There have been hues and cries over the dwindling fortunes of insurance business in the country, even as apathy among subscriber have been blamed on the complex mechanism of insurance products and services as well as distrust between the insurers and subscribers. In this report BENJAMIN UMUTEME examines who these factor robs the sector of millions.
Assistant Superintendent of Police Mr. Edewor Alex, not real name, took it upon himself to buy an education endowment policy for his children from an insurance company. For three years he saved with the company and then stopped paying his premium as at when due, and because the minimum maturity time for the policy was five years, he had to wait for the maturity period.
At the expiration of the five years, he went to the company to make his claim. He was told he would be charged for not saving to the maturity time, which is normal with insurance, when the policyholder does not save all he is suppose to save till maturity.
He agreed to the company’s terms that he should be paid what he saved.
He was told that head office would issue a cheque to the branch where he bought the policy and he would be called to claim the cheque. But three years later, Mr. Edewor is yet to get the cheque from the company.
ASP Edewor is not the only one in this predicament.
An Abuja based commercial driver, Musa Azeez, in 2016 took a vehicle insurance policy with the hope that he was preparing for the rainy day, and little did he know that the rain would fall on him.
According to Azeez, when he had a car crash it dawned on him that he made a mistake the day he decided to take the policy.
“When the accident happened, I called the insurance company who came and did their assessment and left. Two days later, I called the guy that came to do the assessment and he said they will get back to me.
“After two months, they started asking me so many questions and six months later I was told that I am due for just half of what I paid as premium. Honestly, I was perplexed because I had hoped that I would use the amount contributed to buy another car.
“As it stands now, I can’t afford another car and I have not been able to raise enough money from friend and family to buy another one. This experience has left me jobless. If I had listened to the voices of reason I would not be in the situation that the insurance company has put me,” he told our correspondent.
Blueprint Weekend investigation indicated that similar experiences by insurance subscribers may have fuelled the people’s nonchalance and apathy to insurance.
Apathy blamed on complex mechanism of insurance
For the Chief Executive Officer, Union Assurance Plc, Mr. Godwin Odah, apathy currently experienced in the insurance industry is due to the complex mechanism of insurance products and services as well as the inability of society to understand the kind of products that insurance companies have and how those products can be used to address the problems of the society.
Speaking to national daily Odah said, “There is awareness of insurance but what has not happened is the preparedness on the part of the society to see insurance as solution provider. There is the inability of the society to understand the kind of products that insurance companies have and how those products can address the problems of the society.”
What really is insurance?
Insurance is an arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death of an individual in return for payment of a specified amount (premium).
The contingency is the event which causes a loss. It can be the death of the policyholder or damage/destruction of the property.
It’s called a contingency because there’s an uncertainty regarding happening of the event. The insured pays a premium in return for the promise made by the insurer.
How it works
The insurer and the insured get a legal contract for the insurance, which is called the insurance policy. The policy has details about the conditions and circumstances under which the insurance company pay out the insurance amount to either the insured person or the nominees.
Insurance is a way of protecting yourself and your family from a financial loss. Generally, the premium for a big insurance cover is much lesser in terms of money paid.
The insurance company takes this risk of providing a high cover for a small premium because very few insured people actually end up claiming the insurance.
Any individual or company can seek insurance from an insurance company, but the decision to provide insurance is at the discretion of the insurance company.
The insurance company will evaluate the claim application to make a decision.
Generally, insurance companies refuse to provide insurance to high-risk applicants.
Depending on what you want, there is the life insurance; health insurance; car insurance; general insurance; education Insurance, and home insurance which cover loss or damages caused to your home due to accidents like fire and other natural calamities or perils. Some have even gone to insure their boobs, hips etc.
The experiences of Edewor and Azeez, like many others, have left a sour taste in the mouth of many Nigerians.
Data obtained from the Nigeria Insurers Industry Database (NIID) showed that as at February 2018, 4.5 million cars were in the NIID out of a projected 12.5 million vehicles that ply Nigerian roads.
State of insurance
The situation has gone from worse to worst in 2019. As at October 2, 2019, the Nigeria Insurers Association (NIA), started that 2.53 million vehicles were in the database. And of that number, only 1.8 million were insured.
