Understanding the Guidelines For Insurtech Operators in Nigeria

Contributor: Chibueze James

Introduction

On 30^th July 2025, the National Insurance Commission (NAICOM or the Commission) formally issued the Guidelines for Insurtech Operations in Nigeria (the Guidelines), which came into full effect on 1^st August 2025.^[1] The Guidelines mark a critical moment in the regulation of Nigeria’s insurance sector, especially as it navigates the rapidly evolving intersection of finance, technology, and consumer protection.^[2]

Insurtech is a combination of the words ‘insurance’ and ‘technology’. According to the Guidelines, it refers to an institution that uses technological innovations to provide insurance services efficiently and effectively.^[3] Insurtech can offer a tone of opportunities for enhanced accessibility, cost efficiency, innovation in product offerings, and a deeper financial inclusion.^[4] However, despite the aforementioned advantages of insurtech earlier mentioned, these same innovations carry risks such as data-privacy and security issues, unfair or misleading practices, opaque underwriting or claims processes, and potential instability if not properly manage.^[5] Hence, the Guidelines seek to strike a balance, which is to create a clear legal framework that fosters innovation while ensuring market integrity.

Thus, this article seeks to explain how insurance and technology intersect, the rules guiding digital insurance platforms, the requirements for licensing and compliance, and how these guidelines promote innovation and financial stability in the Nigerian insurance industry.

Key Provisions of the NAICOM Insurtech Guidelines 2025

Insurance and technology intersect when digital tools for instance such as Artificial Intelligence, data analytics, chatbots, etc, are used to enhance traditional insurance functions like underwriting, claims processing, risk assessment, or customer service.^[6] For example, in the annual report filed by Lemonade Inc, an American Insurance company,^[7] it uses an AI-chatbot to ask policy applicants questions and assess risk, gathers many more data-points than traditional carriers, and claims bot can approve simple claims in few seconds, running fraud detection algorithms in the background.^[8] Thus, technology revolutionizes insurance, thereby aiding Insurance companies to redefine customer expectations.

The Nigerian government, bearing this in mind, has come up with the Guidelines on Insurtech. It is therefore, imperative that the features of these guidelines are delved into:

1. The Guidelines, which took effect on August 1, 2025, are the result of extensive consultations geared at providing a unified regulatory framework for the licensing, operations and supervision of Insurtech firms.^[9]
2. Categorization of Operators: The Guidelines provide f two categorizations of insurtech operators which are the Partnering Insurtech and the Standalone Insurtech. According to the Guidelines, Partnering Insurtech collaborates with insurance institutions to improve or complement existing operations.^[10] On the other hand, Standalone Insurtech operates independently, offering insurance products or services directly to consumers.^[11]

Under Partnering Insurtechs, the services permitted by the Guideline include:

1. Marketing and distribution of insurance products and services;
2. Customer services;
3. Policy administration;
4. Product management;
5. Claims management;
6. Insurance business aggregation;
7. Crop cutting, data collection and yield calculation;
8. Such other services as may be stipulated by the Commission from time to time.^[12]

On the other hand, a standalone Insurtech is permitted by the Guidelines to transact the categories of insurance specified in its license excluding special risk products such as Oil and Gas Insurance, Marine and Aviation Insurance, Retire Life Annuity, and Insurances of Government Assets and Liabilities for Ministries, Departments, and Agencies.^[13]

1. Application and Eligibility for Licensing: The Guidelines provide that applicants seeking license should complete the application form as prescribed in Schedule I of the Guidelines. The form will contain the name, contact address, telephone number, email address of the applicant, and the amount payable in respect of the licensing fee made to the Commission.^[14]

In addition to the above:

1. the applicant shall submit evidence of approval or no objection, where required.
2. also, the Commission may require an applicant to furnish any further information or clarification for the purpose of disposal of the application and thereafter.
3. the applicant shall appear before the Commission for a pre-registration interview.
4. the applicant may be subjected to regulatory sandbox testing for a period as may be determined by the Commission prior to the grant of license.^[15]
5. Service Level Agreements (SLA): The Guidelines made provisions for what it refers to as an SLA. This is a document containing the contractual relationship between an insurtech and an insurer which is an agency relationship. While the insurer is the principal, the insurtech is the agent. Where the insurtech is also the insurer, the insurtech is fully responsible for the entire insurtech operations.^[16] In other words, where an Insurtech acts as agent, it means it works on behalf of a licensed insurer, that is, the principal, handling tasks like marketing, policy administration or claims processing, but it is the insurer that bears legal responsibility. However, where the Insurtech is itself the insurer, it assumes full legal and financial responsibility for all its operations, which may include underwriting, claims payments, etc.

The SLA contains key relevant contents, which include the scope of operation of the partnership, the Insurtech’s operational model to be offered, duties and responsibilities of each party both during the agreement and upon it’s formation, , the data elements to be shared, the duration of the contract, among other contents.

