Insurance in Nigeria started gaining ground in the early part of the nineteenth century. The British Bank of West Africa started operating as an insurance agent in 1894, while the Royal exchange assurance of London was the first to set up a branch office in Lagos in 1921.
Due to declining economic situations coupled with erratic power supply in the country, some Nigerians may not be too eager to embrace the compulsory insurance products which the Federal Government is currently trying to reinforce through the National Insurance Commission (NAICOM). Nigerians see no need to take up Insurance covers when the disposable income is limited and in some cases non-existent.
Insurance is a risk transfer mechanism where an individual or commercial enterprise shifts some of its uncertainty embedded in everyday life, to shoulders of another in return for a certain amount of money called premium.
Seven years after the launch of the six compulsory insurance policies nationwide, insurance industry operators are still grappling with the enforcement. Indeed, the industry is still very far from realizing the objective, which is to ensure that Nigerians are compelled by law enforcement agents to patronize these compulsory insurance policies with the overall objective of getting more Nigerians into insurance net and increase the industry’s premium income as well as its contribution to the Gross Domestic product (GDP) of the economy.
The compulsory insurance policies are those classes of insurance made compulsory by law, with the objective of providing protection to third parties and the general public. This includes Employee’s Compensation Contribution, Occupier’s Liability Insurance, Motor third-party Insurance, Builder’s Liability Insurance and Health Care Professional Indemnity Insurance.
Whatever is happening in the insurance industry is strictly tied to the economy. If there is positive development in the economy, it will affect the growth of insurance positively. Demand for insurance generally is tied to the purchasing power of the average Nigerian. So, if the purchasing power of the average Nigerian is affected by what is happening, definitely the ability to purchase insurance will also be affected. Therefore, the demand for insurance is tied to the well-being of an average Nigerian. And in this time of recession, people can hardly meet their basic needs. If they cannot meet their basic needs, then of course, it will affect insurance.
The Director General of Chartered Insurance Institute of Nigeria, Mr. Richard Borokini, opines that in spite of the current economic recession, Nigerians should not shy away from exploring the various opportunities available in the insurance sector saying that the enforcement of compulsory insurance in the country is weak.
It is important to tackle the enforcement of compulsory insurance in the country which can be done through technology. The insurance industry is going the way of technology to check that. For example, if you have to purchase your insurance, and your certificate is on a portal, if a law enforcement agency is asking somebody on the road for his insurance, he verifies from the Nigerian insurance industry database, whether or not it is genuine. If it is genuine or not genuine, it would show.
Insurance play a very important role in the growth and development of an economy, notably banking and several other financial Institutions: The banks also insist on the loans they give to their customer to be insured so that in the event of any loss they will not lose.
Another important aspect is that the insurance institutions help individuals who have businesses to get insurance cover in case of any event of loss, in the effect that the insured company will be indemnified thereby keeping businesses afloat.
However, insurance administration and regulation in Nigeria has remained at very appalling low ebb due to the general practice of insurance companies in only collecting insurance premiums but not settling legitimate insurance claims that may arise afterwards. The regulator of all insurance businesses in Nigeria has not always lived up to expectation to apply the statutory provisions on compulsory insurance compliance, as contained in the various statute books to businesses and individuals in Nigeria.
Entrepreneurs will however now need to be on the alert by proactively assessing their businesses vis-a-viz what insurable risks they will need to obtain insurance covers against in order for these risks not to adversely affect their businesses or in some cases, out-rightly liquidate the business(es) should the insurable event occur.
