A former president, Chartered Insurance Institute of Nigeria and now the Managing Director, Sterling Assurance Nigeria Limited, Mr. Fatai Lawal, speaks on the claim process among other issues in insurance business in this interview with NIKE POPOOLA
Why is insurance patronage still low?
Insurance is a complex business; it is so complex that not too many people have the understanding of what it is all about. More importantly is the fact that in this part of the world, there is low level of economic activities, low disposable income, large number of unemployed people, and large proportion of the population fall within the lower income class that can hardly meet basic needs.
Also, the financial system is still not well developed to be able to ensure that people can acquire and access funds using their personal identity. A large number of people live below the poverty line. Insurance is a capitalist oriented business; you need to have an asset that you want to insure; a life that is of value that you want to insure. Once the economic activities of the nation improve and we have a growing number of the middle class, and we include the financial system, insurance will thrive in Nigeria.
The good thing is that we have the population and resources that can boost insurance. We just need time. I want to believe that in a matter of time this will improve.
What is the relevance of insurance to a person who has no dependant?
You don’t need to have dependants to have insurance. In fact, even without dependants, you have to protect the little that you have. It is sad that with hard economic situation, some of the things you have had in the past cannot be easily replaced with your current resources if you lose them. So, you need to protect them. Insurance offers protection against assets and lives. You don’t have to have a dependant to protect what you have. If you have a car and you don’t want the car to be snatched so that you don’t start walking along the street; if you have a house and household items, if fire suddenly occurs and everything turns to ashes, where do you start from? The dress of your friends and neighbours may not be your size, if you need their help; you need money to be able to replace it. What insurance will help you to do in that circumstance is to pay you some money that enables you to acquire your house. So, you don’t have to have dependants to talk about insurance.
You even need to protect yourself against accident, injury that may occur while going about your normal activities if you suddenly get involved in an accident. You may need to incur hospital bills. These are expenses that you did not budget for. Your health may also fail and you need to treat yourself; sometimes at that moment, you may not have the money. Nigeria has so become sophisticated that you can have a health policy for your medical need for the whole year. You can take a group personal accident in case you suffer accident or damage or loss in the course of doing your duty. We also have personal liability insurance, just because you live here, your neighbour could be injured as a result of your work activities.
Although we don’t sue our neighbours here, with growing urbanisation that will happen. If you are taken to court and fined N5m to be paid to your neighbour, and you don’t have it, you go to jail. With minimal amount of money, insurance can take this risk off your neck.
How can insurance help young entrepreneurs?
The young entrepreneurs need it more. Insurance helps to give start-up entrepreneurs the confidence that they need to be able to take entrepreneurial risks. If you don’t have insurance and your business collapses, you go back to square one. Insurance is more useful to them to be able to protect them against losses that may occur in the course of doing their business and it gives the peace of mind required. Even when you have borrowed money, part of the borrowed money for the business is insurance cost.
You want to set up a business, you are going to buy equipment, raw materials, employ people, you should add insurance, which is a fraction of the total cost. In a number of cases, it can be as low as two per cent, five per cent and that cost is part of the cost of doing business.
What are the major risks the young entrepreneur can insure?
If you are trying to take an entrepreneurial risk, what insurance will do for you is to protect you against those losses that you cannot foresee such as accident, fire and burglary risks. We have what we call consequential loss, which is the loss of profit resulting from damage to your goods. For instance, a small entrepreneur who is producing paint in a backyard and is selling it, by the time he adds all his cost of production, he would have added a small margin for his profit. If that thing is destroyed, he will lose the goods and lose his profit. In that case, he can have a loss of profit. But you don’t insure the profit that is not associated with property damage. We call those losses pecuniary losses; losses following damage to a particular thing. You don’t just insure a profit for profit sake. For young entrepreneurs, if you are starting a business and you suddenly incur a loss and you cannot go back to the position where you were before the loss, you may not be able to go back to that project for life.
How easy is it to process insurance claims after a loss?
I won’t subscribe to the fact that claims process is tedious except where the case is complex. Insurance companies today handle claims promptly.
I have been a practitioner for 30 years and I know that some years back it used to be slow and sluggish. Just like in every other aspect of our society where you want to take a loan, you need to know somebody who knows the bank manager. But today, the bank manager comes to beg you if you have a business so that he can give you a loan because he has been asked to go and source for liability. He is the one that is looking for people who have loanable projects to be able to give them loans. It was because of the level of our development. If an average person has a claim of N100, he wants to claim N1,000. So, insurance wants to ensure that what he has actually lost is N100 and not N1,000. But I think the modern technology has actually helped to facilitate and reduce this time. Besides, competition and regulation have made insurance firms to be more alert to their responsibilities.
In Sterling Assurance, for instance, we pride ourselves as having the ability to make claims easier, simpler and faster for the people.
Unlike those years when the companies did not have the resources, companies today are strong and viable and they have the resources to meet their day to day operational losses. When somebody suffers a loss in this part of the world, he shouts to his neighbours to get their sympathy. But when he collects his claims, he keeps quiet so that they don’t come to him to lend them money.
What is the role of insurance in developing mortgage system?
Mortgages are largely developed for everybody and they are taken up by the middle class who have identity and who have a means of livelihood that can be guaranteed over a long period of time. But there is a large number of low income people and poor development of the middle class in this area. Elsewhere, you can take a mortgage from 25 to 40 years. In this part of the world, if you get a mortgage, what they will be offering you is an average of 10 years. Sometimes, they will give you five years. There are major things insurance can do in mortgage. The first thing is to provide capital to people who are developing property or mortgage.
The second thing is to provide mortgage protection insurance for those taking mortgage. The third is to provide basic insurance like fire and burglary. And the fourth is to provide life assurance for those who will take the mortgage so that if the mortgagee dies before finishing the mortgage, the insurance company will pay the mortgage. For instance, if you take a mortgage of 10 years for N10m and after two years the person dies, if you have mortgage protection insurance, the insurance firm pays the balance and the family continues to own the property for life.
How did you become an insurer?
I went into insurance by divine guidance. I was just at the A level school and everybody was choosing business administration and accounting in my own group. I thought I wanted something different and I found insurance to be different. It was new at that time. The only school offering insurance then was the University of Lagos. The scope was also limited and I suspected that it was an area that would grow. I made this decision without any counsellor because my parents were illiterate. Before I knew it, I was on the first list of admission because I passed well. At that time, there was no stress. I found it very exciting, very rewarding and very interesting for me.
Why did you move from being a reinsurer to an insurer?
As a professional, I changed career from being a reinsurer to a direct underwriter all because I wanted to experience the story that is said about claims process not being smooth. I became a managing director and my first task was that nobody will give thank you card for doing their job. If we assess a claim today, we must pay because that is the only business we sell and that has transformed things here in Sterling Assurance. I have built around me people who have also been developed and qualified.
What advice do you have for the insuring public?
The insurance industry today is strong; most of the companies are robust, they are highly regulated and they should patronise them. Buy insurance and it will protect you. It offers you the peace of mind, and it helps you at a time that you will least expect that you will need insurance. The cost of insurance is so small that you should build it as part of your operations. I will advise that the insuring public should ensure that they are adequately protected. Today’s world is such that you cannot leave your life to chances, you should ensure that you take calculated risks and protect yourself against losses that are unexpected or unforeseen.