These figures paint a grim picture of the state of insurance in the country especially with people that are unwilling to take insurance policies which is for their own good.
The fear of insurers…
The joy of every policyholder or beneficiary is to easily make claim. No one is happy to hear long stories when it is time to make claim of the money they saved with insurance company over the years.
This kind of attitude weakens and discourages prospects and customers from buying insurance policies. It makes customers to lose trust they have in insurance in Nigeria.
Any customer that has difficulty to make claim of his already saved money at maturity will never recommend insurance to someone else.
This is what has been killing insurance companies in Nigeria over the years.
However, with the FBNInsurance paying N4.8 billion as claims in 2018, then many would still wonder whether insurance is going out of fashion in the country.
Also, LeadWay Assurance according to its 2017 audited financial statements paid a total claim of N27.4 billion.
Default in claim payment
For insurance expert Uzochukwu Mike, “When customers say insurance in Nigeria is not working and one of the reasons is because of the difficulty they experienced when it was time for them to be paid.”
He noted that irrespective of the improvement in claim payment in the recent years, many insurance companies in Nigeria are still not doing their best.
“The claim payment by the company is good but there are many that are not doing well in claim payment. Some customers are discouraged from entering into any other insurance policy after their initial bad experience.
“They decided not to give listening ear to anything call insurance in Nigeria. Till date, many people who were once customers in any insurance company are feeling sad for buying insurance sometime in their life.
“Claim issue is bad and that is one of the major problems with Nigerian Insurance companies. Some policyholders were not paid their claims on time. Sometimes it lasted up to four months before they got paid. Action like this is annoying and frustrating.
“When you were making premiums payment it was easy but stories and delay comes in when it was time to claim your benefit. Delay in claim settlement has weakened many Nigerian insurance companies. Why not settle claims on time and put smiles on the faces of your customers. Insurance companies should consider their reputations and be careful with claim issues.
Is this reason insurance patronage remains low?
An Abuja based insurer, who simply gave his name as Mr. Joe Idonor told Blueprint Weekend in a chat that, “from experience of talking to an average of 18 people weekly in all spheres of the economy, some of the reasons for prospects not buying Insurance as perceived from interactions and as put forward directly by prospects are: lack of awareness, religious beliefs, personal economic restraints, insincerity of Insurance companies and claim payment avoidance, fear of failure or distress of all Nigeria financial systems, and measuring insurance returns against other investment returns.”
Debunking the myth
Mr. Idonor asserted that the widely held myth about non-payment of claims by insurers is not entirely true. While he did not ruling out an exception, he said most companies pay claims.
“It is a view held by a few without the knowledge of insurance that Insurance companies always introduce technicalities to avoid payment of claims. They cite genuine instances of claim denials by insurance companies after policy holders had faithfully paid premium for years.
“This concern is spread by some to infuse fears on intending buyers. However, some insurance companies claim that claims can only be paid on insured interests which are specific,” he said.
However, despite this widely held view, data from the Nigeria Insurers Association (NIA) revealed that N70 billion was paid out as claims to individuals and corporates in 2016 alone.
The non-payment myth by insurers led to big loss by Chidi.
According to him, when his house was razed by fire he would have gotten some compensation from an insurance company if he had listened to his wife.
“My girlfriend actually mentioned Insurance to me once, but I pushed the suggestion aside because of the information I had. I have to admit that I was a bit lazy to do my own digging outside what has been said about these companies.
“Regrettably, it just didn’t make sense to spend extra money insuring the house considering I had already spent so much. I did not want to lose any more money to insurance companies. I kept asking myself: would they pay me when I have a claim,” he said.
Ignorance fuels apathy
Throwing more perspective on apathy in the sector, Mr. Idonor said: “As simple and suggestive as the word insurance seems, it is surprising that over 60 per cent of the working population know very little about insurance and its scope. A fraction of the 60 per cent only encounter insurance in those areas like 3rd party motor and travel insurance where it is statutorily mandatory.
“For 3rd party motor insurance for example, most insured lack the knowledge that the N5000 paid for insurance alongside d vehicle particulars gives the insured a cover of 1 million naira. This means that a carrier of d 3rd party certificate has protection from d issuing insurance company to fix a 2rd party vehicle to the tune of 1 million naira should the insured involved in an accident. This is mandated so that d 3rd party is safe guided against loss arising from an accident caused by d insured.
