Is government doing more to ‘kill’ or help insurance?
Insurance industry in Nigeria has the capacity to support economic growth and development more than it is currently doing and that is why governments globally give the sector the needed support and attention it requires to grow.
Beyond the role of bringing stability in an economy through effective risk management that enable replacement of assets and resources, and ensures smooth running of the ecosystem, insurance gives value to businesses and households.
For instance, an economy like ours where the issue of long term funding and cost of loans are a serious problem with interest rate at the peak, insurance should be a major source of long term funding that could assist the economy in capital projects and infrastructure development.
Being a sector that should operate beyond the cities to the grassroots with the introduction of micro insurance even at global level, insurance has the capacity to generate employment opportunities as well as help small and medium enterprises grow and add value to the economy.
All these put together directly or indirectly will impact positively on the gross domestic product (GPD) of the nation, which currently stands at less that 1 percent despite the age of the industry in Nigeria.
Within the African market, Nigeria, despite its huge economic potential and rising population of over 160 million, trails behind countries like South Africa, Egypt, and Kenya in terms of premium income with Nigeria’s total outlay just about N250 billion as at the end of 2012.
While the operators cannot be said to have played their own part very well, given their sluggishness to change, rate cutting and lack of internal coherence amongst players, government has a big role to play in driving insurance and its acceptability in Nigeria.
With fundamental problems like high level illiteracy, strong cultural and religious beliefs that ‘God can take care of everything,’ it takes a strong will by government through its agencies to make citizens see the need for insurance.
Like Val Ojumah, managing director, FBN Life said, one major problem confronting insurance is the failure of Nigerians to accept insurance as both investment and social security. “Insurance is still alien to Nigeria’s way of life due to high level of poverty and unemployment, and so hardly do they see insurance as product worth buying.”
With this challenges staring on the face of the industry, it is only government that can bring the needed change if the sector must stand tall and play its role in the economy.
Firstly, government must clearly show interest in the need for insurance by compulsorily taking cover for its assets and employees, and paying premium for such risks as and when due. This will not only encourage other cooperate organisations and individuals to do same, it would have helped government and industry operators reduce the energy and resources required for enforcement of certain insurances that are compulsory.
But situations where government will not insure its assets and where it does, it does not pay premium till around the end of the insurance year, but brings claims for the industry to pay; does not only make ‘nonsense’ of insurance as a risk protection measure, it is helping to kill the sector.
This is what happens yearly and the only reason that has been adduced for this delay is budget approval and disbursement, but the question is – does this same budget affect all other things that government does? Risk management should be taken more seriously than it has been.
Insurance companies by nature of the business as risk managers does not use premiums to pay claims, but pays claims from the returns on investment of the premiums paid by the insured into the insurance pool.
So, when insurance companies pay claims to government from the premiums it paid without having the opportunity to earn returns on it, then government is not helping the sector to grow. Where then will the growth come from? Where will the long term funds for capital projects and infrastructural development come from? Is this the right way to go?
What government can therefore do to promote industry in Nigeria is to make sure its laws on insurance of government assets and employees are taken seriously by ministries, parastatals and agencies at both the federal and state levels to help the sector grow as expected.
Another important role government should be playing is to enforce compliance of the different compulsory insurances amongst the public. Of course this is a role insurance players do not have the power to do.
It is within the powers of government to ensure that every motorist plying on Nigerian roads have a Motor Third Party Insurance against third party liabilities as provided in the Insurance Act 2003; ensure that all employers having more than five employees take Group Life Insurance policy for their staff for death benefit while in service; ensure that all medical doctors and other health workers working in Nigeria have Professional Indemnity Insurance policy against professional errors that could impact on patients as provided in the NHIS Act.
It should also ensure that all public buildings including residential, offices, event centres, schools, malls and all other buildings where people gather have Public Buildings Liability Insurance as provided in Section 64 of the insurance Act 2003; and also ensure that buildings having more than two floors under construction have Builders Liability Insurance for third party damage as provided in Section 65 of the Insurance Act 2003.
By: Modestus Anaesoronye