Purpose: This study investigates how customer-centric innovation can be leveraged to achieve a sustainable competitive advantage in the Nigerian insurance sector. Design/methodology/approach: A quantitative research design was employed, using data collected from 699 managerial and senior operational staff across 63 licensed Nigerian insurance companies. The relationships among the variables were analyzed using partial least squares structural equation modeling (PLS-SEM). Findings: The results confirm that customer-centric innovation has a significant positive effect on competitive advantage, both directly and indirectly. It strongly enhances service responsiveness and customer engagement. Customer engagement emerged as the most powerful predictor of competitive advantage, highlighting the critical role of relationship-building. Service responsiveness also significantly contributes to competitive advantage, acting as a key operational capability. Limitations and Research implications: This study is focused on the Nigerian insurance sector, and its findings may not be generalizable to other industries or countries without further research. The research implies that value in insurance is co-created and emerges from adaptive service systems and relational competencies, rather than being embedded in products. Practical Implications: Nigerian insurers should prioritize customer-centric innovation as a core strategy, redesigning processes to enhance responsiveness and intentionally cultivating customer engagement. Firms must invest in dynamic capabilities, including talent in data analytics and customer experience design. Originality/value: This study provides an empirically validated model of competitive advantage in the under-researched Nigerian insurance market. It uniquely operationalizes and tests customer-centric innovation, service responsiveness, and customer engagement as distinct constructs, clarifying their interconnected roles in a low-trust, emerging economy and offering a strategic roadmap for value co-creation.