The Impact of Digitization on the Nigeria Insurance Industry
Chapter One
AIMS AND OBJECTIVES
This research study will examine the effect of digitalization on the marketing of insurance in the Nigeria Insurance Industry.
CHAPTER TWO
REVIEW OF LITERATURE
IT embodies a convergence of interest between electronics, computing and communication. IT refers to a group of technologies that revolutionised the handling of information (Drew and Foster, 1994). Communication technology deals with physical devices and software that link various computer hardware components and transfer data from one physical location to another (Laudon and Laudon, 2010). Broadly, ICT encompasses technologies for processing and communication of information. Chowdhury (2000) states that ICT encompass technologies that can process different kinds of information (audio, video, text, and data), and facilitate different forms of communications among human agents, and among information systems. Thus, ICT are electronic devices for collection, processing, storage, transmission, and dissemination of information (Duncombe and Heeks, 1999; Marker et al., 2002; Ebijuwa, 2005).
Development of ICT assists firms to effectively integrate into the global market. Globally, the development of ICT is increasingly considered to be an important factor influencing economic growth (Tcheng et al., 2007). According to Vu (2004), ICT can enhance firms’ efficiency and competitiveness by: promoting better communication and interaction with customers; facilitating significant cost savings through e-commerce and ICT enabled management techniques; and enhancing firms’ growth and performance. Furthermore, the development of ICT facilitates better intra-firm communication and increases flexibility thereby facilitating the removal of physical constraints on organisational communication and promoting productivity gains through better management (Jeremy et al., 2003). Investment in ICT can increase production activity and national output; thus, boasting demand for goods and services in the economy. Such investments can also increase employment, directly and indirectly (Alleman et al., 2002).
Notwithstanding the financial implications of ICT investment; such investment is worthwhile as ICT can improve information sharing, decision-making, coordination, product quality, responsiveness and distribution (Al-Mudimigh et al., 2001). Similarly, investments in ICT can also reduce operational costs and facilitate better communication (Datta and Agarwal, 2004; Waverman et al., 2005). Such investment is beneficial as development of ICT enables a firm to explore the global markets and improve the firm’s performance (Jeremy et al., 2003). The benefits of investing in ICT development include; improvement of information flows, enhancement of arbitrage abilities, facilitating price discovery, and substitution of costly physical transport by widening markets networks (Sridhar and Sridhar, 2009; Andrianaivo and Kpodar, 2011). This implies that there is a bi-directional (direct and indirect impacts) causal relationship between ICT infrastructure and economic growth (Sridhar and Sridhar, 2009; Adegbemi Onakoya et al., 2012). Meanwhile, Richardson et al. (2006) identify five areas of ICT applications in support of firm development: economic development of product, community development, research and education, small and medium enterprises development, and media networks.
ICT are catalyst to economy growth and development (Kodakanchi et al., 2006). The role of ICT in national development can not be over emphasised. The United Nations Development Programme (2001) describes ICT as a powerful enabler of development due to its role in the society and national development. Likewise, Datta and Agarwal (2004) show that economic benefits of ICT can be direct (through increases of employment and demand) and indirect (notably through social returns). Moreover, effective ICT network provides necessary information need of a nation economy – industry, commerce, agriculture, services sector – to foster necessary structural linkages for sustainable growth (Bhatnagar, 2005; Anie, 2011). Decision on ICT investments must take cognisance of other socioeconomic factors in order to facilitate growth in developing nations, such as Nigeria (Mbarika et al., 2003). ICT are fundamental to every sector of the Nigeria economy. In this regard, Kramer et al. (2007) highlight the role of ICT in modern economy growth and development. According to them, ICT reduces transaction cost thereby improve productivity; offers immediate connectivity by improving efficiency, transparency and accuracy; substitutes for other, more expensive means of communicating and transacting; increases choice in the marketplace in order to provide access to otherwise unavailable goods and services; widens the geographical scope of potential markets; and channels knowledge and information necessary for sustainable development (Kramer et al., 2007:7)
