Insurance is the transfer of risk from people & corporate institutions to professional risk carriers, bearers – the insurance companies. Every one of us is exposed to one risk or the other because life is full of risks and all these risks can be identified, quantified and handled by insurance transfer mechanism.
So when risks materialise, they lead to financial losses, and if risks are not managed in a scientific manner, it could ruin anybody, any business, any nation, and any economy. That is why all over the world people have come to accept that the best way to handle risk is by way of insurance transfer mechanism. In life, there are risks associated with business and all endeavors, and the cost of transferring the risk to a risk bearer is the premium that people pay.
The risk bearers
The risk bearers are the insurance firms of different brands, some insurance companies specialised either in life or general business, while some operate as composite firms. These insurers offer a guarantee to compensate insured persons or corporate body for their losses under their insurance policies.
How insurance operates
Insurance is different from the Esusu, which is the local traditional insurance that entails that we have the spirit of being our brother’s keeper, so that when any of our family or friends suffers a loss, all of us will rally round and contribute money to help. The way insurance works is such that a homogenous group that is exposed to unforeseen contingencies or risks are put together with the understanding that it is not in all cases that all of them will suffer a loss.
By the theory and science of probability, insurance operators have been able to calculate to arrive at the average number within that homogenous group that will suffer a loss, and from the contributions of every member that make up that pool, insurance can compensate the few of them that have suffered a loss. So from the pool of fund, insurance can build up reserves and make investments because the group will keep growing and expanding.
Sometimes skeptics come to say ‘You pay premium of N10 and if anything goes wrong insurance will pay you N1000, is that not gambling?’ No, it is not gambling but scientific and it is based on the law of large numbers. The number must be relatively large because if it is large the pool of fund will be huge and insurers can always pay handsomely to compensate anybody who suffers a loss. That is the way insurance operates.
Poor perception of insurance
The poor insurance perception in the country has to do with the literacy level to a great extent. What is the level of education and knowledge that people have? That is why the insurance industry will need to do a lot more in educating the Nigerian public. Even the so called elites hardly can appreciate how insurance works or the benefits. This may be peculiar to our environment because when some of these elites travel abroad, they comply with insurance requirements.
Poverty could also be a factor but cannot be a tenable excuse because the poorest class would be the ones that need insurance most. This is due to the fact that should anything happen to them or should they suffer any loss, the chances of their recovery are slim. But if they have insurance, their hopes are high. In essence, from whatever income you earn, there must be a planned pattern of managing and spending, and such plans must include a level of saving from which you can always do some investment or do so many things.
It is not ideal that somebody will be waiting for manner from heaven or until he can access loan or facility from the bank or a finance house before he could start a business or any venture. So for emergencies, there must be a reserve. Hence, poverty shouldn’t be an excuse, rather we should be preaching to people to get better organised and be operating a plan in whatever they do.
Cultivate the habit of savings
If you can cultivate the habit of savings, it will help you in life. Insurance, which is a way of savings, is there for you too. Through insurance you can save for the future and for the training of your children (education insurance). The general public should shun the apathy towards insurance. It is one of those services in modern times that can always provide a relief or a solution to some of our problems.
Within the African continent, Nigeria cannot be seen as a country of the poorest set of people. How come that insurance penetration or awareness in some African states are a lot better than Nigeria? It is only because of our mindset here and not due to poverty, so we should de-emphasise poverty, but promote insurance education and awareness.
An improved insurance sector
In recent times a lot of efforts are being put by insurance operators into widening micro insurance penetration. That is, conscious efforts to spread insurance to the grassroots, the people on the streets, the market people, the artisans, and so on. People are being grouped into corporative societies and credit facilities are being offered to buy some of the equipment’s they needed for their trade and such equipment’s are being brought back to insurance firms providing the facilities to give insurance covers. It’s quite attractive, and is really gaining ground in the East, Lagos and Ondo States as well as in Abuja. It is not that the insurance sector has started promotion, where people are told to buy this and get that, No. Rather, it is sorts of suasion whereby you make people appreciate insurance.
If you go to the banks, you cannot get credit facility with ease. But insurance firms are coming up to say, we can offer you facility, we can be partners in your business and you will get added protection by coming back to buy insurance, and you are secured.
Secondly, a lot of efforts are also being put into product development that will really address our cultural values. For example, when our aged people die, we spend a lot on funeral rites. However, insurance has developed products that are being packaged to cater for funeral expenses. Also, it is common knowledge that we value the best education for our children, so a number of policies are there to take care of our children’s education.
But at the same time, the prospective buyers should begin to have a change of mind by addressing priorities that could be rewarding to their lives and families in their budget planning. Insurance has done quite a lot by making the products attractive and bringing added values that will attract the public. But the public reserve the right and decision to say “I want to buy it”, and one of the things they could do is to reorder their priorities. They need to reorder their priorities and cultivate the habit of savings and believe in the protection of their assets. It’s high time, we begin to get our priorities right and appreciate the value of insurance.
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