Regulatory Framework for Insurtech Firms in Nigeria
The National Insurance Commission (NAICOM) has defended its minimum capital requirement for insurtech firms, emphasizing that the regulation ensures financial soundness while supporting innovation within the industry. This stance was made clear during a seminar for insurance journalists held in Abeokuta, Ogun State.
Dr. Usman Jankara, Deputy Commissioner, Technical at NAICOM, explained that the Commission’s framework offers two options for insurtech firms: either partnering with traditional insurers or operating as stand-alone entities. This approach aims to provide flexibility while maintaining regulatory oversight.
Under the guidelines, stand-alone insurtechs must maintain a minimum capital of N1.5 billion per category of general business or N1 billion per category of life business, or as determined by the Commission. For partnerships, a minimum of N10 million capital and a professional indemnity cover of at least N100 million are required.
“If you choose to partner, all you need is N10 million to operate. But a stand-alone insurtech is essentially a mini-insurance company and must have capital,” Jankara said.
He further explained that the capital thresholds are designed to protect policyholders and sustain trust in the insurtech ecosystem. “We must balance innovation with prudential soundness. If insurtechs fail to meet obligations, public confidence will collapse and set the industry back 20 years,” he warned.
Jankara noted that the capital requirement represents roughly 10 percent of what is mandated for conventional insurers under the new Nigerian Insurance Industry Reform Act. This proportion reflects the unique position of insurtechs in the market, which are expected to be agile but still financially stable.
The guidelines were developed after several rounds of consultation with stakeholders, highlighting NAICOM’s commitment to collaboration. The Commission aims to ensure that the regulations are practical and supportive of the evolving insurtech landscape.
New Penalties for Delayed Claims Settlement
In addition to the capital requirements, Jankara disclosed that under the new law, companies delaying claims settlement face a minimum penalty of N500,000 plus compounded interest at the prevailing bank rate. “If the prevailing rate is 28 percent, it will be applied on top of the unpaid amount, compounded over the period of delay,” he said.
This measure is intended to enforce accountability and ensure timely claim settlements, which are critical for maintaining customer trust and satisfaction.
Confidentiality and Data Protection
Jankara also cited legal and security considerations for not publicising claim payments, noting confidentiality obligations and data protection laws. These factors are essential in safeguarding sensitive information and ensuring compliance with existing regulations.
Key Takeaways from the Seminar
- Regulatory Flexibility: Insurtech firms can either partner with traditional insurers or operate independently.
- Capital Requirements: Stand-alone insurtechs must maintain significant capital to ensure stability.
- Balancing Innovation and Safety: The regulations aim to foster innovation while protecting policyholders.
- Penalties for Non-Compliance: Companies failing to settle claims promptly face financial penalties and interest charges.
- Confidentiality and Compliance: Legal and data protection considerations play a crucial role in how claim information is handled.
