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Making insuring attractive in a challenging economy

Following the financial crisis that is ravaging the economy, Nigerians are now sacrificing their insurance budget to meet more immediate needs, a development experts said could mean sitting on a gun powder. ABDUL-KHALIQ OLALEKAN writes.

Worldwide, insurance has been seen as the last hope of the common man. This is because of insurance prides itself in its ability to restore the insured back to the financial position he was before a disaster struck.

Europe, Asia and South America have progressed remarkably well in insurance adoption and acceptance, and no matter how worst the financial position of an individual is, he still finds a way to foot his insurance bill.

But in Africa, except for some few exemptions, insurance penetration has been abysmally low.

Nigeria is not an exemption in this regard, as penetration remains under one per cent while the contribution of insurance sector to the nation’s Gross Domestic Product (GDP) calls for sober reflection.

With the current financial crisis biting harder by the day, occasioned by increased cost of standard of living, high inflation, and low disposable income, most individuals and corporate organisations are sacrificing their insurance budget to meet their more immediate needs, until things change for the better.

Mr. Kunle Adedeji, when asked of his perception about insurance, jokingly said: “I am being owed five months salaries by my employer, so you now expect me to go and purchase insurance while my families are dying of hunger? Insurance is only for big men, those who have enough money to throw around, and not somebody like us struggling to survive.”

The perception of this man is similar to the thinking of most Nigerians, even including government because insurance is usually the last on the scale of preference of the people, which was the main reason why insurance penetration in the country is still below one per cent. And because of this, people find it easy to yank-off anything that has to do with insurance for the time being.

Yet, experience has shown that the best time to procure insurance is during economic hardship, because every day the values of assets increase, meaning, it will cost more to replace an asset bought before. However, if an individual or corporate organization had paid a token as premium, the responsibility of replacing such insured asset, no matter how expensive it is, could have been shifted to the underwriting firm who insured such asset.

Experts said most people returned to poverty for failure to subscribe to insurance and that when their source of livelihood is affected, they return to poverty, hence the need to insure even in a challenging economy.

However, as the current economic downturn is negatively affecting all sectors of the nation’s economy, President, Association of Registered Insurance Agents of Nigeria (ARIAN), Mr. Gbadebo Olameru, is calling on Nigerians to take the issue of insurance seriously; so that they don’t have to spend more whenever mishap occurs, instead of paying a less premium now.

He stated that the little money in the economy made people have less disposable income, and this is reducing the level of insurance businesses underwriters are currently getting. People, according to him, don’t have money to purchase insurance cover, while the existing customers are not finding it easy to renew their insurances. Operators, agents and all insurance stakeholders are seriously complaining of the hardship in the economy, he said.

Yet, Olameru noted that the wise one takes insurance when the economy is down. “Some people even invest in insurance stocks now that the price is down, and secure their future by insuring now, not minding the current economic predicament,” he stressed. He said there are insurance covers that are as low as N7, 000, saying such insurances have a value of N1 million or more.

To him, “We are all aware that inflation is on the increase day by day. Some assets are fast appreciating and if you are the type that believes God protects, then, I am sorry, because, why God protects, he also gives man the wisdom to do whatever he can to complement his work. If you build a house and you fail to insure it, because the economy is not good, when such house is razed by fire, the cost of building a new one will have increased or you might even be financially incapacitated to build a new one.

“Most people, who have risen above poverty before, become poor again because their sources of livelihood were not insured. A manufacturer, who fails to insure his factory just for a token premium, will regret not taking that decision, when fire razed down his factory.”

On his part, the Managing Director, Anchor Insurance Company Limited, Mr. Ademayowa Adeduro, said for somebody that is enlightened, this is the best time to buy insurance.

“You may think that you don’t have enough money to feed; you only have one car, struggling to pay school fees. What if there is a cut off from that small income you have? The car you bought one year ago, if it is a total write off, how will you replace the car? What if you can’t pay your rent again because all things will move up with the devaluation of naira, whether we like it or not,” he stated.

The reality, according to him, is that the currency of the country has been devalued, saying, ‘so we just have to face it, and I encourage people that are well enlightened, the educated workforce, to embrace insurance. That is the best product I can ever sell to anybody now.’

The Former Group Managing Director, Royal Exchange Insurance Plc, Mr. Olutayo Borokini, on his part, said if the foreign exchange is well managed, and people have access to foreign exchange, it will spring up economy activities, especially in some sectors that are driven by forex.

A lot of local industries, according to him, have closed up, because they could not purchase raw materials for their operations, noting that if the new forex regime is okay and people have access to dollars at a flexible rate, most of those industries would be revamped and then, of course, demand for insurance will also increase ultimately, since the rate of insurance adoption is based on the state of the economy.

“Some weeks ago, you heard about how some investors came onto the Stock Exchange, they brought in money to buy shares. Of course, capital is going to be available, and if capital is available, the economy will jump-start and a lot of activities will pick up and demand for insurance will increase automatically.”

Meanwhile, the President, Nigerian Council of Registered Insurance Brokers (NCRIB), Mr. Kayode Okunoren has advised individuals and business owners in the country to devote more attention to risk prevention mechanisms of which insurance is pivotal, in preserving their material resources.

“Individuals and business owners need to understand risk vulnerability occasioned by the present harsh weather conditions and poor town planning policies, and in so doing, engage insurance experts to advise them on risk prevention.”

Okunoren said, while the painful incidents of fires with its ravenous effects had been witnessed in Ibadan, Nnewi and Kaduna in recent times, Lagos State has also had its painful share of the incident.

He, however, enjoined state governments to get involved in massive education of its citizens on need to engage risk prevention mechanism with special emphasis on insurance.

Recently, the Lagos State Fire Service disclosed that 1,898 fire incidents were recorded in 2015 with billion of naira lost and 80 deaths. Okunoren noted that it was most regretful that the outbreaks of fires have become a recurring decimal in the country, draining the nation of substantial material resources and loss of human lives.

The Managing Director, Linkage Assurance Plc, Mr. Godwin Wiggle, stated that insurance operators understand that Nigerians are facing hard times, and insuring their assets have been a little bit difficult but, however, felt the new flexible forex regime will allow some manufacturing companies access forex to import raw materials for their businesses, adding that this will increase the level of productivity in virtually all sectors, hence, will rub-off on insurance industry.

Wiggle urged the government to assist the industry by enforcing compulsory insurance laws, stressing that relegating insurance as presently being practised is inimical to the development of the economy. According to him, insurance plays an important role in the economy, as it helps to reduce economic waste.

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