Mitigating Risks Through Insurance Plans 

Series of disasters hitting Nigerian business community in recent times have called for the need to optimise insurance to lessen to the cost of these losses, writes Ebere Nwoji

The twin disasters  of Mandilas Lagos fire out break and Ibadan  explosion which destroyed goods and properties worth millions of Naira within the month of January 2024 have called for the need for both government and Nigerians to realise the fact that Nigerian environment is not immune from some    risks witnessed outside the shores of the country.

Indeed, lessons from these disasters so far witnessed this year teach Nigerians that they are as prone to environmental risks as do their counterparts in other climes where insurance is seen as one of the most important and unavoidable expenses  in their day to day scale of preference of needs.

Poor attitude towards insurance

Unfortunately, one of the least things an average Nigerian thinks about is risk occurrence let alone making plans on risk mitigation through insurance.

This is so despite the fact  that poor security situation in the country has commonised environmental risks such as theft, arson and others. These disasters have in recent times affected major markets in the country as a result of hoodlums’ nefarious activities as well as civil unrest resulting in wanton destruction of properties, which have more than ever exposed Nigerian business communities to high level of risks.

Mandilas, Ibadan explosion

Barely two weeks ago, Lagosians woke up to hear the shocking news of the fire outbreak in the 10-storey Mandilas building on broad street Lagos.

According to the Lagos State Fire and Rescue Service (LSFRS), the fire outbreak was as a result of  careless welding during the installation of a power generating set on the second floor of the Mandilas building.

The fire reportedly started from the first floor of the building and spread to the fourth floor.

The LSFRS Director, Margaret Adeseye, disclosed that emergency responders from the Ebute Elefun and Sari Iganmu Fire Stations moved to the scene to curb further escalation and put the situation under control. Media report on the incident  said  six people sustained minor injuries, but that no life was lost in the incident.

Few days before the Mandilas building fire outbreak, explosives stored at a private residence at Bodija area  in Ibadan detonated killing no less than six people while injuring not less than 77 people. Several houses were also said to have collapsed as a result of the incident.

Reports said the incident was caused by activities of illegal miners occupying one of the houses in Bodija  who were said to have stored explosive devices there which caused the blast.

On Sunday January 21,2024 at Iba Housing Estate, Ojo Lagos, a major explosion that sent the residents panicking happened when used motor vehicle batteries stored by one of the residents in one of his rooms exploded due to excessive heat peeling the skins of  the owner and his wife while causing major quake on the houses in the area.Damages were incurred by the residents while the man and his wife were  rushed to the hospital as heat from the explosion roasted them alive beyond recognition.

Fire outbreak in Lagos

Checks by THISDAY on major fire out breaks in Lagos in recent times show that between January and June last year, the Lagos State Fire Service recorded 1,642 fire incidents  with 42 persons killed. The Kaduna State Fire Service also recorded 325 fire outbreaks, with 17 persons rescued, 26 injured and 12 deaths. These exclude the havoc often wrecked by flood during rainy season every year.

All these show that on daily basis, Nigerians are surrounded by risks which mitigation  needed to be planned for. Unfortunately, they hardly anticipate such occurrences until it is at their door steps.

Rather than planning for mitigation, Nigerians prefer to call on government’s intervention when the risk occurs but the question has remained to what extent can government help  through palliatives  to return victims to their former financial position when such unexpected happens which is exactly what insurance does when risk occurs.

Insurance by its simple definition is a legal agreement between an insurer (insurance company) and an insured (individual) , in which an insured receives financial protection from an insurer for the losses he may suffer under specific circumstance.

Such financial protection through claims payment is expected to reinstate the insured to his former financial position before the unforeseen happened.

But Nigerians prefer to receive paltry sum from government as palliatives  instead of insurance plan that will replace what they have lost.

Reasons they often give for not taking insurance cover is that insurance does not pay claims, an assumption they held since the 70s when much room insurance firms with capital as low as N5 million were in operation.

Claims payment 

But with the advent of new generation insurance firms with robust  capital base, claims payment among Nigerian insurers is seamless. But the problem remains how to convince Nigerians that insurance claims payment is real and that there is reasonable value in insurance.

Looking through account books of insurance firms, it could be seen that every year insurance firms pay substantial amount of premium they collected on claims but this is hardly recognised by Nigerians.

For instance, recent media report said that Nigerian insurers  paid  N2.2 trillion claims out of N5.05 trillion premium they collected in the past 13 years.

This represents 43 per cent of the entire premium they collected within the period.

The  Director – General   of the Nigerian Insurers Association (NIA), Yetunde Ilori was quoted as saying that it goes to show that the insurance companies were living up to their expectations.

According to her, the industry is embarking on a campaign that is likely to increase claims payout in the industry because, “we want to publish companies’ outstanding claims for their owners to come, complete documentation, and be paid.”

She said it was a testament that insurance industry pays claims, which helped to ease the burden of people in the event of loss or when the unexpected happens.

“People are encouraged to keep insuring their properties in case of general insurance and their dependants in case of life, so that when the need arises, they will have something to fall back on,” Ilori said.

payment to police

Barely two weeks ago,the  Inspector-General of Police, IGP Kayode Adeolu Egbetokun, distributed over N2 billion to 785 families and Next of Kin of deceased police officers as claims for the insurance policy packaged for the officers for the years 2015/2016, 2017/2018, 2021/2022 under Group Life Insurance  Policy and the Inspector – General of Police Family Welfare Insurance Scheme for the year 2022/2023. These were paid by insurance firms in Nigeria.

Cumulatively, the Nigeria Police Force, through the Force Insurance Office, has been able to settle a total number of 2,533 insurance claims of deceased Police personnel amounting to over N6 billion between June 2023 to date.

claims payment 

The commissioner for Insurance, Mr Sunday Olorundare Thomas late last year mandated NIA authority to publish all outstanding claims in the book of insurance companies inviting the claimants to come up with the necessary documents for the purpose of paying such claims.

On their part, the insurers have in recent times embarked on a number of sensitisation  programmes aimed at educating, encouraging Nigerians to embrace insurance but these are yet to yield the desired results.

For instance, the Nigerian Council of Registered Insurance Brokers(NCRIB) has taken it  as duty to visit victims of every fire disaster to commiserate with them and encourage them to see the need to seek for insurance protection.

The council recently visited the scene of the Mandilas fire incident, during which the President of the Council, Prince Babatunde Oguntade lamented that the fire incident had further led to the hardship in the country, considering the fact that those who were victims of the fire were Nigerians.

Oguntade noted that the magnitude of the losses could have been mitigated if the victims adequately insured their assets and utilised the services of insurance brokers that are the professional intermediaries in the insurance value chain.

While calling on Nigerians to imbibe the culture of insurance for the mitigation of their exposure to risks, Oguntade opined that government at all levels needed to pay more attention to enforcement of existing laws backing some compulsory insurances, to help the government and the people protect their human and material assets, as well as grow the insurance industry.

He said, “It remains inexpedient for government to continually seek to provide palliatives for victims of calamities. Instead, they could assist encourage or assist them to pay insurance premiums, to enable them make claims that would be consistent with the volume of their losses when they occur.”

The council also visited the scene of Ibadan explosion where he preached the same message of putting in place insurance plan to mitigate losses.