1. Non-Permissible Activities: The Guidelines prohibits an Insurtech firm from engaging in certain kind of activities. They include but are not limited to the following:
2. Unlicensed Insurance Operations, where an Insurtech offers insurance services without obtaining the necessary license from the Commission;
3. Ineligible Insurance Business, which, for instance, could be Oil and Gas Insurance and Marine and Aviation Insurance.
4. Unapproved Products and Pricing Model involving launching products or using dynamic pricing without actuarial support or prior approval from the Commission.
5. Data privacy violations, which could involve sharing of personal data without consent.
6. Engaging in activities prohibited by extant laws and regulations.^[17]
7. Business Obligations:^[18] The Guidelines provide for certain obligations that must be fulfilled and kept by an Insurtech. For instance, an Insurtech has an obligation to display the license obtained from the Commission and details of validity of license on its website. It shall state clearly that insurance is the subject matter of its operation. It is also obligated to maintain at all times the minimum capital requirement and Risk Based Capital as may be prescribed by the Commission.
8. Minimum Capital Requirement: For a standalone Insurtech, the minimum capital requirement is the higher of N1,500,000,000 per category of general or non-life insurance business or risk-based capital determined from time to time by the Commission; N1,000,000,000 per category of life insurance business or risk-based capital determined from time to time by the Commission; or such other amount as may be prescribed by the Commission from time to time.^[19]

This means that a standalone Insurtech must always meet the highest capital requirement set by law. It could be ₦1.5 billion for each non-life insurance category, ₦1.0 billion for each life insurance category, a risk-based figure that the Commission calculates, or any other amount the Commission prescribes later. In other words, the Insurtech must hold whichever of these figures is greater at any given time.

On the other hand, for Insurtech partnering with insurance institutions, the applicant shall have a minimum capital requirement of N10,000,000 as at the date of application and shall continue to maintain the same throughout the license period and professional Indemnity of not less than N100,000,000 or as may be prescribed by the Commission from time to time.^[20]

In simpler terms, this provision requires every applicant to have at least ₦10 million in capital at the time of applying for a license, and to keep that amount intact throughout the validity of the license. In addition, the applicant must secure professional indemnity insurance of not less than ₦100 million, or any other amount that the Commission may later stipulate. This indemnity cover provides financial protection against liabilities that may arise from mistakes, negligence, or professional misconduct in the course of business.

It is important to note that from time to time the minimum capital requirement specified in the case of an Insurtech partnering with insurance institutions may be increased by the Commission.^[21]

1. Dispute Resolution: For the purposes of settling disputes where it arises, the Guidelines provide that where a dispute arises between an Insurtech and insurance institution, the provisions of the arbitration clause in the partnership agreement or the SLA shall be exhausted before referring the matter to the Commission.^[22] Furthermore, any dispute arising out of insurance transactions, the person(s) so affected may refer the matter to the Commission.^[23]

How Does the Guidelines Promote Innovation and Financial Stability in the Nigerian Insurance Industry?

1. The mandatory minimum and risk-based capital thresholds strengthen financial stability. This ensures that Insurtech’s have sufficient funds to meet claims and market shocks, which boosts consumer trust.
2. The Guidelines allow the Commission to prescribe new capital thresholds or expand categories give room for Insurtechs to scale sustainably while ensuring the industry remains financially sound.
3. By distinguishing between partnering and standalone Insurtechs, the guidelines create a clear framework that encourages innovation while also ensuring that each model operates within a stable and regulated environment.

Conclusion

In view of the foregoing 2025 Guidelines for Insurtech Operators in Nigeria represent a progressive step in modernizing Nigeria’s insurance industry. Through establishing a clear licensing structure and risk-based capital requirements, the Guidelines balance innovation with accountability. Furthermore, it empowers technology-driven solutions to improve efficiency in insurance services, while ensuring that operators remain professionally responsible. Finally, the guidelines positions Nigeria’s insurance industry for sustainable growth in a dynamic global marketplace.

Reference

1. NAICOM, ‘Press Release: NAICOM Issues Guidelines for Insurtech Operations in Nigeria’, <https://share.google/dorSL6SAvViZw0iTo> accessed 13^th September, 2025. ↑
2. Edu, Y, and David, P, ‘Regulatory Update: Guidelines for Insurtech Operations in Nigeria Introduction’, <https://share.google/9vN5zQjJgdJ1q8KmL> accessed 13^th September, 2025. ↑
3. Guidelines for Insurtech Operations in Nigeria, par 2.1. ↑
4. KPMG, ‘Insurtech: Infrastructure for New Insurance’, <https://share.google/5vzG1J4B9Hlg6Inte> accessed 13^th September, 2025. ↑
5. Trelient, LLC, ‘Insurtech: Managing Risks to Consumer Privacy, Information, Security, and Fairness’ <https://share.google/PxVErZ87Ab5BUzfnm> accessed 13^th September, 2025. ↑
6. Cosma, S, and Rimo, G, ‘Redefining Insurance through Technology: Achievements and Perspectives in Insurtech’, <https://www.sciencedirect.com/science/article/pii/S0275531924000941> accessed 15^th September, 2025. ↑
7. Wikipedia, ‘Lemonade, Inc.’, <https://en.wikipedia.org/wiki/Lemonade,_Inc.> accessed 15^th September, 2025. ↑
8. Lemonade Inc., ‘Changing Insurance Starting with Everything’, p 3, <https://share.google/EjbUGT3SGpkArfVob> accessed 15^th September, 2025. ↑
9. Orimisan, B, ‘NAICOM Issues Operational Guidelines for Insurtech Firms’ <https://share.google/QbvXX4kyJ95OVOykf> accessed 15^th September, 2025. ↑
10. Guidelines for Insurtech Operations in Nigeria, par 2.1. ↑
11. Ibid. ↑
12. Ibid, par 4.1. ↑
13. Ibid, par 4.2. ↑
14. Ibid, Schedule 1. ↑
15. Ibid, par. 5.0. ↑
16. Ibid, par 2.1. ↑
17. Ibid, par 12.1. ↑
18. Ibid, par 13.0. ↑
19. Ibid, par 14.1 (i). ↑
20. Ibid, par 14.1 (ii). ↑
21. Ibid, par 14.1 (iii). ↑
22. Ibid, 16.1 (i). ↑
23. Ibid, 16.1 (ii). ↑