As part of its goals to actualize a digital-driven economy, NAICOM has released operational guidelines for the licensing, effective administration, and operation of Insurtech companies in Nigeria. This laudable innovation can be described as a timely and much-needed development in the Nigerian insurance ecosystem, as its ultimate goal is to encourage the development of new and technology-driven insurance products and services. This article will explore how to start an insurtech company in Nigeria, examining the legal considerations for establishing an insurtech company in Nigeria, with reference to the relevant provisions of the existing guidelines and other applicable laws.
Overview of an Insurtech Company
Insurtech is an abbreviation for insurance technology, which describes the application of advanced innovations like artificial intelligence, big data analytics, blockchain, and machine learning to transform and automate traditional insurance services. By leveraging these digital tools, intending insurtech companies or existing insurance entities offering technology-driven insurance solutions seek to improve customer experience, optimize operational processes, and deliver tailored insurance products.
Insurtech uses technology to change and improve traditional insurance by altering how policies are created, underwritten, and managed. Through the use of real-time data analytics, Insurtech allows insurers to assess risks and set prices more precisely, while also minimizing the likelihood of fraud and financial losses. In Nigeria, the National Insurance Commission (NAICOM) is the apex agency saddled with the responsibility of licensing and managing insurtech operations. This innovation is considered a win-win for both insurers and the insured. It can be applied to improve service delivery and user experience in many areas, including vehicle insurance, life insurance, property insurance, warranty, health insurance, etc. However, there are challenges of possible breach of data privacy, security, and ultimately resistance by traditional insurance entities to the transition occasioned by this new wave of innovation.
What are the Permissible Insurtech Services and their Scope of Operation in Nigeria?
The rules provide for two major types of Insurtech firms: the standalone insurtech and the partnering insurtech. Each of these firms has permissible services that help to guide their operations.
The following services are permissible for Partnering Insurtech:
Marketing and distribution of insurance products and services, customer services, policy administration, product management, claims management, insurance business aggregation, crop cutting, data collection and yield calculation, and such other services as may be stipulated by the Commission from time to time.[1]
Standalone Insurtech companies are generally allowed to render such insurance services as may be specified in their license, except transactions involving special risk products such as Oil and Gas Insurance, Marine and Aviation Insurance, Retire Life Annuity, and Insurance of Government Assets and Liabilities for Ministries, Departments, and Agencies (MDAs).[2]
What are the Legal Considerations for Starting an Insurtech Company in Nigeria?
Whether you are an existing insurance company providing insurance solutions through technology or a technology-driven firm intending to operate in Nigeria, here are some legal considerations before you kick-start your Insurtech company in Nigeria.
1. Company Registration with the Corporate Affairs Commission
To operate an insurtech, it is legally required for the company to be registered with the Corporate Affairs Commission based on the required minimum share capital for insurance companies. This is an inevitable step as the documents issued upon incorporation are relevant to applying for an insurtech licence from NAICOM.[3]
2. Compliance with NAICOM and other regulatory agencies
All Insurtech companies are mandated to apply for an Insurtech license before commencing operation. The application must be in the prescribed form to be issued by NAICOM upon due satisfaction.[4] The company must ensure that it has the minimum capital to be eligible for registration, depending on the type of insurtech company and insurance business carried out by the company.[5]The license is valid for 4 years and is subject to renewal.[6]
Where the company is involved in risk management, reinsurance, investment, actuarial function, divestment, outsourcing, and shared services, providing annual returns and accounts, whether as a standalone or partnering insurtech company, it is further required to ensure compliance with the provisions of NAICOM Prudential Guidelines on such matters.[7]
3. Intellectual Property Protection
Before commencing your insurtech company, it is necessary to carry out a due diligence search of your brand name at the relevant registry, e.g, Copyrights, Trademark, or Patent Registry, to avoid any form of infringement on an existing right.
Additionally, to protect your brand, logos, software, and other intellectual property, it is advised that companies intending to register as insurtech companies should register and obtain copyrights or patents. This allows for better security of your brands, which attracts and retains clients’ loyalty and confidence. Furthermore, in the operations of websites, insurtech companies are to avoid uploading infringing content that constitutes a violation of the rights of others under the Copyright Act.[8]
4. Consumer Protection and Data Security-
To guarantee consumer protection and data security on their websites or mobile apps, insurtechs are required to comply with the relevant provisions of the Nigerian Data Protection Act, 2023, and the Cybercrimes (Prohibition, Prevention, Etc.) Act, 2015, and all other data privacy laws. This is to ensure the prompt safeguard of the personal data of consumers and all other data processing activities.[9]
In addition, insurtechs are required to establish a customer registration process that uniquely identifies all users and critical devices, ensuring they are linked to recognized identification systems, and all submitted identities must remain valid at all times.[10]This requirement aligns with the NIMC Act, which prohibits any individual or corporate entity from accessing data or information in the National Identity Database relating to a registered person without prior authorization from the NIMC.[11]Hence, such user identification must comply and be duly verified in line with the extant Act.
Conclusion
Registering an insurance company differs significantly from registering an insurtech firm. An insurtech is not just a typical startup or tech company; it focuses specifically on promoting innovations, products, and services related to insurance. In Nigeria, the licensing process is managed by NAICOM, the regulatory authority. However, there are additional legal obligations that must be met to fully establish an insurtech company, which are outlined in this article. To initiate the process, it is crucial to consult a legal expert for guidance and direction on how to navigate this unique compliance pathway.
If you’d like to speak with our team about starting your insurtech company in Nigeria, you may reach out to us through the WhatsApp icon on this page, or submit the contact form using this link here, and we’ll respond to you.
[1] Rule 4.1 NAICOM Guideline for InsurTech Companies 2025
[2] Rule 4.2 NAICOM Guideline for InsurTech Companies 2025
[3] Rule 6.1 and 6.2
[4] Rule 5.0
[5] Rule 14.1
[6] Rule 15.0
[7] Rule 11.0 and 11.1
[8] Section 55 and 61 Copyrights Act 2022
[9] Rule 9.1 NAICOM Guideline for Insurtech Companies
[10] Rule 9.1.4
[11] Section 26 NIMC Act
