Using Claims Payments as Currency in Insurance Contracts

The issue of claims payment in an insurance contract is regarded as the primary reason why the insurance business exists. Ebere Nwoji reports that insurers and their stakeholders now view claims settlement—which nurtures public trust and corporate integrity—as the currency of an insurance contract.

Over the years, a lack of public trust and the failure of some insurance managers to prove the integrity of their corporate entities by paying genuine claims when risk occurred have stunted the growth of the insurance sector. This has also deprived the sector of the mass patronage it seeks.

As a result, while virtually every Nigerian—including uneducated rural dwellers—has embraced banking services for many years, most Nigerians, even the educated class, have abandoned compulsory insurances. Against this backdrop, the insurance sector occupies the lowest position among all subsectors of the financial services sector. For example, the pension sector, an aspect of insurance today, boasts an accumulation of over N32 trillion in assets as of May 2026, whereas the insurance sector’s total assets at the end of Q4 2025 stood at N4.78 trillion. The total premium of the industry, which represents its annual turnover, was N2.3 trillion at the end of 2025.

Often, the poor patronage of the insurance sector by the public— the main reason for the sector’s low turnover and minimal contribution to GDP— is attributed to a lack of awareness of the value of insurance, the poverty level among Nigerians, and the poor image of the industry.

Insurance Managers and Claims

Recently, insurance managers have embraced the fact that seamless, genuine claims settlement, trust, and integrity remain the currency of an insurance contract.

This interpretation means that the right to claim payment serves as a medium of exchange within an insurance ecosystem. Without seamless, genuine claims payment, an insurance contract is grossly incomplete and ineffective.

Claims payment in an insurance contract serves as a catalyst that attracts potential policyholders to insurance patronage.

Insurance claims, according to experts, are formal requests for compensation made by a policyholder to an insurance company for losses suffered under the terms and conditions of the policy.

Claim payment restores a policyholder to his former financial position before the risk occurred. When an insurer repudiates a genuine claim, it results in double losses for the insured: the loss of the premium paid to cushion the risk and the loss of the property involved in the peril.

Experts therefore view the insurance business as fundamentally about claims payment, and the claim is the main reason a policyholder takes out an insurance policy.

According to the experts, without claims being paid by insurance companies, people are unlikely to take out insurance policies. Every insurance contract contains a promise that when the eventuality (claim) occurs, the insurer—as the risk bearer—will compensate the insured or policyholder.

Claims payment in Nigeria

In Nigeria, especially in the early years of insurance practice, insurers often found ways to avoid payment by interpreting ambiguous clauses written in tiny italic letters that were not made visible or clear at the beginning of the contract. This created mistrust among Nigerians that persists today. Even with increasing financial literacy, many Nigerians are still reluctant to buy insurance, preferring to carry their risks and rely on faith.

This development has damaged the industry’s image, leading the public to view every insurance practitioner as dubious and the industry as the most unreliable part of the financial services sector.

NAICOM’s View

Former commissioner for insurance, Mr Fola Daniel, once addressed insurers on the need to take claims payment seriously, saying the best advertisement insurers could do is to pay genuine claims without delay or argument.

He added that when a policyholder easily receives a claim for a risk he insured against, the policyholder will automatically become an example for the insurance sector.

In line with the former commissioner’s reasoning, the Managing Director and Chief Executive Officer of Heirs Insurance, Mr Niyi Onifade, explained the role of claims in an insurance contract. He spoke at a press briefing to announce achievements recorded by his company in its five years of operation. He said claims settlement, trust, and integrity together form the currency of an insurance policy contract.

Traditionally, insurance contracts pay claims in fiat currency, but emerging models such as captive insurance, peer‑to‑peer insurance, or blockchain‑based parametric policies allow claim payouts to function more like a currency in that they are transferable, divisible, or usable for future coverage.

