2022: The Year Insurance Sector Embraced Technology

Insurance sector operators in the year 2022 commenced a major shift to a new landscape through migration in their mode of operation from manual to digital model, writes Ebere Nwoji 

Insurance operators with lots of positive thinking welcomed the year 2022 as both global and local insurers tagged the year a period of accelerated economic recovery and a shifting period in insurance landscape.

This was despite concerns about new variants of COVID-19 pandemic tagged Delta and Omicron, which early in the year raised fears of fresh lock down among business managers.

But Nigerian insurers in particular seemed to be more optimistic during the year that their technological retooling as a result of the COVID-19 pandemic was capable of making the difference.

This being the case, they were more determined to consolidate on the changes the pandemic compelled them to make.

Many insurance operators in Nigeria migrated from physical marketing with much emphasis on insurance brokers and agents to digital marketing using technology.

Even the brokers and agents themselves shifted from one-on-one marketing to digital marketing using various online platforms.

The industry regulator, National Insurance Commission (NAICOM), in its summary of what the new technology based business model was set to achieve in the industry during the year said, “The insurance eco system is evolving rapidly and insurers can no longer lean on old familiar ways while the prevailing technological and strategic winds shift around them.”

The Commissioner for Insurance, Mr. Sunday Olorundare Thomas, addressing the media on the confidence of the sector operators and their determination to achieve success during the year, using their new business model anchored on technology said, “In today’s modern business environment, disruption plays an integral part of any business, hence innovation being implemented by the Commission is geared towards gaining control of a specific segment of the market that has been left untapped by encouraging the introduction of products tailored to the consumers in order to grow insurance businesses.”

The Global Insurance Market

Globally, at the onset of the year, the insurers were very optimistic too that the year would witness accelerated economic recovery and additional digital technology investments which would generate significant growth for the industry during the period.

The reason for their high hopes was clear, the year 2022 was the first year business operators across the globe practically adjusted their seats to commence real operation after much breakdown in their system of operations by the pandemic and its associated lockdowns on businesses.

For insurers in particular, it was the first year they would deploy the new technologies they acquired as a result of disruptions in their former business models by the emergence of COVID-19.

It was indeed a year laggards in technology usage, especially among developing countries like Nigeria apparently saw the need for a swift shift from old way to new business way thrown up by the global new normal.

This being the case, the insurers, especially those who had commenced experiments on their new technologies projected that the market in terms of growth prospects would be fairly bullish, citing the fact that they had planned to increase investments in enabling technologies and evolving talent models to build on the digital and virtual platforms that would sustain their operations and maintain their engagements with customers.
The  insurers,  however predicted that from the beginning of the year that there would  be challenges ranging from economic hurdles such as the potential for sustained inflation; to sustainability concerns including climate risk, diversity, and financial inclusion; to rapidly evolving consumer product and purchase preferences. 

As the year 2022 draws its curtain to a close, the insurers and their sector observers have paused to x -ray how they have utilised their acquired technologies to achieve their expectations and concluded that the industry was riding on technology to positively shift to a new landscape.

Reports by Finance Experts 

Deloitte, in its 2022 global insurance report, said the year was expected to be another bumper year for the insurance industry, but the invasion of Ukraine to some extent dashed those hopes. Premium income grew slower than originally assumed, as the war took its toll on economic activity and confidence, even as inflation supports the top line. Overall, global premium income grew by +4.8 percent in 2022, with life and p&c developing almost in step (+4.9 percent and +4.6 percent respectively. 

The above figure was considered against the backdrop of a global inflation rate of 6.2 this year.

In terms of claims, Allianz Ship Insurance Report Highlighted War, Fires, COVID, Climate Change, and Congestion as main source of claims for insurers during the passing year.

“Insurance claims from companies have become more severe over the past five years due to factors such as higher property and asset values, more complex supply chains and the growing concentration of exposures in one location, such as in natural catastrophe-prone areas,” said AGCS Chief Claims Officer and Board Member, Thomas Sepp. 

Nigerian insurance market performance

In Nigeria, NAICOM said in spite of macro economic challenges, which have bedeviled businesses in Nigeria, insurance sector recorded a year-on-year growth rate of 6.2 per cent at the end of first quarter 2022.

The commission also said the market size of the sector also grew at 15 per cent in the same period, thus standing out as one of the fastest sectoral assets expansion in Nigeria during the period.

NAICOM’s Deputy commissioner for Insurance Technical, Sabiu Abubakar, who stated this while speaking at the second edition of   the Chartered Insurance Institute of Nigeria’s (CIIN) 2022 Business Outlook held in Lagos, also said the insurance industry held a commendable market average retention of 73.3 per cent in the first quarter of 2022.

NAICOM said the sector in the second quarter of 2022 recorded a gross premium income of N369.2 billion, indicating a 20.1 per cent growth rate compared to the same period in 2021.

