The digitalisation trend is nascent, with tech insurers accounting for a small portion of global premium, but is expanding across the continente

Nigeria’s insurers look to digital solutions to boost penetration

Despite Nigeria’s economic and demographic potential, insurance penetration remains low. Both established players and smaller newcomers are considering digitalisation, which is likely to accelerate client acquisition. The digitalisation trend is nascent, with tech insurers accounting for a small portion of global premium, but is expanding across the continent. It is expected to be further facilitated by the development in May 2023 of the National Blockchain Policy, which aims to provide a framework for a more digitalised economy. Indeed, Nigeria’s insurance sector and the wider West African regional market is expected to leverage the emergence of crypto-assets and digital currencies to improve product offerings and deepen insurance penetration. 

Growth Conditions 

The conditions for technology-led insurance adoption have continued to improve. As of the beginning of 2023 there were an estimated 122.5m Nigerians using the internet and nearly 194m mobile phone connections. The number of mobile internet subscriptions stood at 152.2m as of October 2022, up 8.7% year-on-year compared to the 140m reported in October 2021 (see ICT chapter). 

Nimbler operators are expected to lead the insurance industry’s technological evolution, with several fully digital players having entered the market. “Nigeria’s insurance sector has been upended by the global growth in digitalisation, meaning that investing in digital infrastructure has become imperative for companies to remain competitive,” Lekan Ajisafe, CEO of Lagos-based insurance company Post Assurance Brokers, told OBG. “The digital adoption rate has been robust, permeating the entire value chain, and the regulators have taken the initiative by automising their portal.” 

Nigerian start-up ETAP, which launched its beta mode in November 2021, lets users sign up for third-party auto insurance protection and file claims through a mobile app. It also offers lower prices and rewards for drivers with good records. ETAP’s application uses machine learning to create risk profiles and customise insurance offerings for drivers. As of April 2022 ETAP had insured 130,000 car trips since its beta launch. 

Casava Microinsurance, a digital microinsurance provider, offers digital products for health insurance, income protection or credit insurance. The firm completed a pre-seed funding round in December 2021 and had 100,000 customers as of October 2022. 

By opting to interact digitally and using technology to customise products to each client, technology insurers are hoping to not only lower insurance costs, but also eliminate the hurdles that often discourage potential customers from buying products from traditional insurers. Easy use and customised policies are likely to attract young Nigerians to new tech-based insurance products. 

The distribution of mobile insurance is another potential driver. Agriculture insurance, for instance, accounted for N4.4bn ($10m) in gross written premium in 2019, according to the Nigerian Insurers Association. However, reinsurer Africa Re estimated that agriculture premium in Nigeria could eventually reach $600m. By leveraging distribution methods that do not depend on traditional brokers or face-to-face distribution channels, new technology insurers could facilitate insurance adoption in one of the country’s most critical sectors. 

Regional Context 

Nigeria’s digital insurance development is part of a broader trend in Africa. Many such companies are expanding across the continent, and they are often partnering with traditional insurance providers already in active in the market. In Mali, for example, OKO offers crop insurance to farmers, partnering with traditional insurance providers such as Allianz. Pula, another agriculture insurance provider, had operations in over 17 countries in Africa and Asia as of October 2021. Many other tech insurance firms are expanding their domestic reach. For Nigerian insurance providers, this shows the fast changes brought about by mobile insurance offerings, as the ease of distribution through digital methods foreshadows growing competition between domestic and regional entities.