Insurance sector analysts therefore say that claim payment serves as a test instrument for determining the extent to which an insurer lives up to the ‘utmost good faith’ promise. In other words, claim payment serves as the brand image of an insurer and a parameter for measuring the integrity of any underwriting firm and its management.

NIIRA and Claims Payment

The importance of claims payment in insurance business and the need to end the era of delayed or denied claims compelled insurers to assign a special position to claims in the Nigeria Insurance Industry Reform Act 2025.

Indeed, the Act, through its stipulations on prompt claims settlement and policyholder protection, offers a solution to the lingering problems of delayed claims and the lack of mass patronage of insurance.

The Act is explicit on its stance on fast claims settlement and streamlining of claims processing, which will encourage mass patronage of insurance.

Section 210 of NIIRA 2025 requires all insurers to adhere to strict deadlines for claims processing and payment. The section introduced specific provisions to ensure faster and more efficient payment of claims by insurers.

It requires all insurers to settle claims in writing by the insured or entitled parties within the timelines specified in the National Insurance Commission’s (NAICOM) Service Charter, but no later than 60 days of notification.

NIIRA states that failure to comply with these requirements attracts a penalty, in addition to compound interest on the claim amount, to discourage unnecessary delays.

It enforces a “zero‑tolerance” policy on delayed claims to restore public confidence in the insurance sector. The Act generally aims to streamline the claims process by introducing several measures, including expanding acceptable modes of communication to include electronic means, such as email, for delivering policy documents and potentially other claim‑related communications, which aids efficiency.

It also aims to remove the requirement for a police report for motor accident claims, unless there is a death or serious bodily injury, provided there is sufficient proof of loss or damage. The Act also has a definite stance on protecting policyholder interests.

Following the Act’s mandate on claims payment and its zero‑tolerance stance on non‑payment of claims, the Commissioner for Insurance, Mr Olusegun Ayo Omosehin, said he would implement it later. Most insurance firms now digitalise their claims settlement process to ensure payment of simple claims that do not require loss adjusters’ attention within 24 hours.

Digitalised system

To reverse the trend, insurers have employed technology, a development that has set some of them apart from the rest. Leading the list are Heirs Insurance, which says it has democratised insurance so that policyholders can get their claims paid within 24 hours of sending and receiving a discharge voucher.

The Managing Director, Onifade, said holders could buy insurance with their phone and receive claims through the same process.

He added that with an AI‑assisted model of claims processes, especially the Prince AI chart board launched by the company, policyholders could file their claims through WhatsApp, an app, or the web.

Other firms with digitalised insurance payment processes include Universal Insurance plc, which has developed a fast claims payment system using AI for instant remote motor inspections via smartphone, eliminating physical assessment.

Also, Unitrust Insurance has deployed the Webplug App and WhatsApp chatbot to cut turnaround time, promising claims settlement within 24 hours of document receipt.

Most of these fast‑claims‑paying underwriting firms utilise platforms like FastClaim, an AI‑powered app adopted by underwriters that allows insurance practitioners to take photos of damaged vehicles, with AI assessing severity and generating repair estimates instantly.

Some firms also partner with insurTech firms, enabling them to connect customers with digital claims platforms across different insurers.

Negative observation

Analysts have observed that when high‑magnitude claims arise from certain policies, the issue of “he who pays the piper dictates the tune” often rears its head.

This means that because it is the underwriter who pays adjusters’ fees, they set conditions for their payment by mandating the adjusters to reject or delay genuine claims payment on such risks.

Sector analysts said if insurers truly want to demonstrate that claims settlement, integrity, and trust are the currency of an insurance contract, they should abandon such sharp practices, allow adjusters to perform their assessment objectively, and pay the resulting claims without unnecessary delays or argument. They argued that after all, the reason for venturing into the insurance business is to collect premiums and protect the insured when risk occurs through seamless claims payment.

Given the important position of claims payment in insurance contracts, sector observers said every insurance firm worthy of patronage should develop its own fast claims payment model to make claims payment seamless and redeem the industry’s image.