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Chuks Udo Okonta
The critical role of insurance in driving financial inclusion by protecting businesses and individual’s hard-earned cash came under the spotlight during a recent webinar discussion hosted by Managing Director of Coronation Insurance Plc Olamide Olajolo.
The event with themed: ‘Shared Prosperity through Financial Inclusion – Protecting your business and wallet using insurance’ was moderated by CNBC Africa Anchor Wole Famurewa, panel of experts included: Adedeji Olowe, Founder/CEO at Lendsqr; Babatunde Moses, CEO of Sycamore.ng; and Yemisi Isidi, CEO of Triift Africa.
Following the sharing of individual perspectives, the panelists responded to questions from a lively audience of webinar participants.
According to them in a volatile market where a single event could wipe out a lifetime’s work, insurance played a critical role in both personal and business survival.
They noted that by creating a pool of capital in which the good fortune of the many assured the survival of the few who encountered misfortune, insurance had a critical role to play – primarily by making sure that Nigerians didn’t rely on their savings or assets to cover losses.
They submitted that in an economy of over 40 million small businesses accounting for approximately 84 per cent of employment and 50 per cent of Gross Domestic Product (GDP), Nigeria’s low rate of insurance penetration meant that most small businesses and individuals were relying on cash to manage daily risks.
Yet even in large, successful businesses with substantial assets and secure cash flow, it was impossible to have investments or cash sufficient to cover your entire risk portfolio, they posited.
They maintained that this kind of financial recklessness often challenged the ability of Nigeria’s small business sector to drive sustained growth and long-term prosperity.
According to them, just N250 000 cover, for example, could secure over N1 billion in risk, adding that what business could set N1 billion aside to cover their own risks?As such, it was incumbent on the industry to change the narrative on insurance.
The panelists believed that the attitude to insurance could be changed in Nigeria by providing practical examples of how simple insurance products could sustain financial inclusion by protecting income and investment.
They were also at pains to demonstrate the value of insurance, especially to businesses, stressing that
simple, affordable, products like health and life insurance for business owners, for example, could save a family or a small business owner from being wiped out by the ill health of the bread winner or single business operator.
They posited that access to credit was a key driver of business success across all businesses in Nigeria, noting that small businesses, however, struggled to access credit and that insurance had a critical role to play in this.
Small businesses with adequate insurance cover, they said present at much more secure credit proposition to reputable financial institutions, like banks, and other grade a lenders.
As such, small businesses with just a few basic covers were far more likely to access credit on much more favorable terms, they posited.
They noted that with most insurance providers been able to advise on the risks that specific individuals or businesses faced, the simple process of purchasing insurance act as a powerful force for financial education in Nigeria.
The experts stated that by deepening financial literacy, Nigeria’s insurance sector was ensuring the survival of far more businesses and the prosperity of far more families.
According to them, in tough times and volatile exchange rates, insuring assets purchased at more favorable US dollar values was critical for businesses that relied on imported equipment, insight or services.
They submitted that fortunately, technology had made accessing insurance in Nigeria much easier – and cheaper – with many insurers offering simple, effective risk products, simply by downloading apps onto handheld mobile phones.
As insurance became more common amongst the personal and mass small business segment, it would play a much more significant role in driving financial inclusion, preserving wealth and supporting long term prosperity in Nigeria, they posited.