As a young secondary school student, I liked commerce as a subject. And amongst all the topics we were taught, “Trade and Aids to Trade” was my favourite. By definition, aids to trade are those auxiliary services that make it easy to carry out trade. These include but not limited to insurance, advertising, warehousing, transportation, and banking. These support services serve as leverage to business and help its competitiveness. Therefore, it will be difficult for a business entity to survive without them. They determine the survival of any business entity whether small, medium, or large scale.
Insurance is a support service to a business that helps it manage her risks. While, it helps the business to manage her risk, insurance also promises to bring the business back to the position it was if the risk insured crystallizes. However, this reimbursement happens only when the cause of the loss is an insured peril.
How does insurance do this? It is structured in such a way that the insured knows in advance what his policy covers and what is excluded. This is expressly stated in a policy document that embodies the terms and conditions of the policy and is made in a readable format. In recent times, this is interpreted in languages that the insured understand to reduce ambiguity.
The insured is expected to not only read but understand the lines in the policy. The understanding of the policy document is especially useful when claims occur. This is because, when an insured understood the terms, conditions, warranties, and clauses in his policy document, lodging of claims and processing of the same become a lot easier. This is perhaps one of the challenges of many Nigerians. We are usually in a hurry and rarely read policy documents, such as terms and conditions for any product or service. The simplification of this process is a major challenge that the insurance industry needs to address in order to gain more trust from the public.
In Nigeria like any other country, businesses are vulnerable to catastrophic shocks ranging from fire to burglary, pecuniary to liability risk. A business entity could be enmeshed in unforeseen legal liability as a result of the usage of its products by the public. Unfortunately, these risks could bring about the end of the business entity if not properly managed; leading to other unforeseen circumstances such as trapping owners and employees to a poverty-vulnerability vicious cycle. The aim of insurance is to prevent this likelihood and/or restore hope if it happens.
Despite the benefits businesses could reap through the insurance support services, many businesses still do not take advantage of insurance to protect their business. There are many insurance products that a business can buy to safeguard her from an imminent crash in a third world country like Nigeria. There are products like Fire and Special Perils, Fire Consequential Loss, Fidelity Guaranty, Money, Burglary, Group Personal Accident, Motor Vehicle Insurance, Public Liability, Product Liability, etc. Each of these products has its own unique features, covers, and exclusions. For example, while fire and special perils cover the business against actual conflagration and allied perils, the fire consequential loss provides cover to the business against the income the business would have earned over a period but for the fire incident that happened. Fidelity Guaranty covers the business against dishonesty and embezzlement by insured’s employees against the business and when there is a loss of money to armed robbers, money insurance will come to the rescue.
In recent times, many businesses in Nigeria have gone under following an unfortunate fire incident in most commercial centers of the country. While the happening of the fire incident may not be the fault of the business owner; the owner could be blamed for not taking steps to forestall the impact of the fire incident. However, it is has been proven that one of the reasons for the non-acceptance of insurance is because of the cynical attitude of many people. To them insurance can never work. Little do they know that insurance does work and provides a hedge against such an occurrence of risks.
These cynics based their argument on the fact that it is impossible to pay a token to the insurance company and be indemnified or reinstated to the former position before the loss. While it may be correct to say Nigeria Insurance Industry has suffered from poor image arising from many years of poor handling of claims, litigations, and the likes, the narrative has changed drastically from the goodwill the industry is beginning to garner. The regulatory agency, the National Insurance Commission has continued to work assiduously to restore credibility in the industry. Today, claims are settled quickly and without stress to the insured. In fact, times certain vital claims substantiating documents are waived and the claim paid just to build business relationships and goodwill.
Perhaps, an explanation of the concept of insurance will help for clarity. Insurance is the pooling of risk which depends on the game of large numbers. It uses the concept of using the resources of the fortunate many to indemnify the unfortunate few. A good business student will comprehend this concept and then added a little mathematics, forecasting, and understanding of past experience, all things being equal, the company will take care of her liability and still smile to the bank. This has been consistent over the years but a poor understanding of the dynamics of the market and other environmental factors have pushed perception to negative making understanding and appreciation of insurance policy very difficult.
At this point, it is imperative to admonish the insurance practitioners to be a little more visible than it has been. People can only patronize the propositions they can relate with and values that resonant with them especially when it comes from trusted sources. The industry needs to make use of both traditional and modern means of advertising and communication to change the perception of insurance in the minds of Nigerians. The insurance industry needs to take advantage of Information and Communication Technology (ICT) to create, engage, and relate more to the public. More so, there is a need for them to launch a campaign that will bring to the fore the amount and number of claims the industry pays per time. This could be done through publications by the industry trade organization, the Nigeria Insurers Association.
Having said the above, it is important to mention that the benefits accruable to businesses from insurance support services cannot be overemphasized. It is my firm belief that a business that aims to be in perpetual existence will find the insurance cover a worthy partner. While this article targets mainly business entities, it is equally valuable to individuals. Therefore, let us as individuals and businesses buy insurance for sustainable living and peace of mind.
Chukwu Oteh is a Chartered Insurance practitioner based in Lagos. He can be reached on 0807 838 8333