Dynamics and unsung roles of insurance

In this report, JULIANA AJAYI looks at the dynamism of the Nigerian insurance industry and the role it is expected to play, especially for small businesses

Over time, the insurance industry has evolved from a striving industry to a rising force. In a recent report by Agusto & Co., a pan-African Credit Rating Agency and a leading provider of industry research and knowledge in Sub-Saharan Africa, it was disclosed that the Nigerian insurance industry raked in  N520.1bn in Gross Premium Income in the financial year ended December 31, 2020.

The report noted, “The lockdown following the Coronavirus Disease negatively impacted insurance products distribution, especially with the inter-state travel bans on movement of people and goods.”

It also stated that the industry paid out net claims of N196bn, up by 20 per cent year-on-year (representing 37.6 per cent of GPI in the financial year 2020.

Despite the setbacks and other challenges, the insurance industry continues to show signs of growth.

The National Bureau of Statistics recorded that in the second quarter of 2021, the insurance industry recorded 16.41 per cent growth.

The Executive Secretary/Chief Executive Officer, Nigerian Council of Registered Insurance Brokers, Tope Adaramola, in an interview, said, “The insurance industry has grown over the years, though we are not yet there. The total contribution of the industry to the Gross Domestic Product is still poor. This is a challenge to Nigeria when compared to other advanced countries like the United States and United Kingdom, even in African countries like South Africa, Egypt and Kenya.

“However, the industry is doing a lot, especially under the compulsory insurances. As we speak, there are six of them. Not that the law was just promulgated to stay in the books of the regulator as well as the self-regulator. These institutions, including the National Insurance Commission, Nigerian Council of Registered Insurance Brokers, which is the umbrella body, and Nigeria Insurers Association are at the forefront of improving the benefits of compulsory insurance.”

According to him, if all these go well, Lagos alone can yield a premium income to the entire insurance industry that will change the narrative, not to mention other compulsory insurances like health and third party.

His words, “Less than 20 per cent of the vehicles on Nigerian roads are insured. Even among those that are insured are falsified certificates. If we have to change the narrative, we must look in this direction.”


Insurance for everyone

Over the years, some people have held the misconception that insurance is only designed for the rich.

The fear of being asked for a huge amount of money has made some of these people resolve to bear losses without any means of recovery. For others, it is having insufficient understanding of insurance.

Adaramola said, “I must emphasise that where we really get it wrong is that a lot of people believe that insurance is for the rich and not for the poor, which is a very wrong narrative that we have hung unto for a while.

“The essence of insurance is to restore you to the place you were before any form of loss to your valued property in the event of any risk or mishap that may happen to you.

“As a poor person, everything you have must be insured. Whatsoever you have that is going to make you lose your sleep should be insured. There is hardly anything that an insurance company cannot insure, depending on the homogeneity of the risk.”

He asserted that premiums paid on insurance are more affordable than most people perceive them to be. An insurer or broker, he added, can always be approached for insights on various types of insurance needed at the moment.

“For all these insurances, what you pay in terms of premium is very minute. You can insure your house against fire or storm; you can even insure your trade for next to nothing, including your life, by using a life assurance premium. You pay very little premium,” he said.


Role of insurance in small businesses

When a theft or robbery occurs in major financial institutions like the bank, the Central Bank of Nigeria, Asset Management Corporation of Nigeria and the Nigeria Deposit Insurance Corporation can be called upon for financial assistance. But many of the small financial operators are forced to shut their businesses or start all over again whenever there is a financial loss as a result of theft or negligence.

At least, one in five POS operators has at one point or another been swindled or robbed, Financial Street gathered.

Not only do POS operators not insure their businesses, majority of them are unaware of the role insurance is meant to play in their businesses.

Isaac Babatunde, a teacher, who has different Point of Sale shops in Ogun State said, “I have about five years experience in this business. First thing that is important to note in this business is that it is not well regulated. There are some advantages and disadvantages. In as much as it creates job opportunities for young ones, the disadvantages are very costly. First, the issue of handling lots of cash could involve theft, which sometimes results in police issues leading to closing of business. About late last year, I opened a branch somewhere and my sales representative ran into loss with the issue of fake alert. They played on her intelligence and cashed out money.

“Another issue is fake notes. They come, give you a fake note and ask you to transfer to them. The third one is the most dangerous one, which is the issue of mistakes in transfers. Someone comes, asks you to transfer N10,000 and you end up transferring above due to work pressure.”

Deborah Oguntimehin, a graduate of Banking and Finance in Ibadan, Oyo State, explained, from experience, some of the risks faced by POS operators.

Her words, “For people to come down to the POS operator is because they do not want to go down to the bank. Most of the time, you discover that even after coming to use the POS, they still go to the bank to lodge complaints. They come to deposit money into their accounts by handing cash to you; meanwhile, having deposited the money, they end up not receiving any alert. This leaves them with no choice but to return to the bank they avoided in the first place.

“Thank God for the new POS like Money Point and Bolt, I think you can now complain on behalf of the customer right where you are, which makes the customer get credited latest in 48 hours.”

Michael Okorie, on the other hand, says despite the POS being a very lucrative business in a populated area, the risks attached are many.

“If someone comes to transfer money through you and you are yet to receive notification, you are not bound to hand cash over to the person. This act may chase customers away, but you have your account history to show for it.”

Adaramola, again, explained the role of insurance to small financial operators. Responding to the type of insurance most suitable for POS operators, he said not only can they insure their money, but also their staff.

“There’s something called money insurance, which covers your liability or loss of money. Those of them with employees can also do fidelity insurance which takes care of the likelihood of dishonesty of staff, which may result in loss of money.

“They can also do an all-risk policy for their phones and POS machines in the event of damage. These may look little, but they are policies underwritten for these events,” he said.

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