A recessional strategy for improved growth in Insurance

As the debate for the sale of some of the nation’s assets rages as one of the solutions for recovery from the present economic recession, the National Insurance Commission and Insurance experts, however, maintain that the preservation of national assets against risks and wholesale patronage of insurance products constitute the recipe for recovery, Writes CLEMENT NWOJI.

As Nigerians grapple with the challenges of the present recession, there is a barrage of concerns just as there are flying suggestions on how to confront the multifarious challenges posed by the economic downturn. These are in efforts to pull the nation out of the present woes and activate economic growth that will translate into the wellbeing of the masses, contrary to what is obtainable now.
Although, initially, the duo of Minister of Finance, Kemi Adeosun, and the Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, were reluctant to tell the nation the truth that recession had set in. But Nigerians, who had long been experiencing hard times associated with the economic challenges, were certain that things had fallen apart. While the CBN Governor maintained that the present economic condition was not caused by monetary policies but linked with structural policies, Adeosun insisted that the country is experiencing technical recession.

But the economy is bogged down by corruption, kidnapping, terrorism, human trafficking, high rate of inflation, depreciation of the Naira, downturn in manufacturing sector, high cost of standard of living, and a host of others.

In the face of the prevailing economic challenges, the Federal Government is are expected to rally round and proffer solutions to pull the nation out recession. This is where the role of insurance cannot be overlooked in protecting existing national assets from unforeseen circumstances such as natural disasters like fire and flooding and physical deterioration. Not only these, there is also an urgent need to safeguard, with relevant insurance policies, businesses set up with bank loans obtained at low interest rates than what is obtainable under the prevailing circumstances so that in the event of any loss, the commensurate compensation can be received by the affected persons or be used to remedy the effects of the damaged assets.

Sadly too, both government and individuals’ attitude towards insurance is that of nonchalance and neglect. For instance, as at today, the Federal Government is yet to renew the Group Life insurance of its civil servants, which had expired since July, 2016.

Even the budgetary provision made for insurance in the 2016 Appropriation Act for the offices of Secretary to the Government and the Head of Civil Service of the Federation was mere N60.3 million, not even enough for the renewal of insurance of government assets or Group Life for civil servants. Also, individuals fail to undertake insurance of their assets such that in the event of any disaster like fire, the assets worth several millions are lost to the infernos.

Currently, due to losses associated with economic recession, there are increasing waves of closure of businesses due to the inability to break even, slashing of workers’ salaries, mass layoff of workers, cybercrimes, armed robbery, kidnappings and other related criminal activities. Some of these could have been remedied to some extent if not absolutely, had there been insurance coverage.

With regard to selling and reacquiring assets once the economy improved, experience has shown that similar priced such as the Nigerian Airways and the Daily Times of Nigeria have not met the desired expectations of government. They have either been disposed of by the buyers as in the case of the Nigerian Airways or the assets are almost comatose.

An accomplished economist and a former CBN Governor, Prof. Chukwuma Soludo, opposed the sale of assets, saying: “If we sell assets and lodge into the reserves under the current policy framework, I am willing to take a bet that in a few months’ time, it will be frittered away. Then we will be in even a bigger mess as economic agents know that we have nothing else to resort to.”

Also, most of the legislators are opposed to the assets sale and preferred that they be preserved and made profitable instead.
Recently, the National Insurance Commission (NAICOM), beamed its focus on the “Role of insurance in a challenged economy” at a seminar in Gombe State, and there was a consensus that insurance constitutes an indispensable safeguard against risks and losses associated with economic crisis in any nation.

Making his presentation, the NAICOM Director, Authorisation and Policy, Pius Agboola, noted that although the economy had been witnessing some growth, but it does not translate into development.

He noted that although the economy is declared the largest in Africa, in terms of Gross Domestic Products (GDP) growth, above South Africa, but the per capital income of Nigerians is below a dollar per day.

Agboola maintained that at this critical economic state, insurance ought to occupy the centre stage, as the situation calls for preservation and protection of already acquired wealth and assets.

He listed the role of insurance to include reduction of wastage in the economy, facilitation of infrastructural and finance sector development, promotion of economic growth and development, among others. For insurance to play these roles, he argued that government and the citizens must take risk to lift Nigeria from the present economic low level to higher level; noting that the more individuals and government think about insurance, the shorter the period of economic hardship faced by the country.

However, he canvassed that there must be a regime of effective and efficient claims management by the insurance practitioners in order to generate the expected patronage and confidence from government and individuals.

According to the NAICOM Director, “Claims management is one of the critical factors that build public confidence in insurance. The more you prevent fraud in claims management, the more you win public confidence.”

Also, on his part, NAICOM’s Head of Market Developments, Sabiu Bello Abubakar, maintained that for insurance to play its expected role, the market must be developed to enhance its capacity to take big risks. While noting that insurance is a game of larger number, as a developed market is measured by the level of acceptance and patronages by individuals and government.

Abubakar lamented that about 98 per cent of Nigerians are uninsured, just as the few insured obtained their insurance certificates from fake operators, while identifying religious beliefs, poverty level and dearth of awareness, as inhibiting the growth of insurance.

However, the Commissioner for Insurance, Alhaji Mohammed Kari, assured that in collaboration with operators, the Commission is mapping out strategies to rebrand the whole profession and sector, and increase awareness of its potential to facilitate appreciation of insurance role in boosting private businesses and economic growth.

 

Source: Guardian