NAICOM also said there was an impressive 65.0 per cent quarter on quarter growth as continued steady growth from the first quarter of the year correlates with similar performance of the second quarter period.

Disclosing the content of its bulletin of the insurance market performance for the second quarter 2022, NAICOM said some quality improvements in the market indicators including growth, claims settlement and profitability shows that the market could be adjudged as sound and stable whilst, the stance of the market deepening remains optimistic.

It said in terms of market size, the sector recorded an increased rate of growth of about 11.9 percent quarter on quarter with a total asset of about N2.3 trillion.

The industry’s financial position revealed a total of N1.2 trillion in assets of non-life business, while the life business contributed N1.1trillion.

Breakdown by business classes

Further breakdown of the statistics reveals that out of the total gross premium income, non-life segment maintained its primacy at 59.3 percent.

Motor Insurance stood third at 14.8 per cent while Marine & Aviation, Gen. Accident and Miscellaneous reported a share of 12.3 percent, 10.9 percent and 8.9 per cent respectively.

Life business on the other hand recorded 40.6 percent of the insurance market production as its share contribution, gradually closes up.

The share of annuity in the life insurance business stood at about 24.7 per cent while individual life held a major driver position at 41.8 per cent of the premium generated during the period.

In terms of claims, the NAICOM report said the industry recorded 0.2 percent growth in gross claims during the second quarter compared to the corresponding period of 2021.

“The industry statistics for gross claims in quarter two of 2022 stood at N174.8 billion, representing 47.3 per cent per cent of all premiums generated during the period.

This occasion reflects the professional underwriting capacity of the industry as driven by the intensified regulatory activities of the Commission, NAICOM said.

It further said the net claims paid on the other hand stood at about N148.2billion, signifying an 84.8 percent of all gross claims reported during the period.

The life insurance business recorded a near perfect point of about 88.90 percent claims settlement, as against the reported claims while non-life segment stood at about 76.8 per cent.

The data further revealed that the insurance market indeed remained profitable during the year, recording an overall industry average of 56.9 per cent, maintaining a relative position of 57.7 per cent recorded in the corresponding period of preceding year.

The non-life segment loss ratio stood at 43.6 per cent while the life business stood at 68.8 per cent, depicting a less profitable scenario comparatively over the same period.

Consequently, the industry recorded an expansion to about N2.3 trillion Assets at the end of half year 2022, growing at a size of 12.0 per cent Year on Year (YoY).

NAICOM’s Director Supervision Directorate, Barineka Thompson, stated these while presenting a paper titled Performance of the Nigerian Insurance Industry: 2017 To 2022 – Facts Behind the Figures” at a seminar in Lagos. 

In conclusion, Thomas noted that the insurance industry during the year 2022 was shifting to a new and positive landscape.

Other developments in the industry

Aside its financial performance, other developments which happened in the industry during the year were NAICOM, few days back announced the much contemplated increase in motor insurance premium by increasing the rate by 200 percent.

The Nigeria insurers Association (NIA) commissioned its corporate head office at Victoria Island and changed its leadership baton from Musa Ganiyu as the Chairman to Olusegun Omosehin.

Similarly the baton of leadership in the Chartered Insurance Institute of Nigeria  (CIIN) changed from Sir Muftau Oyegunle to Edwin Igbiti as the President.

Achieving insurance penetration 

The sector operators consolidated on efforts to achieve insurance penetration across the country through education and awareness of the public.

NAICOM continued its efforts at achieving financial inclusion in insurance sector through micro insurance scheme and spreading of insurance awareness and education in various regions and states.

This year, the commission penetrated interior of Kastina state with insurance awareness.

Challenges

Despite these achievements, stakeholders in the sector said there were still a good number of factors working against optimum realisation of operators’ dream of achieving mass patronage.

Some of these, the stake said are hostile economy, trust issues emanating from hidden clauses in insurance policy documents, inadequate access to information, technology issue, weak regulatory frame work as well as lack of skilled personnel as top among the militating factors.

They also highlighted lack of awareness on the value of insurance as a key factor.

 The Head, corporate communications Polaris Bank, Mr Rasheed Bolarinwa who stated this while presenting a paper on, “Media as Catalyst for Insurance Inclusion,” at a two-day media retreat organised by the Insurance Industry Consultative forum (IICC) for insurance journalists in Ijebuode, Ogun State, said these factors had done so much harm to the insurance industry that the response that followed the mention of insurance or insurance companies to an average Nigerian was predictable.

“Negative reactions and lukewarm attitude are the kind of feelings that come with an invitation to insurance policies. This informed the low patronage and acceptance of insurance companies operating in Nigeria, “he observed.

But NAICOM said it was determined to overcome these challenges through insurance education and change in insurance claims payment narratives.