Get an Insurance Policy this Year
Did you hear about the tanker explosion which took place late last year around the Festac axis of Lagos State? One of the sad points, was that the fire was so extensive that it destroyed the vehicles that were put up for sale in nearby car showrooms. Listening to the news, I wondered whether these vehicles had any form of insurance cover! In the event that there was none, that was indeed a huge loss to the affected entrepreneurs. In the local parlance, we would call that ‘gbese, huge gbese’. Talking about insurance, the high sense of optimism and positivity that is displayed by many Africans, makes the concept less popular in these parts. A house owner who is being convinced to take up some form of burglary insurance policy, would argue against it and justify his stance by saying "God forbid oh! My house will never be burgled". "I pay for vigilante". It is no wonder that insurance contributes only about 0.3% of the nation's GDP, in spite of the compulsory insurance areas highlighted in the 2003 Insurance Act.
Mandatory Insurance There are six classes of insurance for which failure to comply will be regarded as a criminal offence punishable by law. These are Motor Vehicle Insurance, Employee Group Life Insurance, Health Care Professional Indemnity, insurance of public buildings, insurance of buildings under construction and employers’ liability insurance. The most common is the third party motor vehicle insurance, and the least popular, in my view, is the one relating to buildings under construction. Lagos State, has in recent times, recorded a number of building collapse incidences and very few of the affected structures have been covered by insurance, sadly so. I guess contractors and building owners, bank on the fact that "all will be well". Failure to comply with this provision attracts an offence punishable with a fine. One can say this is a white elephant provision, as the fine is rarely implemented. National Insurance Commission (NAICOM), needs to rise up to its responsibility of ensuring compliance with the compulsory insurance policies.
Generally, there seems to be inadequate awareness of the need to insure. Publicity should be carried out in such a way that it brings a change in mindset, such that people do not attribute insurance to bad luck. A practitioner once mentioned that, insurance should be viewed from the angle of prevention is better than cure. Kudos to insurance companies that have come up with innovative packages such as loss of job, cyber insurance, education insurance and funeral planning related schemes. Insurance is a form of risk management, which could hedge against the possibility of losing economic security. Whether we care to admit it or not, every one of us is exposed to various risks as we go about our daily activities.
No Premium, No Cover One cannot talk about insurance without bringing to the fore the "no premium no cover rule", which presupposes that premiums be received in advance in full, or the policy automatically lapses, thus, discouraging laymen from buying policies. In ordinary terms, this means that if your policy costs N20,000 and you have only paid N15,000 as at the time of the disaster or unfortunate incident, you cannot claim any compensation from the insurer. There have been arguments for a review of this concept, with some experts proposing a reasonable grace period with an appropriate penalty, for insurance covers where premium has not been paid. This proposal for reform, should be well thought out to contain the problem of unpaid premiums or bad debts within the sector. The drawback in underwriting of insurance contracts on credit, is that the insured may never see the need to pay his premium if no fatality occurs.
It must be mentioned that, insurance operates on the principle of utmost good faith. This means that insurance companies, must ensure that they carry out sufficient due diligence before taking up policies, to reduce incidences of reneging from their obligations. Lack of integrity among insurers, has eroded public confidence in insurance. It is advisable to deal with brokers, who are generally in a better position to claim the rights of the insured, because they better understand the fine print.
Global Brands It is noteworthy, that a number of global brands in this sector have their eyes on Africa, and particularly, Nigeria, while others are already visible through various affiliate arrangements. Syndicated arrangements are the norm, with regard to capital intensive policies, such as those in the aviation, oil and gas, and the maritime sector, where million dollar insurance policies are commonplace. In this light, the regulators have been called upon to implement global best practice standards, and exert some regulatory squeeze that will compel insurance companies to shore up financial capacity. This will encourage innovation and consolidation arrangements, and reduce incidences of reinsuring with foreign firms. Dispute Resolution There are quite a number of unresolved cases, relating to insurance claims. The complexities of dispute resolution are apparent in this sector and lawyers need to advocate for necessary reforms. There may be the need to explore ADR options, by incorporating relevant clauses into all insurance contracts. Cases of non-payment of compensation, may also be referred to NAICOM as of first instance. The law courts which are over-burdened, should only serve as last resort dispute resolution options.
Insurance business has grown over the years, and it is hoped that individuals and small businesses, will appreciate the need to take out basic policies. It may be wise to include taking a relevant insurance policy in your 2018 goals. Here is wishing everyone a peaceful and fruitful year.