“Surprisingly, most Nigerians would rather bear costs resulting from such insurable interest instead of following d procedures of being indemnified.
“Consequently, such insured pay the mandatory N5,000 as a necessary evil to avoid VIO or road safety officers and not for the benefits embedded therein.
People just pay because it is a law. They don’t know or care about the benefits,” he explained to our correspondent.
The question then is why Nigerians continue to give insurance the cold shoulders in spite of the enormous benefits?
Blueprint checks revealed that several factors continue to conspire against the sector, one of which is religion. Insurance companies sell protection to cushion against hardship caused by misfortune and because religion is deep-rooted in Nigeria people do not see misfortune as our portion or as just the will of God which humans must not plan for.
“However, families who lost bread winners wallow in penury around us; we still are not moved to plan because it can only happen to others and not us.
“So people would rather not be rational to discuss life uncertainties because, religiously, it is considered negative confession. Thus, religious house thrive with positive confession but when misfortune occurs the family is prayed for and left to face the harsh realities of life,” Idonor continued.
The economic reality of the time is not helping matters either. “Of the few who are aware of the benefits in Insurance, a large percentage is restrained from taking up insurance policies because of financial considerations. With the national minimum wage grossly inadequate to meet family needs, insurance is seen as a luxury to be enjoyed only by d rich. Perhaps this distantly accounts for d strong “not my portion” faith as it seems to be the only logical reason to face life uncertainties. People look forward to surviving today first before looking forward to tomorrow.
The good side
A facility manager in Abuja, Oladele Kazeem, bought a comprehensive car insurance cover in 2015, the type that covers both first and third party issues. “I had seen first-hand the importance of insurance from how it covered our company cars, so when I got my car, I knew I had to insure it too,” Habib explains.
“I bought my car in June, and it was stolen in front of my street gate in December. When I insured it, I did so in case of a major accident. That the car would be stolen did not even cross my mind,” he said.
Habib’s initial panic died down when his account officer assured him he was going to get compensated for his loss.
“I called my account officer the moment it happened; it was just a few minutes after midnight. He told me not to worry about it. I remember he asked me to go to bed and make a police report in the morning,” he laughs.
“Of course, I could not go to sleep; my car had just been stolen. I went to the police station that night to make my report. I made some statements, and that was that,” he rounds off.
At first, Habib was put off by how undisturbed his account officer was until he filed his claim for compensation. “The process was seamless and stress-free. I was certain I’d get compensated so like my account officer, I started to relax,” he narrates. “I remember people looked at me funny and assumed I had a lot of money since I did not seem bothered.”
By February, two months after the incident, Habib had received his compensation. According to him, “It would have been disastrous if I did not have insurance. I cannot imagine trying to raise money for another car six months after getting one.”
Habib, who believes that insurance is not expensive stated: “My current car is valued at ₦2 million and I paid a premium of ₦83,000. Anybody that can buy a car in Nigeria can afford it.”
Our correspondent reports that insurance premiums are relatively affordable as one is unlikely to pay more than 5 per cent of the value of the car for comprehensive car insurance, and you would end up saving much more than that on repairs. If one can afford a ₦20 million car, expectation is that one can afford a ₦1 million premium.
Regulating the sector
In spite of this bright spot in the insurance landscape, analysts say there is need for the National Insurance Commission (NAICOM) to increase its regulatory activities in the sector it claims to regulate.
The establishment of NAICOM was a relief to policy holders as it will help protect policy holders and enhance insurance companies’ ability to underwrite big businesses and pay claims, also, NAICOM’s recapitalization policy for insurance companies is a welcome.
Mr. Uzochukwu noted that lack of awareness of the benefits of insurance is a big challenge that the regulator needs to address.
“NAICOM should create awareness of her existence through television channels and newspapers. They should spread the information that any policyholder having issues with claim or the like should write to them quoting the insurance company he or she is having issue of claim with and other important detail. With this development, NAICOM writes to the insurance company in question and the claim settled easily. They should employ good number of capable workers that can easily respond to policyholders complain,” he added.
