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Archives of Business Research – Vol. 10, No. 11
Publication Date: November 25, 2022
DOI:10.14738/abr.1011.12651. Adejumo, W. A., & Tijani, A. R. (2022). Improving Insurance Operations in Nigeria Through the Digital Technologies. Archives of
Business Research, 10(11). 222-231.
Services for Science and Education – United Kingdom
Improving Insurance Operations in Nigeria Through the Digital
Technologies
Adejumo, Wahab Adewuyi
Department of Insurance
The Oke-Ogun Polytechnic Saki. Oyo State. Nigeria
Tijani, Adetunji Raimi
Department of Insurance
The Oke-Ogun Polytechnic Saki. Oyo State. Nigeria
ABSTRACT
This paper aims to evaluate the impact of digitalization technologies on the
insurance industry in Nigeria. Data were obtained from primary sources only. The
primary data were collected through the mailed questionnaires that were
administered to selected Chartered Insurers in Nigeria. The questionnaires were
designed to reveal issues on digital transformation in Insurance industry in Nigeria.
Seventy (70) questionnaires were sent to the respondents across the country in the
six Geo-Political zones in Nigeria. It is noteworthy that 45% of the respondents were
the Chief Executive Officers of different insurance companies, 30% of them were at
Senior Manager Level of the Life Assurance Companies while the remaining 25%
were the General Managers of Underwriting, Claims, Marketing and Human
Resources Departments. It was found out that Nigerian Insurance companies as well
as the NAICOM had transformed more than 40% of their services into digital
technology. Besides, the research further revealed that almost every insurance
company in Nigeria has a digital platform. The research recommends that the
Federal Government should create sufficient budgetary allocation to invest in
InsurTech and improve the training of the staff of the Government owned insurance
companies such as NICON, Nigeria Reinsurance Corporation, LASACO, on the
acquisition of digital skills. This will quickly encourage and mandate the private
owned insurance companies to equally invest in InsurTech and arrange digital
training for their staff so as to acquire digital skills necessary for the full digital
transformation. The National Assembly should also amend the existing
Constitutions on big data and recommend strict penalties for cybersecurity
breaches. All these will disrupt the insurance services in Nigeria.
Keywords: Digitalization, InsurTech startups, Transformation, Digital Technology,
Insurance Companies, Internet of Things (IoT)
INTRODUCTION
Since the late 1980s, the digital revolution has transformed the economy and society. In
Nigerian society, digital disruption has led to changes in communication, interaction and
consumption models and has led to greater demand for devices and software with more
functionality, cloud computing and data traffic services. This has made the insurance industry
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Adejumo, W. A., & Tijani, A. R. (2022). Improving Insurance Operations in Nigeria Through the Digital Technologies. Archives of Business Research,
10(11). 222-231.
URL: http://dx.doi.org/10.14738/abr.1011.12651
to provide the basic digital skills for their staff that would be needed to use the associated
technologies.
The development of the digital economy has systematically changed the value and the
marketing of goods and services due to the exploitation of information from data generated and
shared on digital platforms with the consequent reduction in the transaction and
intermediation costs.
In fact, digitalisation is destined to deeply modify the financial and insurance ecosystem,
impacting all activities that compose the whole insurance value chain, from product
development to pricing or underwriting, sales and distribution, new policies, fast claims
management as well as modern asset and risk management.
With digitalization, insurers will be able to assess their customers’ needs, target products and
services to individuals and businesses, support underwriting decisions and reduce the cost of
fraudulent insurance claims. In this regard, the importance of Big Data lies not just with the
collection and storage of large and disparate pieces of information, but also in the ability to
analyse and extract tangible and useful knowledge from said data (Antonella, 2020).
