ROLE OF INSURANCE IN THE ECONOMY IN AN ELECTION YEAR
A PUBLIC LECTURE ORGANIZED BY PENINSCOPE AT WELCOME CENTRE HOTELS, AIRPORT ROAD, LAGOS. DELIVERED BY DR. F. K. LAWAL (MANAGING DIRECTOR/ CEO, STERLING ASSURANCE NIGERIA LIMITED) ON THE 13TH DAY OF DECEMBER 2018
I like to congratulate the management of Peninscope Professional Warranty Limited for successfully organizing this very important program at this time in the political and economic situation of our dear country, Nigeria. The time is apt and the topic is very relevant for discussion for our national life.
You will permit me to mention that this topic when finally digested in this event a lot of benefits will substantially accrue to our economy and very importantly to Nigerians as a peopleespecially as we move intoyear 2019 which is our election year.
No doubt, Nigeria and Nigerians both at home and abroad must as a matter of responsibility prepare for the inherent perils that accompany a period of political elections with the prevalent multi-party system and the attendant hiccups.
It is imperative that certain risk management mechanisms will have to be put in place by individuals, corporate bodies and Governments now that we are preparing for elections next year. The time is now. The most scientific social device to prepare against risk in an election year is insurance. It is therefore right to know that Insurance as a social means of managing risk has so many roles to play in a nation at a time like this.
❖ Business decisions seem to be easy and reasonably accurate when the economy is stable. Owners of businesses can predict the outcome of certain decisions during stable, calm and friendly economic environment and as such, it is said that rapid developments, occur when there are no wars and policies of Government remained responsive. It is therefore expected thatGovernment does everything in her power to create an enabling environment for businesses to thrive.
❖ Unfortunately, Political instability has been a major challenge to most economies in the African continent coupled with insincerity on the part of leaders to the governed. These and some other factors have led to UNCERTAINTY in the economy and difficulty in business decisions remain shaky.
❖ Successive Governments came to power with their own policies which could be friendly or otherwise. For example, when this present regime came into power, there was a ban on certain imported products etc. So, the election year is a period of mixed feelings…”panic and hope”. This state of mixed feelings can be seen as UNCERTAINTY as the outcome of any business plan or decision becomes unclear.
❖ Nonetheless, with the tools of insurance, UNCERTAINTY in the economy can be sensibly controlled. A big role.
AN OVERVIEW OF THE NIGERIAN ECONOMY
❖ According to Wikipedia (Nigerian economy), Nigeria is a middle-income, mixed economy and emerging market, with expanding manufacturing, financial, service, communications, technology and entertainment sectors. It is ranked as the 30th-largest economy in the world in terms of nominal GDP, and the 23rd-largest in terms of purchasing power parity.
❖ Index Mundi explains that Nigeria is one of Sub Saharan Africa’s largest economies and relies heavily on oil as its main source of foreign exchange earnings and Government revenues. Following the 2008-09 global financial crises, the banking sector was effectively recapitalized, and regulation was enhanced. Since then, Nigeria’s economic growth has been driven by growth in agriculture, telecommunications, and services. Economic diversification and strong growth have not translated into a significant decline in poverty levels; however, over 62% of Nigeria’s 200 million people still live in extreme poverty.
Despite its strong fundamentals, oil-rich Nigeria has been hobbled by inadequate power supply, lack of infrastructure, delays in the passage of legislative reforms, an inefficient property registration system, restrictive trade policies, an inconsistent regulatory environment, a slow and ineffective judicial system, unreliable dispute resolution mechanisms, insecurity, and pervasive corruption. Regulatory constraints and security risks have led to limited new investment in oil and natural gas, and Nigeria’s oil production had been contracting every year since 2012 until a slight rebound in 2017.
President BUHARI, elected in March 2015, has established a cabinet of economic ministers that includes several technocrats, and he announced plans to increase transparency, diversify the economy away from oil, and improve fiscal management, but his reliance on the Central Bank Governor has led to overwhelmingly protectionist policies aimed at defending the naira from further devaluation. President BUHARI ran on an anti-corruption platform, and has made some headway in alleviating corruption, such as the implementation of a Treasury Single Account (TSA) that allows the Government to better manage its resources. The Government also is working to develop stronger public-private partnerships for roads, agriculture, and power.
PERCEIVED UNCERTAINTY IN AN ELECTION YEAR
❖ The election year is characterized with violence, slow passage of certain reforms, political party prostitution and so on. And all these bring about UNCERTAINTY in the political and economic life of a nation. The question of whether to spend or not to spend (investments) lurks in the minds of business owners and even individuals. Be that as it may, I will like to state that insurance proffers some solutions to these aforementioned risks.
THE ROLE OF INSURANCE IN AN ECONOMY
❖ Definition of Insurance: Insurance is an arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium.
❖ Wikipedia defines Insurance as a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss. An entity which provides insurance is known as an insurer, insurance company, insurance carrier or underwriter.
❖ Insurance promises to place an Insured to the position he or she was before a loss as in the case of indemnity polices while benefit policies promise to pay out lump sum to beneficiaries in case of death or agreed loss.
❖ To the definitions above, one sees that to every risk associated to life or business, insurance would provide some forms of security to control the outcome of the uncertainty and when the tools of insurance are employed during an election year they will mitigate any loss that may happen.
❖ The role of insurance therefore, is to:
guarantee peace of mind to the insured
place the insured back into the position he or she was before a loss
and protect/enhance the nation’s GDP
SUGGESTED INSURANCES TO BUY DURING AN ELECTION YEAR
❖ Below are some unfortunate circumstances that may befall citizens of any given state during any election year :
❖ Destruction of properties
❖ Loss of lives and businesses etc
Good enough, destruction to properties because of Riot, Strike or Civil Commotion used to be exempted in the standard wordings in most insurance policies but nowadays, with little additional premium such can be covered e.g. the RSCC in motor policies can now be enjoyed by the insuring public.
Suggested Insurance products to buy during an election year would include:
❖ Fire & Burglary Insurance
❖ House Holder Insurance
❖ Comprehensive Motor Insurance
❖ Business Interruption
❖ Life insurance covers (Endowment and investment policies)
❖ Annuity among others.
RECOMMENDATION(S) AND CONCLUSION
Having noted some of the roles that insurance plays in the economy more so in an election year, it is recommended that individuals, corporate entities and even government should take up all necessary insurances for adequate protection against the unforeseen contingencies.
In conclusion, the role of insurance in any given economy cannot be overemphasized as the economies of most advanced countries in the world’s today are strongly supported by insurance. It is now imperative that Nigerians should visit the nearest insurance companies to them among the forty-six available to purchase from the numerous life and non- life insurance products.
I want to wish Nigeria and Nigerians the very best in the election year of 2019.
LET US THINK OF SAFETY….LET US THINK OF A SECURED FUTURE…. LET US PATRONISE INSURANCE COMPANIES NOW.
Thanks, for listening.