THE nature of our world is that, it keeps evolving; consequentially new trends will keep emerging. Risk is any exposure to potential loss or damage that can impact on a person, place or organization. Nevertheless its description has expanded from being a mere possibility of disaster to being a concept of quality assurance, legal compliance and specific performance. With the increase in technological innovation around the world, risk and risk management now transcend a river that has overflowed its boundary to the shores of the gulf sea. For example, the risk matrix of climate change spans through extreme weather conditions, more flooding, food shortages, increased power outages and business interruptions. Downtime due to power outages, supply chains interruptions and more, can cost a company millions to recover. In the same breath,the risk matrix in a fire incident can exceed bodily medical treatment alone to include breakdown of labour, damage to property and mental trauma. Hence the impact of risk is not an isolated effect but a chain reaction of diverse consequences.
Technological innovations such as data entry and recording software, cloud computing, advanced analytics, telematics, block chain, smart contract and artificial intelligence et cetera are all providing ways of measuring, controlling and pricing risk with customers. These innovations are fundamental influencers of industries. This is not to say that all risk can be insured but that through technology, government’s input, natural and societal events as well as the populace disposition to risk management, it is possible to determine insurable interest and insurance in general. Nowadays, sensors, electric doors and monitoring systems now give homeowners and insurers’ data on and control over major risk. Telematics monitors, good road networks, effective transport systems,rails, effective traffic devices, driverless cars can almost reduce the overall need for motor insurance. In the words of Tom de Swaan, the Chairman of Zurich Insurance Group ‘technology is going to affect our industry tremendously’. He explained further that ‘the whole value chain will be impacted and the various innovation would lead to a very very fundamental rethinking of how we do business’. as reported in the annual publication of International Finance 2018
‘A realistic forecast of the future, in any situation must be based to some extent on the experience of the past and existing trends,’notes I.O Irukwu in his textbook Insurance Law in Nigeria. Insurance in Nigeria has gradually evolved.More often than not, such changes come by the way of a legal frame work via the instrumentality of laws made. Examples of such laws are Decree No. 58 of 1991, section 50 Insurance Act; No Premium No Cover in 200 3 and the recent new minimum capital requirement for Nigerian insurance companies; Minimum Paid-up Share Capital Policy for Insurance and Reinsurance companies in Nigeria(NAICOM/DPR/CIR/25/2019) law in 2019 . Prior to the promulgation of theinsurance Decree in 1991, the insurance industry was (and is still) to a greater or lesser extent still the most vilified in the financial sector, as some people used to see the industry as something like the springboard of the infamous ‘419’ haunting businesses.
This shows the quintessential role the government via its regulatory body , NAICOM, has to play in driving the penetration and orientation of insurance in Nigeria.
It is trite law that the regulatory body does not have a say in pricing in Nigeria. I am of the opinion that the cost of insurance product in Nigeria is quite open ended given the option to choose; the cost of insurance should be streamlined, closed and narrowed down. An insurance policy that deals with public safety should be complied with and monitored. Considering our dense population and size, insurance policies on fire, motor, health, building construction and professional indemnity should be reviewed and enforced. The government, for better implementation, can make them a requirement for certain benefits to accrue to individuals and businesses. At the same time, issues surrounding comprehensive data regulation will grow in importance, therefore, insurance regulators and data privacy rules will play a significant role in determining how insurers will be able to use data and also influence the level of product customization available to customers. Data will be the driving force of these innovations as it remains tantalizing close, but not yet in the full control of many businesses.
Since there are no quick fixes that allow insurers to clean up their data, Insurtech is the means to transform insurance from an arcane policy-led industry into one that succeeds by placing the customer at the heart of everything it does. According to a research by Martin Lindstorm, a columnist for Harvard Business Review and author of Buyology-Truth And Lies About Why We Buy, it was opined that ‘ninety (90) percent of purchasing decisions are made based on feelings’. I say these feelings can be built with a ‘Sterling Prestigious brand, Anchored through a Linkage of Sovereign Trust and an Allianz of effective service delivery.’ This is because the modern customer is digitally savvy and techologically inclined.
Another big challenge that is being faced in Nigeria is the transition to a more modern, data-dependent and digital industry. Thus, employees with proficiencies in fields related to computer programming and data engineering are becoming increasingly vital to the ultimate success of an insurance firm. Working partnership between insurers and insurtech companies are likely to develop over the coming years. I cannot say we are there yet, but we have taken a step in the right direction. The good news is thatwe can, the better news is that we will, the best news is that we must innovate the practice of insurance to rejuvenate our economy.
- Oyediran, a legal practitioner, writes in via [email protected]