The insurance industry is a money spinner in developed economies. It is so influential that it touches the lives of just about everyone. In Britain, 19.6 million of the country’s 26.4 million households had motor vehicle insurance policies in 2014. Consequently, insurance companies in Britain are so powerful that they own banks.
The industry raked in 160.4 billion pounds (N670 trillion) in premium income in 2013. The population of Britain is a scant 65.1 million compared to Nigeria’s population of 192 million. The fortune of Nigeria’s insurance industry is the reverse of its British counterpart.
The industry is plagued by abysmally low patronage. Unlike in Britain, most of Nigeria’s insurance firms are owned by banks. The industry’s premiun income for 2016 was a paltry N380 billion. That is about the annual income of one Nigerian bank. The regulators and operators are still battling to hit the elusive N1 trillion premium income mark. No one knows how to reach it.
The abject poverty in the industry is dramatized by the miserable share prices of insurance firms quoted in the Nigerian Stock Exchange (NSE). Most of them are penny stocks.
They are just at their par value of 50 kobo per share. Nigeria’s insurance industry is plagued by an odd combination of self-inflicted calamity and intrinsic apathy of a suspicious and ill-informed public. Statistics from the industry suggests that less than three million Nigerians hold any form of insurance policy.
Measured against claims by the Federal Road Safety Commission (FRSC) that there are at least 14 million vehicles on Nigeria’s dilapidated roads, one sees an industry that is ripped off both by insider abuse and a lawless apathetic public.
The law of the land makes it mandatory for every motorist to hold at least a motor vehicle third party insurance policy. Given the FRSC projection of 14 million vehicles on Nigerian roads, a conservative estimate suggests that the industry should earn a minimum of N50 billion annually from third party policies alone if it provides cover for 10 million vehicles.
The industry is deprived of billions of naira annually from third party insurance policy alone. Millions of motorists hold fake third party insurance policies just to placate the police, vehicle inspection officers, and FRSC among the flotilla of law enforcement agencies that assault motorists’ ears on the roads. Of all the law enforcement agencies on the roads, it is only the police that have the basic skill of identifying fake insurance policies.
The rest just wave away anyone with insurance papers that have not expired. Fake third party insurance policies are sold to motorists at legitimate vehicle licensing offices strewn across the country. The fake policy carries a price tag of N1, 500 while the genuine third party insurance policy attracts a premium of N5, 000. In recent times the police have compelled insurance agents to curtail their impudence in the sale of fake policies.
They now warn policy holders of the consequences of being caught with a fake insurance policy. Some have totally refrained from selling the fake policy, while the hardened criminals among them still dare the underwriters.
The truth is that the loss to the industry remains colossal. Nigeria’s insurance industry is perhaps its own greatest enemy. The underwriters are devious. Very few Nigerians trust them. About 99 per cent of the motorists in Nigeria know next-to-nothing about who benefits from a third party insurance policy. The high level of third party policy illiteracy emanates from the fact that the underwriters do not want policy holders to know their rights.
In Britain, when a motorist brushes another person’s vehicle, the off ender gives the owner of the damaged vehicle the details of his insurance company and they part ways. The owner of the damaged vehicle and the underwriting firm of the errant driver meet and settle the issue.
The underwriter fixes the damaged vehicle without stress. In Nigeria the errant driver and the owner of the damaged vehicle often block the road and trade punches because in most cases they do not know that it is the responsibility of the insurance company to fix the damage.
Even in rare cases where someone knows his right and calls on the underwriter to handle his responsibility, the owner of the damaged vehicle would be sufficiently frustrated to abhor dealing with an insurance company any other time.
Underwriters simply rake in billions of naira annually from third party insurance policies, but shirk their responsibility of fixing damaged vehicles. The high level of illiteracy about third party insurance policy is a huge bonus to Nigerian underwriters.
They want the status quo to remain. Ironically that selfish attitude is a double-edged sword. It gives the industry pittance and robs it of billions of naira. Fake third party insurance policies thrive from motorists’ perception that the policy is an instrument for placating the police rather than cover for possible damage to a third party’s vehicle.
Motorists would rather hold a fake policy and repair a third party’s vehicle when any damage occurs. The insurance industry would definitely benefit more from third party insurance if it educates policy holders on its benefits and at the same time accept responsibilities from the policy