In Nigeria, ICT development and usage is enhanced by the nation’s federal government through establishment of the National Information Technology Development Agency (NITDA) in 2001. NITDA is an agency responsible for fostering the development and growth of IT in Nigeria. The agency regulates, monitors, evaluates, and verifies progress of IT development in Nigeria, under the supervision and coordination of the Federal Ministry of Science and Technology (NITDA, 2013). NITDA power has further been enhanced by National Information Technology Development Agency Act (NITDA Act) of 2007 to ensure effective operation and implementation of National IT policy in Nigeria. Consequently, Nigeria is one of the world’s fastest growing telecoms market and largest telecoms sector in Africa. Nigeria is ranked as one of the largest internet usage in Africa; with online population of 45, 039,711 users, representing 26.5% of the nations’ population (ITU, 2013; IWS, 2013). Likewise, the nation’s internet penetration in 2012 was 28.4%, representing 28.9% of African total internet usage (ITU, 2013; IWS, 2013). The nation’s ICT development and usage is far above the International Telephone Union’s (ITU) benchmark of 1% (Ndukwe, 2005). This suggests that the ICT culture in Nigeria economy has improved significantly.
ICT AND DEVELOPMENT OF INSURANCE IN NIGERIA
The entry of British trading companies in the region and subsequent increased inter-regional trade marked the beginning of modern insurance in Nigeria. Development of shipping and banking activities, coupled with increased trade and commerce necessitated handling of some of business risk locally (Adeyemi, 2005). The mode of operation of early insurance offices in Nigeria started as agencies of overseas insurance companies. The first insurance company, Royal Exchange Assurance Company Limited, was incorporated locally in 1921 by the Guardian Royal Exchange of London. Until the time of independent in 1960, there was virtually no wholly owned indigenous insurance company in Nigeria. During this period, insurance business was predominantly underwritten by the subsidiary of European companies with headquarters based in Europe (Irukwu, 1986). Subsequently, other agencies and companies were established, including: Patterson Zochonis (PZ); Liverpool, London and Globe; BEWAC’s Legal and General Assurance; and the Law Union and Rock (Jegede, 2005). The World War II, particularly between 1921 and 1949, adversely impacted the growth of insurance because trading activities were obstructed both in Nigeria and United Kingdom. However, business activities gradually improved, and the Nigeria insurance industry improved accordingly.
The first indigenous insurance company, the African Insurance Company Limited, was established in 1958. By 1976, there were twenty five (25) insurance firms in Nigeria. The Nigerian government ventured into insurance business by establishing NICON and Nigeria Reinsurance Corporation in 1969 and 1977 respectively. This marked the beginning of governmental control of insurance in order to redress the excessive foreign control of insurance business in Nigeria. Prior to introduction of governmental control of insurance, a few foreign companies controlled over 75 per cent of Nigeria insurance portfolio. The insurance industry has grown, but not without its attendant challenges. The challenges include poor market penetration, potential abuse, low level awareness, low operating capital, low local underwriting capacity and acceptance of foreign risks (Ezekiel, 2005). These challenges culminated to massive regulation of the Nigeria insurance industry, which has become substantially intensified in the last two (2) decades. The objectives of the insurance sector reforms include: to increase the industry’s low retention capacity; to attract foreign capital infusion into the industry for enhanced premium growth and profitability; to achieve a consolidation that will produce companies capable of meeting claims obligations promptly; to ensure that the nation’s insurance companies can effectively compete at the continental and global levels; to enable the industry attract the wherewithal for strategic investments in human capital development for greater efficiencies; to create a necessary competitive environment to promote brand activities, to increase investment and better public awareness of the benefits of insurance to society at large; to actualise necessary economies of scale to ensure that insurance is affordable and accessible; and to encourage the industry to leverage on synergies from mergers and acquisitions and other alignments to achieve superior product innovation, deeper market penetration and product distribution (Obaremi, 2007:52).
