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Insurance companies must evolve in Nigeria — Or risk extinction.

Insurance in Nigeria has been around longer than, well, Nigeria. But sixty odd years on, it continues to struggle.

  • Insurance penetration in Nigeria is one of the lowest in Africa at 0.4 percent — compared to 16.9 in south Africa and 3.4 in Kenya.

  • Less than 2 percent of Nigerians hold any form of Insurance policy.

  • Insurance currently contributes about 0.7 percent to the GDP; less than African average of 3.3 percent and the global average of 7 percent.

There are a few contributing factors responsible for the continued non-performance of insurance in Nigeria. Not least from the way it is perceived as an institution that only takes, but never gives. This is a common sentiment from back when insurers were notorious for not paying claims — and it continues to be passed down like family heirlooms from generation to generation.

Its scruffy, half-baked, commission-based salesmen who peddle it from door to door without serious conviction do not help its cause. Neither does the nonchalance to recruit and deploy adequately trained field personnel. On one hand, it shows the obvious disconnect between insurers and prospective policyholders. And on the other, a self-centeredness and disregard for their target audience that is deep rooted in a arrogant and dismissive culture — the foundations on which valid claim denials are built.

Nevertheless, there is potential for insurance to thrive in Nigeria. But just not the way it’s currently done. The average Nigerian is happy to give, but does so only with full expectation of receiving in return. So the fundamental idea of paying premiums and “losing” every penny of it when there are no incidents, make it a luxury majority are willing to do without.

So where does the value lie for Insurance companies in Nigeria?

#1 Strategic Partnerships and Value Added Services.

Insurers would be better served taking a play from other industries who have adapted their primary offerings to create more value and satisfaction for the customer.

The hospitality industry for example have since adopted this winning approach — evolving from offering just beds, to offering free WiFi, spa and gym treatments, conference rooms and even intercontinental dining experiences.

By offering additional services through strategic partnerships with service providers operating in relevant sectors, Insurers can entice Nigerians with “tangible” returns on premiums even if there are no incidents. Especially then.

For instance, health insurers can provide free or discounted routine medical checkups as added on services for purchasing policies.

Home insurers too can help policyholders purchase and install security devices at less than market price. Or hire private security guards at a cost less than what non-holders would pay. They can even partner with e-commerce marketplaces for handymen so policyholders can book the best hands for electrical repairs, plumbing or any other domestic repairs required.

Operating under the proper guidance of data, insurers should break customers into segments and identify which additional services to deploy accordingly. This in turn, will drive revenue growth as well as create another income stream for the insurers.

#2 Complete Digital Integration will reduce cost and grow revenue

By leveraging the existing digital footprints across Nigeria, insurance companies can make their products readily accessible to every Nigerian with a smartphone and an internet connection.

Adopting technology will make buying insurance and making claims easier and faster. Insurers must seek to create user-friendly and easy to navigate web and mobile designs; make access to customer service easier or create avenues for self-care; innovate with the way premiums are collected, perhaps as automated deductions spread over longer periods, as opposed to one-time lump sum payments; and deploy social media to repair decades of bad PR and negative perception.

Failure to evolve puts them at risk of obscurity.

Should insurance companies fail to move without any sense of urgency and conviction, they risk exposing their hugely untapped market to disruptors, who have already began their first foray into the venture — with platforms for comparing prices. It wouldn’t be long before they adapt this winning approach and knock traditional insurers farther from the mind of the average Nigerian. And into obscurity.

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