Nigerians To Pay More To Replace Insured Assets


As the country continues to grapple with recession, occasioned by the slump in the price of crude oil in the international market which resulted in double digit inflation rate and naira devaluation, Nigerians are now paying more to replace their insured assets, LEADERSHIP Sunday can authoritatively report.
Findings showed that the prices of cars, houses and housing materials, among others, have gone up by 100 per cent, meaning that money that could buy two cars 18 months ago, can only buy one car now.

To this end, most insurance consumers who paid their premium last year with the old value of their assets, will have to settle for less to replace the insured assets in case of any mishap, as insurance companies will only pay claims on the old value.

Consequently, for the consumers to maintain the same standard of assets they insured, they will have to add up the remaining increase in value or go for a lesser standard or brand.
Of the classes of insurance policies in the industry, Leadership investigation revealed that comprehensive insurance is the most affected as the value of cars has skyrocketed following scarcity of dollars to import vehicles coupled with the Federal Government’s ban on importation of vehicles through the land borders, as only a few car dealers are now utilizing the Nigerian ports.

For instance, if a risk occurs on a car insured for a value of N8 million which it was sold 18 months ago, but now goes for N16 million, the insurance company will only pay claims on the insured value of N8 million. This means, the vehicle owner will either add N8 million more from his pocket to get the same car brand or go for a lesser brand.

The second most affected policy, according to findings, is property insurance, with the prices of building materials such as cement, sand, gravel, iron rod, and so on, going up on a daily basis.

Speaking on this development, the group managing director, Cornerstone Insurance Plc, Mr. Ganiyu Musa, said since the exchange rate mechanism is central to virtually all economic activities in the country, the current state of the economy, its import component on national life, insurance inclusive, is still very high.

He said deep depreciation of the nation’s currency had had a negative impact on insured values. “If you just take a very short example of automobile, two years ago, the entry level of Toyota Corolla that we are buying was going for like N9 million and I understand right now, it is going for N18 to N19 million depending on the specification you requested for.

“If anything happens to the car you bought N8 million 18 months ago, maybe it’s a total loss or it is stolen, the insurer will only pay back N8 million which, within the overall scheme of things, will not buy you the same brand again”, he pointed out.
He, however, advised Nigerians to constantly monitor the value of their assets and make sure that the insured value is consistent with the real replacement value.

In the same vein, the chairman, Nigerian Insurers Association (NIA), Mr. Eddie Efekoha, said the volatility of the nation’s currency in the forex market had led to high inflation and high interest rates that were having a multiplier effects on the prices of goods and services.

To this end, he said the price of replacing insured properties had risen tremendously, in some cases, more than 100 percent, even when policies were underwritten in the old prices.
The most affected classes of insurance, according to him, are motor insurance, building insurance an medical insurance, among others.

Efekoha who is also the managing director of Consolidated Insurance Plc added: “We (insurance industry) witnessed higher claims in 2016 than in 2015 and the reasons are obvious. Most properties are insured in their old prices, but now, the building materials have increased, meaning, we are going to pay more, to reinstate a damaged building.

“The same goes for medical insurance as the price of most of the drugs have equally gone up as a result of volatility in exchange rates. Replacing a damaged vehicle will cost more than it cost a year ago, when the policy was undertaken.”

The former director-general of NIA, Mr. Sunday Thomas, while explaining the reason for increase in claims in the last one year, said the increase in fraudulent claims coupled with more awareness on claims as well as increase in value of claims led to increase in claims value and volume.

He said, “In recession, people will want ways and means to make money. The tendency to defraud is very high. It is not likely that insurance companies will be able to stop all fraudulent claims, but they stop as many as possible.

“Then, we also know that the value of claims, by the reason of foreign exchange issues, has increased. So, all these combined, would have been responsible and again, there is an increase in awareness in terms of the knowledge of claimants to make claims on their policies.”


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