NAICOM peeps at future of insurance sector

Barineka Thompson

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Chuks Udo Okonta

The National Insurance Commission (NAICOM) has said the insurance ecosystem is evolving rapidly, and insurers can no longer lean on old familiar ways while the prevailing technological and strategic winds shift around them.

While peeping into the future of insurance business, NAICOM said insurance is shifting from ‘detect and repair’ to ‘predict and prevent’.

Director, Supervision Directorate, NAICOM, Barineka Thompson, in a paper entitled: The Future of Nigerian Insurance Sector in a Shifting Landscape, delivered at the recently held Seminar for Insurance Correspondents in Lagos, submitted that as our often-cloudy present opens up toward a brighter future, insurers should embrace technology across the customer journey if they hope to secure the trust and loyalty of tomorrow’s policyholders.

He remarked that like many industries where digitisation has taken hold, tech shouldn’t be adopted for techology’s sake, stressing that simply upgrading to the latest technological trend is not enough to sustain a competitive edge.

He said factors such as distribution; claims; operation proposition; risk and capital can drive insurers’ potential for future success as they consider their digital strategies.

He exposed what the future looks like with an analogy tagged; welcome to the future of insurance, as seen through the eyes of Mr. Scott, a customer in the year 2030.

His digital personal assistant orders him a vehicle with self-driving capabilities for a meeting across town.

Upon hopping into the arriving car, Scott decides he wants to drive today and moves the car into “active” mode. Scott’s personal assistant maps out a potential route and shares it with his mobility insurer, which immediately responds with an alternate route that has a much lower likelihood of accidents and auto damage as well as the calculated adjustment to his monthly premium.

Scott’s assistant notifies him that his mobility insurance premium will increase by four to eight per cent based on the
route he selects and the volume and distribution of other cars on the road. It also alerts him that his
life insurance policy, which is now priced on a “pay-as-you-live” basis, will increase by two per cent for
this quarter.

The additional amounts are automatically debited from his bank account.

When Scott pulls into his destination’s parking lot, his car bumps into one of several parking signs.

As soon as the car stops moving, its internal diagnostics determine the extent of the damage. His personal assistant instructs him to take three pictures of the front right bumper area and two of the surroundings.

By the time Scott gets back to the driver’s seat, the screen on the dash informs him of the damage, confirms the claim has been approved, and reports that a mobile response drone has
been dispatched to the lot for inspection. If the vehicle is drivable, it may be directed to the nearest in-network garage for repair after a replacement vehicle arrives.

Thompson noted that while the experience of Mr. Scott may seem beyond the horizon, such integrated user stories will emerge across all lines of insurance with increasing frequency over the next decade.

“Infact, all the technologies required above already exist, and many are available to consumers. With the
new wave of deep learning techniques, such as convolutional neural networks, artificial Intelligence (AI) has the potential to live up to its promise of mimicking the perception,
reasoning, learning, and problem solving of the human mind,” he said.

He maintained that the experience of Mr.Scott–the shifting impact
in this evolution, insurance will shift from its current state of “detect and repair” to “predict and prevent,” transforming every aspect of the industry in the process.

He said the he pace of change will accelerate as brokers, consumers, financial intermediaries, insurers, suppliers, and regulators become more adept at using advanced technologies to
enhance decision making and productivity, lower costs, and optimize the customer experience.

He highlighted what he called the Forbes four pillars of the future of insurance (March2022), in which he identified: Distribution and Channel, stating that insurers aiming at growth should forge new partnership opportunities to help them develop new offerings and maneuver into new markets.

Another is the Risk, which indicates that reward trade-off of changing consumer behaviors are becoming increasingly comfortable with sharing their data, especially when it means they can receive discounts.

Proposition and Product: To stay relevant and competitive, insurers should shift focus to solutions rather than products.

And that no two customers have the same needs, and the insurance solutions they are offered should reflect their specific risks.

Operation and Technology: When it comes to increasing revenue and margin optimization, it is critical to capitalize on core capabilities. And that insurers should first define their core abilities.

Thompson submitted that for creating digital business models, there are three new opportunities insurers should embrace: Involves selling insurance directly to consumers online, adding that it is becoming increasingly common for non-insurers to build insurance businesses and the platform/ecosystem approach attempts to integrate insurance with other larger services on
one centralized platform via new technologies, digital sensors and real-time responses.

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