech companies due to its complexity.

Failure to properly navigate this regulatory maze may result in significant penalties, sanctions, or even the revocation of the InsurTech company's operating license.

Closely related is the need for InsurTech companies to comply with the data protection and privacy requirements. Maintaining the confidentiality and integrity of customer information is of paramount importance. InsurTech must establish stringent AML/KYC procedures to verify the identity of their customers and prevent financial crimes. Given the rise of internet fraud and other fraudulent activities in Nigeria, InsurTech companies would contend with issues such as data breaches, cyber-attacks, false claims, policy manipulations, and identity theft, all of which have severe implications. Hence, InsurTech companies must implement appropriate cyber security measures to protect their infrastructure and customer data. Failure to do so can result in financial losses, reputational damage, and regulatory sanctions.


Economic conditions

Market size for InsurTech-services and biggest companies in this business area

In 2023, the Nigerian insurance market hit a milestone of over N1 trillion premium income according to This Day Live. We have also seen some InsurTech companies such as Curacel, AutoGenius, Reliance, CompareIN, Insurpass and Casava emerged with technologies that integrate the creation, distribution and administration of the insurance business using mobile applications, thereby promoting ease of accessing insurance products and services at competitive prices. Evolutics, another prominent InsurTech startup, provides software solutions tailored to insurance providers, facilitating efficiency and automation across various insurance segments.

Some partnerships have also emerged between insurance companies and FinTech companies to offer convenient access to a wide range of insurance products while promoting transparency and market efficiency. Such partnerships include; the partnership between Carbon, a Fintech company and Axa Mansard (an insurance company) to launch a range of healthcare benefits for its customers in the wake of the COVID-19 pandemic lockdown in Nigeria. Also, Aella Credit, another Fintech company providing lending services, launched its health insurance product AellaCare to provide health insurance for financially excluded persons in Nigeria.

Traditional insurers like Leadway Assurance and Heirs Insurance Group are making frantic efforts to integrate technology and digital innovation into their insurance services. For instance, Heirs Insurance Group has introduced a USSD platform that allows policyholders to renew their policies without internet access. Additionally, the company has developed a chatbot called Prince to assist customers in resolving queries and renewing policies via WhatsApp. Overall, InsurTech companies in Nigeria continue to innovate and collaborate with traditional insurers and FinTech companies to ensure the further expansion of the insurance market, thereby offering opportunities for enhanced efficiency, accessibility, and customer-centric solutions.

Additional comments regarding the economic situation for InsurTech-services or what InsurTech’s must be aware of in this business area
Nigeria, as the largest economy in Africa, presents immense potential for the growth of InsurTech services. With a population exceeding 200 million, the sheer size of the market is undoubtedly enticing for innovative insurance technology companies. However, the Nigerian economic landscape is not without its challenges.

The high inflation rates and currency devaluation have created a volatile environment, posing risks to the pricing and profitability of InsurTech offerings. Additionally, the country's relatively low insurance penetration, accounting for only around 1% of its GDP, underscores the vast opportunities for InsurTechs to expand access to insurance products and services. Limited financial inclusion and low digital literacy among the target customer base may hinder the widespread adoption of digital insurance solutions.

InsurTech providers must also contend with competition from traditional insurers and intermediaries, who  are increasingly adopting disruptive innovations to deliver insurance services to customers. In order to succeed in this dynamic environment, InsurTech companies must employ strategic operational approaches. Carefully managing currency and inflation risks through hedging strategies and pricing models will be crucial.
By understanding the unique economic realities, InsurTech providers can navigate the Nigerian market and unlock the tremendous growth potential it offers, ultimately contributing to the expansion of insurance coverage and financial inclusion across the country.

Authors

NameOrganisationEmail
Ebimobowei JikenghanG Elias[email protected]06346
Eberechukwu Ezike [email protected]0 

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