How AI can increase accessibility, affordability in Nigeria’s underserved areas
By Esther Agbo
Artificial intelligence (AI) is transforming the insurance landscape, making financial protection more accessible to millions of underserved citizens.
From AI-powered chatbots to digital platforms, innovation is bridging the gap between insurance companies and remote communities.
A staggering 16 states in Nigeria remain insurance deserts, devoid of brokerage firms and leaving millions of residents vulnerable to financial shocks.
The absence of insurance brokers in these areas has been identified as a significant barrier to expanding insurance coverage, exacerbating the challenge of providing essential financial protection to rural populations.
According to Agboola Pius, Managing Director of Peerless Management & Solutions Limited and former Director at the National Insurance Commission (NAICOM), the high costs of incorporating broking firms have restricted insurance operators to profitable urban centres, neglecting vast rural areas.
Pius highlighted the critical role brokers play in the insurance ecosystem during the Nigerian Council of Registered Insurance Brokers Lagos Area Committee (NCRIB-LAC) 2024 midyear workshop in Lagos.
The 16 states without insurance brokers include Nasarawa, Adamawa, Ebonyi, Borno, Gombe, Taraba, Yobe, and others. This lack of coverage leaves rural populations exposed to financial risks, emphasising the need for innovative solutions to address the challenges of insurance penetration in Nigeria’s underserved regions.
One of the primary barriers to insurance penetration in Nigeria’s underserved regions is the substantial cost associated with setting up a broking firm; the high costs of Incorporation.
Incorporating a broking firm in Nigeria involves significant financial outlay, deterring brokers from establishing operations in less profitable rural areas. Addressing this barrier requires regulatory reforms to reduce incorporation costs or provide subsidies for firms operating in underserved regions.
Moreover, to address these challenges, there is a pressing need for incentives for brokers willing to operate in rural locations, which means drawing from global practices, incentives for brokers to operate in rural areas. Models from developed countries show that government subsidies, tax incentives, or simplified regulatory processes encourage brokers to expand their footprint into underserved regions.
Looking at developed countries, there are several successful models that Nigeria can adapt. In some regions, governments have implemented policies that provide financial support to insurance brokers operating in rural areas.
Additionally, public-private partnerships have proven effective in expanding insurance coverage. These models highlight the importance of government intervention and collaboration with the private sector in overcoming barriers to insurance penetration.
Leveraging Technology should also be considered. Artificial intelligence (AI) presents a transformative opportunity to enhance insurance distribution efficiency. For instance, AI-powered chatbots can provide customer service and support, reducing the need for physical presence and automating processes such as underwriting, claims processing, thereby lowering operational costs. Additionally, AI can help in risk assessment and fraud detection, making insurance processes more efficient and reliable.
Nigerian insurers can however adopt similar technologies to lower operational costs and reach remote populations efficiently.
Globally, the insurance sector has witnessed significant advancements through the adoption of AI and other technologies. For example, in the United States, companies like Lemonade use AI to process claims swiftly, enhancing customer satisfaction and reducing administrative costs. Similarly, in India, firms like PolicyBazaar leverage AI to provide personalised insurance recommendations, improving customer engagement and coverage.
Adapting these technological innovations to the Nigerian context requires addressing local challenges such as internet accessibility and digital literacy. Efforts to improve digital infrastructure and provide training on the use of technology can significantly enhance the effectiveness of AI in insurance distribution.
Furthermore, collaboration and partnerships are crucial in leveraging technology to enhance insurance penetration. Partnerships between insurance companies and technology firms can foster innovation and the development of tailored solutions for the Nigerian market, it can as well facilitate knowledge sharing, resource pooling, and pilot projects to test new technologies in real-world settings.
Additionally, collaboration with government agencies can ensure the alignment of technological advancements with regulatory frameworks, promoting a conducive environment for growth.
Improving insurance penetration in Nigeria’s underserved regions requires a multifaceted approach that addresses the high costs of incorporating broking firms, provides incentives for rural operations, and leverages technology. By drawing on successful models from developed countries and fostering collaborations and partnerships, Nigeria can overcome the barriers to insurance coverage and ensure that more of its population benefits from the security and peace of mind that insurance provides and also ensure financial resilience for all its citizens.
