With the rapid drop in oil prices, the devaluation of the naira and the sudden clamour for the implementation of austerity measures, flaws in the fabric of Nigeria’s fiscal policies have come to the fore.
The over-dependence on crude export, which accounts for over 60 percent of the country’s Gross Domestic Product as an economic mainstay, has placed the nation’s coffers in a precarious position especially with the United States’ emergence as a stiff competitor in the international oil market with its discovery and utilisation of shale gas and hydro energy sources.
In the absence of a backup plan and dwindling foreign reserves, analysts project a long fall in Nigeria’s well-being and subsequently on the individuals that work, exist and depend on it for sustenance.
While some presume that the affect may take a short amount of time before the ripple effect is felt by the average Nigerian, experts have begun to advocate the need for investing in an insurance plan, either at the institutional or individual level, in order to mitigate the unexpected losses that may arise.
Although the term ‘insurance’ is often bandied around by professionals versed in the dynamics of financial speculations and liabilities, research shows that a vast majority of the populace (who essentially need this service) in emerging markets often misconstrue the risk-protection platforms for banking institutions.
According to the team at Stanford University, insurance is a contract or policy in which an individual or entity receives financial protection or reimbursement against losses from a cover company.
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In other words, the insurance companies are designed to pool clients’ risks so as to make payments more affordable for those they have indemnified.
Highlighting the some of the benefits of putting money aside for the future, Henry Enaholo, the head of group retail at Royal Exchange, a full service insurance and asset management firm, said, “There are two main categories for insurance. They are namely: Life and General insurance or assurance.
“The good thing about investing in insurance at this time is that there are guaranteed returns on these packages whether there is inflation in the naira or oil price is dropping. It also gives the beneficiary the full value of what the assured has put aside regardless of the state of the economy.”
In spite of the high remuneration associated with these policies, most Nigerians often show a lack of interest in utilising these test channels to safeguard against unforeseen circumstances.
Revealing why the high rate of apathy towards insurance is still a burning issue in developing nations like Nigeria, Chima Nwajaogu, the co-partner at Black Creek, a risk advisory and corporate finance and securities firm, states: “We have an apathy in taking care of risks or talking to insurance companies because it’s clear that the insurance companies and it’s regulators have not done enough to educate people on what the benefits are in making sure they are covered.
“Having done business in Europe and America,” he continued, “I think the risks [we face here and those they experience over there are] basically the same just that it is well understood in such markets and business people take advantage of insurance policies. Even if the business doesn’t go through, you find out that people are taking insurance because they have the requisite knowledge.”
Further addressing the factors causing these inonsistensies, Nwajaogu said, “The problem has been with the way the insurance companies have modelled their operations. They basically modelled it around the banking sector where you have a bunch of people going out just to sell the product and get premiums without knowing what they are selling – a case of selling products that the seller is not well equipped to sell.
“The people with the technical expertise in most companies may not be more than five people while the rest would just be marketers…that has become the challenge.”
Giving insight into some of the ways which government interventions can help create awareness and drive better participation of its citizenry in insurance, experts have proposed sustained publicity campaigns, imposed sanctions on organisations who do not make insurance cover a mandatory requirement for their staff, as well as increased tax measures on institutions or individuals who are averse to getting at least a life insurance plan.
Rita Ohai