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
POPULATION OF THE STUDY
According to Udoyen (2019), a study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitute of individuals or elements that are homogeneous in description.
This study was carried out to examine the impact of digitization on the nigeria insurance industry. Leadway Insurance PLC form the population of the study.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of hundred and twenty (120) questionnaires were administered to respondents of which 100 were returned. The analysis of this study is based on the number returned.
CHAPTER FIVE
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS:
Introduction
This chapter summarizes the findings on the impact of digitization on the nigeria insurance industry, Leadway Insurance PLC as case study. The chapter consists of summary of the study, conclusions, and recommendations.
Summary of the Study
In this study, our focus was on the impact of digitization on the nigeria insurance industry, Leadway Insurance PLC as case study. This research study will examine the effect of digitalization on the marketing of insurance in the Nigeria Insurance Industry.
The study among others, the following problems motivated this study, inability of insurance companies in Nigeria to:
Increase insurance penetration
Promote the lack of trust and confidence of the public
Change the perception of the insuring public towards insurance
Increase revenue, transparency and better marketing using digital technologies.
The study adopted the survey research design and randomly enrolled participants in the study. A total of 100 responses were validated from the enrolled participants where all respondent are staff of Leadway Insurance PLC.
Conclusions
Development of ICT/digitalization assists firms’ to effectively integrate into the global market. The insurance sector is crucial to sustainable development of a nation. The study is significant in view of the need for insurance companies’ in Nigeria to develop and maintain a high level of ICT usage in order to meet the nation’s insurance needs, to enhance their profitability and to contribute positively to the nation’s economy. The study examined the impact of ICT adoption on insurance companies’ profitability in Nigeria. It identifies the imperatives for adoption of ICT to promote efficient and efficient service delivery in the insurance industry as a strategy for attainment of the profit maximisation objectives of insurance companies in Nigeria. Using structured questionnaires of 100 respondents from Leadway insurance PLC, an empirical analysis was undertaken to explore roles of Digitalization in enhancing quality of service delivery and profitability of insurance companies in Nigeria. The data were processed with IBM SPSS V19 Software, and the hypothesis was tested with Pearson correlation. The outcome suggests that adoption of ICT by insurance companies can enhance their efficiency, their quality of service delivery, and their profitability. The implication of the findings for practice is that insurance companies should endeavour to update their ICT facilities regularly, in view of its impacts on quality of service delivery and profitability.
With respect to the analysis and the findings of this study, the following conclusions emerged;
- The usage and adoption of digitalization contributes to penetration of insurance in Nigeria.
- Digitalization improves the quality of service rendered by insurers in Nigeria.
- Digital marketing contributes positively to sales of insurance policies in Nigeria.
Recommendation
Based on the findings the researcher recommends that;
- According to the findings of this research and the high effect of “using internet in activities related to marketing research” on insurance sales, it is recommended that the managers and sales experts of life and investment insurance apply the information derived from customers to improve the process of electronic service delivery and highly satisfy the clients..
- According to the result that “the possibility of online order” has the highest effect on life and investment insurance sales among the components of “using internet in activities related to clients”, it is recommended to insurance companies to allocate a section in their websites to product customization and customer choice.
- Based on the result that “the online support” has the highest effect on life and investment insurance sales among the components of “using internet in activities related to distribution channels”, it is recommended to insurance companies to equip their sales network with the most updated communication facilities and online services to increase their market share and be informed from the latest changes in processes, services, and products in the fastest possible time.
- According to the result that “the website visitors’ information” has the highest effect on life and investment insurance sales among the components of “using internet in activities related to marketing research”, it is recommended to insurance companies to become aware of their clients’ interests regarding a particular product and attempt to develop it more than before.
REFERENCES
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- Adeyemi, M., An overview of the insurance Act 2003. Issues in merger and acquisition for the insurance industry, 61-78, In: O. C. Ezekiel, (Ed.), Proceeding of the NIA workshop on Insurance ACT 2003, Lagos: Nigeria Insurance Association, 2005.
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