NAICOM Deepens Insurance Penetration In Nigeria With The New Operational Guidelines For Insurance Web Aggregators – Insurance Laws and Products – Nigeria – Mondaq


Recently, the National Insurance Commission (“NAICOM”) issued the Insurance Web Aggregators Operational Guidelines (the “Guidelines”) which set out the regulatory framework for the deployment and operation of web aggregator platforms within the Nigerian insurance sector.
 A web aggregator is a company registered under the Companies and Allied Matters Act (CAMA) and licensed under the Guidelines, to act as an intermediary between insurance companies and the public.
The functions of a web aggregator include:
Essentially, the Guidelines provide a framework for the licensing, registration and regulation of web aggregators and also regulate their business relations with insurance companies. While web aggregators are required to obtain operating license from NAICOM, insurance companies are required to obtain “No Objection” from NAICOM to be allowed to carry on a web-based insurance business. The Guidelines took effect from the 1st of February 2022 but creates a 60-day window for full compliance with its provisions by existing web aggregators and insurance companies.
This article highlights key provisions of the Guidelines and the likely impact on the Nigerian insurance industry.
An entity that intends to obtain a web aggregation license from NAICOM is required to comply with the following:
A license granted to a web aggregator shall only be valid for two (2) years, subject to suspension or cancellation by NAICOM. A web aggregation licence shall be renewable each year, subject to NAICOM's prerogative and upon payment of an annual renewal fee of one million naira (N1m). However, application for renewal is required to be submitted at least 45 days before expiration of the license.
Likewise, an insurance company interested in offering its products on a web aggregator's platform and thereby seeking to obtain “No Objection” from NAICOM, is required to apply to NAICOM in the prescribed manner, with the following documents attached:
The Guidelines prescribe the mode of operations of web aggregators and insurance companies, and also establish code of conduct for them in relation to their respective web aggregator platforms. By the same token, business obligations of web aggregators and insurance companies, as well as restrictions applicable to operations of insurance companies in relation to their respective web aggregator platforms, are explicitly stated in the Guidelines which include the following:
A web aggregator is required to enter into an SLA with an insurer or a broker intended to partner with, prior to the provision of web aggregation services. The Guidelines prescribe the standard clauses that must be included in an SLA.
To prevent web aggregators from engaging in anticompetitive practices, the Guidelines prescribe transparency in the transmission of leads to an insurer. Thus, a web aggregator is required to use Lead Management System (“LMS”) in transmitting the data of a customer to insurers. LMS is defined in the Guidelines as the software deployed by a web aggregator for recording, filtering, validating, grading, distribution, follow-up, and closure of leads from the enquiries received on its website with an intention to buy insurance products.
To ensure data security and protection, a web aggregator must comply with IT security procedures and prevent unauthorised access and misuse of customer data, in the transmission of leads to an insurer.
The Guidelines prescribe certain reporting and disclosure obligations on web aggregators. In particular, a web aggregator is required to:
As the regulatory authority for the insurance industry, NAICOM is empowered pursuant to the Insurance Act and NAICOM Act, to issue regulations governing insurance business in Nigeria.
The Guidelines seem to have regard to current market trends and industry outlook for the insurance sector. According to analyses and projections by Augusto & Co. (a research, credit ratings and credit risk management agency) in its 2022 Insurance Industry Report3, insurance penetration rate stands at less than one percent (1%) in Nigeria. The industry's gross premium income (GPI) has also continued to stagnate at ?520.1 billion (US $1.4 billion) when compared to previous years. Figures released by the National Bureau of Statistics (NBS), showed that the financial sector (consisting of financial institutions sub-sector and insurance sub-sector) contributed 3.10% to the overall nominal gross domestic product (GDP) as at Q4 2021. Insurance sub-sector's share of the contribution stood at 7.82% compared to financial institutions sub-sector's share of 92.18%.   
However, the industry is reported to have shown signs of resilience and potential for growth, following restrictions in product distribution encountered during the COVID-19 induced lockdowns of 2020 (and some part of 2021) and the huge claims it has had to pay following the destruction of properties that trailed the ENDSARS protests in 2020. One unique development during these crises was the increase in the use of online channels to market and sell insurance products resulting in an upscale in consumers' and insurance companies' online presence. Before now, the insurance industry has leveraged the more structured data in the banking industry (through the adoption of bancassurance) and the strategic alliance with Fintechs (through InsureTech) to improve sales and grow premium income. With web aggregation encouraging more people to search and stay online, insurance companies can easily adopt online target-marketing campaigns to re-orientate the insurable public about the need to embrace insurance products.
With the coming into operation of the Guidelines, online marketing and sale of insurance products, increased insurance awareness in the market, and a deeper insurance penetration among the public, are expected in the near future. Also, the regulatory framework within which web aggregators can operate in providing information to potential insurance consumers and giving leads to insurers, has now been made crystal clear. We note that among other issues, consumer protection and the prohibition of anticompetitive practices (two principal issues to be considered in the insurance industry) have also been clearly outlined in the Guidelines. It is also noteworthy that the Guidelines have broadened the compliance obligations of web aggregators and insurance companies due to certain returns now required to be made to NAICOM.
The Guidelines categorically state that, the duty to seek information on understanding and complying with its provisions, rests on the participating web aggregators and insurers. As the 60-day timeline for complying with the Guidelines expires in the first week of April, companies operating in the Nigerian insurance sector need to seek appropriate advice on confirming their additional obligations under the Guidelines.
1 Insurance Act No. 1 of 2003 (Cap. I17, Laws of the Federation of Nigeria, 2004)
2 National Insurance Commission Act No. 1 of 1997 (Cap N53, Laws of the Federation of Nigeria 2004)
3 Augusto & Co: 2022 Insurance Industry Report –

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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