According to a report by PWC, only around 1.5% of Nigerian adults are covered by insurance today. When I read that, I was actually almost surprised it was that high. I’d say that the sector is broken, but that would suggest it had, at one point, been “fixed”. It has never been fit for purpose, hence the incredibly low adoption rates and the fact that insuring oneself against risk has not really entered Nigerians’ collective consciousness. All this, and we have no real State or Government infrastructure to support us for when things go wrong either.
The insurance sector we are faced with today is manual, based on legacy systems, massively under capitalised, comes with absolutely no product differentiation and offers very little value for consumers. It is of a bygone era and is wide open for some smart people to come and start fixing it.
Insurance is difficult to make attractive to me. To most. It’s a need to have, not a must have. But when you need it, you really need it, and this is what, from my perspective, is lacking in our insurance market; emotional connection. Insurers need to better connect with potential customers and paint a picture of how insurance can help them at the toughest of times. They need to instil a fear of loss into customers, so that there’s a real and urgent emotional requirement to invest in themselves, their assets, their health. Furthermore, insurers need to make insurance more palatable for consumers — and by this, I mean in terms of affordability and flexibility.
Speak to any insurance broker [most likely face-to-face — because digital just ain’t a thing for the sector] and there is no product or policy that speaks to ME. That speaks to YOU. It’s just some grammar and some numbers that could be for anyone, and, oddly enough, no-one. Insurance is supposed to insure YOU and YOUR belongings, but I’ve yet to view a policy that in any way speaks to ME. There’s a massive disconnect that needs to be solved.
For example. I am 50 years old. I have many years’ driving experience. I want no harm to come to my cars, myself, my passengers or others around me and am therefore a careful driver. I pay my insurance premiums on my cars. My son, 18 years old, has very little driving experience — he’s just staring out. Yet he and I are quoted the same insurance premium for the same car. Yet younger people are statistically more likely to be involved in a car collision [due to driving inexperience, or perhaps just youthful vim behind the wheel]. Why are we paying the same prices? What data informed that decision? It means that older drivers like myself [low risk] are paying over the top for insurance for younger drivers [high risk] — where’s the incentivisation to pay for insurance when the pricing structure is neither risk or claim reflective? Where’s the value in me paying for and subsidising younger, less experienced drivers?
Addressing the issues around incentivisation and affordability / pricing structures are crucial to reinventing Nigeria’s insurance market. At present, insurers will ask for an entire premium one year in advance; for those who have nothing to give, no savings and live virtually day-to-day, how is this even possible? How can people afford one year ahead for something they’re not even sure if they need to have? It goes back to making insurance palatable, connecting common sense + emotional pull, as well as affordability; pricing for reality. In the UK, for example, when you get a lovely new shiny iPhone — you hold this pretty expensive piece of kit in your hands, and the salesperson [be it in person or online] is offering you insurance right there and then, at point of sale.
- They are playing on your emotions — what if you break or lose this lovely shiny phone?
- They are playing on your common sense — won’t it be a pain if I lose or break this phone but can’t buy a new one?
- They are making it affordable for you — the first three months are free and then it’s only an additional £4.99/mth and can be added on to your bill.
It makes sense to do it. Job done.
From an outsider’s perspective, no work seems to have been done in profile building of insurees. Nigerian insurers must build a better profile of the many different types of people they are insuring, so that they can build products accordingly that actually work for their consumers. At the moment, the pricing is unfair and the process unworkable. I would hazard a guess that over 90% of insurance brokerage is still done face-to-face. Again — how am I incentivised to take time out of work to sit in a building and go through the painstaking process of answering questions that aren’t suited to me or my lifestyle? Where’s the value?
Say, I have a car that I only use to travel in Victoria Island. Why can’t I insure it just for VI? I have another car that I use to go to and from the Mainland — again — why can’t I adjust an insurance premium accordingly? Perhaps I’ll buy a midlife crisis playboy car that realistically I’ll only use for a few weeks of the year in total — why can’t I insure it for just those few weeks? What I, and others are looking for in insurance is flexible, customisable options that are built around our own needs, and not the outdated intel that is set by traditional insurance brokers.
And the demand for flexibility and customisation is only set to grow. My children’s generation are becoming less and less interested in owning assets. They are more likely to lease items and not buy them — cars, homes, phones, even high value fashion. How can we build a better insurance business model around this new way of living and spending? What we have now doesn’t fit, and certainly won’t fit the future. What is needed is an insurance model based on the separation of asset ownership to activity ownership — to the extent where we can insure for the movement of actual goods/items for single trips? I want to be able to insure something specific on a whim — via mobile. I don’t want to have to book an appointment with a broker, whose middle man motives I am not sure of and whose lack of opaqueness makes me nervous, three weeks before I want to do something or go somewhere. I want to secure insurance moments before I decide to do something and then do it, safe in the knowledge I am insured and can go on with my life. Consumerism, how people engage with consumer goods and how people move with them is changing fast; insurance needs to move — fast. The ones who will succeed are the ones who can accommodate spontaneity.
As ever, you’ll see I’ve returned to mobile; to digital. And by digital I don’t mean electronic — which seems to confuse a number of the insurers I’ve engaged with recently. Scanning a form electronically and then having a call with a broker is not digital insurance. Plain and simple.
Digital is the only way we will gather enough data on the population, at scale, processing it using machine learning, to make better informed, customised decision making that benefits the consumer and the insurer. Insurers need to get creative with their solutions, if they are to drive up insurance rates from just 1.5% of the population. This is what we’re looking at at the moment at Sparkle; providing personalised services based on data decision making, as well as connecting people and digital platforms seamlessly. In the very near future, I want us to be able to provide tailored, flexible insurance for our tribe, and so the team and I are exploring opportunities and speaking with digital insurers who, like us, want transparency and simplicity to underpin all financial and lifestyle transactions.