Driving Insurance Sector with Technology

Ebere Nwoji  writes on how the National Insurance Commission is making effort to position insurance  as a technology -driven sector

Insurance sector operators, like every other forward-looking sector, are determined to leverage on technology to revolutionise their business models. The sector is aligning with technology providers to enter a new era of efficiency and customer-centric service delivery. Indeed, the sector operators, led by the regulator, the National Insurance Commission (NAICOM), are leaving no stone unturned in their efforts to fully employ technological innovations to drive every aspect of insurance business.

The Commissioner for Insurance, Mr. Olusegun Ayo Omosehin, is leading the way in employing every available strategy to drive the effective use of technology in operating firms within the system. Since his assumption of office, Omosehin has ensured the disruption of old business models still used by some conservative firms, instituting a regime of modern technology utilisation. His determination spans through marketing, product design, distribution, and service delivery. Omosehin’s efforts are yielding fruits, with mobile apps becoming commonplace in insurance product distribution among operating firms in Nigeria.

Technology Adoption

Many firms have adopted automated underwriting processes, with some advancing to systems powered by AI algorithms for quicker and accurate risk assessments. IoT devices like smart home sensors and wearables provide real-time data for personalised pricing and proactive risk management. Some insurance firm are also partnering with insurtech companies to expand their market share.

Omosehin is consolidating the technological foundation laid by his predecessors to ensure a smooth transition to a technology-driven business model. He uses regulatory powers, trainings and meetings with professional groups within the industry to encourage the adoption of technology. Recently, Omosehin urged members of the Nigerian Actuarial Society (NAS) to collaborate, innovate, and lead the way in shaping the future of the Nigerian insurance industry through AI and machine learning.

At the 2024 Nigerian Actuarial Society’s Annual Industry Conference, Omosehin emphasised the importance of actuaries utilising AI to avoid being left behind. He highlighted the significant transformation driven by technological advancements and data revolution, stressing the intersection of actuarial science and AI as a unique opportunity to shape the future of insurance in Nigeria.

The commissioner for Insurance said it was in recognition of these developments that the federal government planned to position Nigeria as the AI hub for AI solutions in Africa. This, according to him, would be achieved through the development and implementation of a National Artificial Intelligence Strategy aimed at accelerating AI adoption in Nigeria. He added that it was thus important that the insurance industry and, by extension, actuaries were at the forefront of its adoption.

On the role played by NAICOM, Omosehin said, “In conformity with the above, the Commission was committed to the Federal Government’s  strategy. We will ensure that our sectoral regulatory policies are consistent with the outlined goals of the Federal Government while enhancing the stability of the Nigerian Insurance Industry.”

Technology Impact on Insurance

Insurtech experts highlight several ways technology is impacting the insurance sector, which include digital transformation, which they explained that in the insurance sector, digitalisation places a strong emphasis on enhancing customer experiences, increasing operational profits, and preparing for future challenges. By leveraging digital platforms and algorithms, insurance companies can streamline and expedite processes, making them faster and far less cumbersome. Additionally, following digital trends, the insurance industry is witnessing direct customer reach through digital platforms and social media.

There is also risk assessment, where the experts said technologies are being used for risk assessment, especially in areas like property insurance. Augmented reality (AR) enhances the physical environment by integrating digital elements into a real-time view, typically accomplished through the camera on a smartphone. In contrast, virtual reality (VR) offers a fully immersive experience by substituting a genuine environment with a simulated one. This allows insurers to virtually inspect properties and assess risks without physically being present.

On data analytics and predictive modelling, analysis said data analytics and predictive modelling play a crucial role in the insurance industry by helping companies make informed decisions, enhance risk management, and improve overall operational efficiency. Experts say that as technology continues to advance, the role of data analytics in the insurance sector was likely to evolve, with increased emphasis on real-time data, artificial intelligence, and machine learning techniques in fraud detection, customer segmentation, claim processing, policy pricing, renewal, and cyber risk modeling.

Advancing data analytics

On enderwriting, the experts noted that insurers could use advanced data analytics and predictive modelling to assess risks more accurately. This, according to them, helps in setting premiums based on individual risk profiles rather than general categories such as age, health status, and lifestyle. 

They said by  doing so, insurers could  predict the likelihood of claims and set appropriate premiums.

It also enhances fraud detection. According to experts, technology aids in identifying and preventing fraudulent claims through the real-time analysis of patterns and anomalies in data. The invention of new technologies in the insurance sector elevates the industry to a new level, enhancing its ability to detect fraudulent activities.

Insurtech experts spoke on telematics and said IoT devices, such as telematics in vehicles, allow insurers to collect real-time data on driving behaviour. This data  they said was  used to personalise insurance premiums based on individual driving habits, which directly or indirectly inspires customers to drive safely and responsibly.

The experts noted that insurance companies were leveraging on smart home devices, noting that data from smart home devices offer personalised home insurance and mitigate risks through early detection of issues like water leaks or fire.

Given the undeniable relevance of technology for the growth and advancement of all businesses, including the insurance sector, NAICOM is currently strategising to employ every available tool to ensure that the insurance sector leverages technology to move to the next level.