One example of using digital technology for risk underwriting and analysis is that both Machine
Learning and Artificial Intelligence will help with post - loss assessment, fraud detection and
predicting customer behaviour. The Climate Corporation in USA that uses climate and soil data
to offer farmers insurance against losses from weather events is another example. Not only
these, AllLife in South Africa offers life and disability insurance to policyholders, who suffer
from HIV or diabetes in such a way that in their monthly health checks, every client gets a
personalized analysis and advice on managing their conditions. To assess their clients’
conditions the insurer has direct access to medical data from medical providers. If clients do
not follow the check-up plan, coverage can be reduced or cancelled (Sherif, 2019)
More so, with the digital technologies, policyholders’ data will be analysed and processed by
algorithms in order to accurately calculate the claims reserves to be held in the event of a claim
and thereby enable the insurance companies to use the resources available in a more efficient
way, directing them towards profitable investments. The blockchain solutions will equally
provide more transparency and reduce both the administrative costs and the premiums and
finally help to speed up the claims services.
In addition, Risk selection will become ever more accurate and precise as emphasized by
Antonell (2020) in the ways in which technology is improving risk selection. This includes the
use of data gathered from connected sensors with the support of Internet of Things. Big Data
will equally help to enrich underwriting decisions and assist in forward-looking and
sophisticated risk measurement (catastrophe modelling). Digitalisations of insurance will also
make data more readily analysed and products more readily adapted.
Summarily, digitalization involves the use of Artificial Intelligence (AI), Internet of Things (IoT),
robotic process automation (RPA), cognitive technologies (CT), online platforms, big data
analysis, distributed ledger technologies (DLT), machine learning (ML), cloud computing and
5G networks.
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Archives of Business Research (ABR) Vol. 10, Issue 11, November-2022
Services for Science and Education – United Kingdom
It has been established that digital technology is the key to the insurance sector for its evolution
and overall growth. It not only adds value to the industry, but also directs its future to some
extent with the changing time and its requirements. In fact it has helped companies not only to
conduct market research, market penetration, market development and business promotion,
but also to provide after-sales services and understanding customer satisfaction.
To cap it all, data collection and data analysis of insurance companies has been made possible
with the use of digital technologies.
The digital technology started with the development of the Internet, followed by the roll-out of
broadband networks and large scale use of smart phones, with the consequence that every
human being has access to information, social networks and audiovisual entertainment. There
is also an increasing use of digital platforms as business models for the supply of goods and
services. The end result of development of digital technology is the use of devices and
applications for complex analysis of big data, cloud computing, blockchains, chatbots and
artificial intelligence.
Besides all these, the digital technologies are equally forcing a fundamental transformation of
business activities like changing the relationship between the service renders and their
customers, bringing new entrants and their disruptive technologies, driving new channels,
creating new products and services, breaking down the walls between industries and, in many
cases, forcing a basic rethink of the business model (Sherif, 2019).
It is now practically impossible to predict what will be the future of our insurance and other
business activities with the speed of the changes brought about by the digital technology.
With digitalization, customers can now literally buy insurance policies with the click of a button.
Modern policies developed are fully automatic and are updated using a database, with self- serving dashboards that make it easier for customers to decipher complicated insurance
policies, calculate monthly premiums and easily enter into longer term life assurance policies
and annuity plans. The complicated policy coverage costs can now be seen virtually, helping
customers understand the rates of change and thereby, determining which plans will suit them
best (Sherif, 2019).
In Nigeria for instance, an AutoGenius is an insurTech founded in 2014 and offers Auto
Insurance and Insurance Brokerage services digitally. Cassava, another insurTech registered
with NAICOM offers both General and Life Assurance services. It pays its claims within 48 hours.
More so, Sherif (2019) further expressed that digitization also makes it easier for customers to
track the speed at which their policies are growing. For instance, in several countries including
Nigeria, customers can use their smartphone to upload a picture of property or assets they
would like to insure and request a policy. The application uses available data about the property
or product and responds with an immediate insurance policy offer within seconds. ETAP, a
Nigerian insurTech startup, with its game-changing app, allows drivers to buy insurance policy
in 90 seconds and complete a claim in 3 minutes.