Lagos flood: Building a wall around insurance

By  Modestus  Anaesoronye

The Ikoyi, Victoria Island and Lekki axis of Lagos were overtaken by flood two weeks ago after a weekend heavy rain in many parts of the State. Reports have it that people lost valuable items and properties, while businesses were grounded until the waters found their levels.

Last week again, some parts of mainland and Lagos-Ogun axis of Sango Ota area got their own share of the flood, following some days of rain fall across the state.

Flood insurance denotes the specific insurance coverage against property loss from flooding. To determine risk factors for specific properties, insurers will often refer to topographical maps that denote lowlands, floodplains and floodways that are susceptible to flooding.

Are there really insurance cover for flood in Nigeria, the answer is no. The reasons are obvious, not a lot of people see the need for flood insurance because there has not been much experience of that given our topography. And insurance being a game of large number does not find the market here to be able to become profitable as a business.

In traditional insurance, insurers use the economic law of large numbers to charge a relatively small fee to large numbers of people in order to pay the claims of the small numbers of claimants who have suffered a loss. Unfortunately, in flood insurance, the numbers of claimants is larger than the available number of persons interested in protecting their property from the peril, which means that most private insurers view the probability of generating a profit from providing flood insurance as being remote. Though in 2011, flood caused colossal damage in the city, and only an Ikeja-based firm, FrieslandCampina WAMCO Nigeria made a claim of N3.5 billion, due to its own type of cover

In America where there are more experiences of flood, the most common flood insurance is offered through the federally regulated program known as the National Flood Insurance Program (NFIP). Nationwide, only 20 percent of American homes at risk for floods are covered by flood insurance. Most private insurers do not insure against the peril of flood due to the prevalence of adverse selection, which is the purchase of insurance by persons most affected by the specific peril of flood.

In certain flood-prone areas, the federal government requires flood insurance to secure mortgage loans backed by federal agencies  In the United Kingdom, usually, the British insurers require from clients living in Flood Risk Areas to flood-proof their homes or face much higher premiums and excesses.

In Canada, home flood insurance doesn’t exist in this country, says the Insurance Bureau of Canada.

The insurance bureau defines a flood as water flowing overland and seeping in through windows, doors and cracks.

Source: Businessday