Insurance

How inadequate information on premium bars Nigerians from insurance

Poor patronage of insurance to a large extent stems from poor public knowledge of premium charges on various classes of insurance products. Chuks Udo Okonta, in this report examines how premium cost specification can arouse public interest and boost sales of insurance products.

Mr. John Okafor, not real name, left his warehouse on Friday, July 4, 2017, after the day’s business, hoping to meet demands of some of his customers who have order for wares when he resumes the next day.

He got home, took his dinner and listened to evening news and retired to his bed to relax in preparation for the next day activities. Just as he tried to catch some nap, his mobile phone rang, he picked the phone trying to check the caller.

Behold, the caller turned out to be his colleague in the same plaza where his warehouse was located. Hello, Mr. Okafor, trust all is well, he asked?

Please, come over to the plaza, your warehouse is on fire. There is a fire outbreak in the plaza, I just received a call and I am on my way there. His colleague shouted.

The phone dropped from Mr. Okafor’s hand as he jumped from the bed running to pick his cloths so as to savage his wares. His wife accompanied him, while he panted and prayed for safety of his wares.

They got to the plaza to meet other shop owners weeping and rolling on the floor as men of the Federal Fire Service fought to extinguished the fire which had ravaged the entire plaza.

Mr. Okafor’s shop was not spared, all his wares had been consumed by the fire. He gaped, wondering how to restart his business.

Few days later, Mr. Okafor’s friend who had knowledge on insurance visited him and enquires from him the insurance firm that insured the shop. The friend was surprised when Mr. Okafor told him that the shop was not insured.

It was then the friend told him that, he would have saved his business with just a premium of N4,000 paid to an insurer, who would indemnify him with N2 million to restart his business.

All Mr. Okafor could say then was that he was never aware that such paltry sum would had helped secure his life time investment.

Many people are like Mr. Okafor, who do not know that just a little premium could secure their lives and properties. To them, insurance premium are often too expensive, but this is not true.

According to information obtained from an underwriter, the premium of fire proof cover, which is in three categories goes for as low as N1,000. The Gold category, with maximum cover of N2 million goes for a Premium of N4,000. Silver product, with maximum cover of N1 million, goes for a premium of N1,750 and Bronze, has maximum cover of N500,000 with premium of N1000.

Besides the cover, other benefits include, public liability (if the fire spreads beyond your house) of N100,000; medical expenses of insured up to N20,000; rent relief, maximum of N20,000 and free floor cover.

Observers said premium specification would really help the public to leverage insurance to protect their lives and properties. According to them, the public are only aware of the premium of motor third party which is sold for N5,000.

They urged insurers to state the premium of each class of product, adding that it would go along way in educating the public and enhancing their interest in buying insurance.

Stakeholders Perspectives

The Managing Director/ Chief Executive Officer, Blue Konsult Limited, Chris Obi, said low insurance penetration in Nigeria, which is due to low awareness is contributing to the existence or thriving of other forms of assurance, of which some of them are crude, others simply fallacious,

He said poor knowledge of insurance premium has forced people to seek alternatives, adding that the extreme religiosity of millions of insurable Nigerians is partly from insurance issues, which makes them to conveniently wish away the existence of risks in their lives.

“They will say “I reject it.” and coupled with low levels of disposable income, for many, they do not want to listen to insurance salesmen.

“The different forms of ‘isusu’ and ‘ajo’ available have replaced or scared offinsurance in several places.

“Some people resort to a doubtful and bogus “African insurance” or somepopular Juju, for personal protection instead of life insurance, auto, accident and property insurance.

“All these are losses to insurance, out of ignorance, disbelief, mistrust or previous bad experience from insurers,” he said.

Chairman, Small and Medium Enterprises (SMEs) Trade Group of the Lagos Chamber of Commerce and Industry (LCCI) Abiodun Oladapo, believed insurers should up their games in mitigating the risks suffered by the public.

Oladapo, who was unhappy due to the disaster suffered by one of his relatives, narrated how the relative invested all his earnings and even borrowed to cultivate a maize farm in anticipation for good return on investment.

According to him, his relative having harvested the maize, bagged them in anticipation for sale when the price appreciates. While waiting for the right time, the warehouse where the products were kept was razed by fire and all the products consumed by the inferno.

He said the relative loss all his earnings and went into debt as the products were not insured.

He then, implored insurers to come to the aid of small business operators by crafting affordable policies and that they should also improve on insurance education as most people are yet to come to terms with the workings of insurance.

Oladapo also urged insurers to do more in the area of claims payment, adding that the public will buy insurance when they see people’s business restored through insurance mechanism having been affected by disaster.

Former National President, Association of Registered Insurance Agents of Nigeria (ARIAN), Gbadebo Olameru, also believes premium specification would help promote sales of insurance products. According to him, many people refrain from insurance with the belief that they would pay more to secure their lives and properties. Which is contrary to the fact.

He said public awareness should centre on premium specification and benefits accruable from the various products in the kitties of insurance companies.

Operators Perspectives

Managing Director/Chief Executive Officer (CEO) of Leadway Assurance Company Limited, Oye Hassan-Odukale, said the insurers need to do more to breakdown the price of insurance products.

According to him, many people refrain from buying insurance due to lack of knowledge of how insurance works, especially the premium charge to provide cover for risks.

“I have had instances where I tell people to insurance their house and they would ask how much? And I would say like N10,000 and they would ask is it for a month? When they are told that it is per annum, they would scream, you mean per annum? They will be surprised. A lot of Nigerians do not know much about insurance. Some people see insurance to be more expensive than what it actually is. We need to actually continue to educate our people. We all go to church, mosque and other meetings, insurance should be made the leading subject, for everything needs insurance. It just for us to get out there and tell people about insurance,” he said.

Managing Director/Chief Executive Officer, Law Union & Rock Insurance Plc, Jide Orimolade, said premium specification helps the public in furnishing their considerations, adding that people would buy more insurance products if they are abreast of the premium to be paid on the product they need.

Insurance Industry’s Gross Premium

Insurance companies in a period of six years generated about N1.72 trillion gross premium, which ought to be more going by the nation’s population.

According to the Nigerian Insurers Association (NIA) the premium was generated between 2011 and 2016. The association noted that between 2011 and 2015 life insurers posted N447.59 billion, while non life operators made N896.24 billion and both generated N380 billion in 2016.

The breakdown revealed that life operators made N54.55 in 2011; N69.97 billion, 2012; N80.42 billion, 2013; N108.58 billion, 2014 and N134.07 billion, 2015.

Non life operators posted N163.19 billion in 2011; N182.17 billion, 2012; N187.42, 2013; N184.97 billion, 2014 and N178.49 billion, 2015.

Former Chairman of the NIA, Eddie Efekoha, said the estimated volume of business underwritten by the insurance industry in 2016 was estimated at N380 billion as against N311 billion approximately underwritten in 2015, which was an increase of about 22.2 per cent.
Conclusion

Many people will buy insurance if they understand that a paltry sum could save them from colossal damage. Insurance operators have to make their premium visible just as the prices of commodities such as rice, coke and electronic gadgets.

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