In Nigeria’s harsh economic climate, many business owners overlook the importance of insurance, viewing it as an unnecessary expense. However, experts stress that insurance is essential for protecting assets, ensuring business continuity, and providing financial stability in unpredictable times.
A case in point is Mr. Tony Eneche, a bank employee and bar owner, who suffered significant financial losses after a fire destroyed his business in 2019. Despite his wife’s advice to take out an insurance policy, Eneche had not done so. The couple had to rebuild the business out of pocket, eventually abandoning it altogether. This unfortunate experience highlights how insurance can serve as a critical safety net.
Despite Nigeria’s population of over 200 million, insurance penetration remains below 1%. The industry only reached ₦1 trillion in Gross Premium Income in 2023, a milestone attributed to increased awareness and innovative approaches by insurance providers.
Several factors hinder the growth of insurance in Nigeria:
- Perception Issues: Many Nigerians see insurance as a luxury rather than a necessity.
- Trust Deficit: Delays in claim processing and a lack of transparency have eroded trust in insurance companies.
- Cultural and Religious Beliefs: These sometimes discourage the adoption of insurance policies.
- Limited Accessibility: Insurance companies often lack distribution channels in rural areas, making it difficult to reach potential customers.
Economic Challenges Facing Nigerian Businesses
With inflation at 34.6% and lending rates at 27.5%, small and medium-sized enterprises (SMEs) face numerous challenges. According to Lendigo, an SME-focused fintech company, inadequate power supply, poor infrastructure, and limited access to financing are among the top issues affecting businesses. Moniepoint, another fintech firm, reports that over 95% of SMEs fail within their first five years, primarily due to low demand, poor visibility, and operational inefficiencies.
Amid these struggles, many businesses neglect insurance, despite its potential to mitigate financial risks and safeguard operations.
Niyi Onifade, CEO of Heirs Life Assurance, emphasized the need for insurance at a recent event in Lagos. He urged Nigerians to view insurance as a lifestyle decision, protecting assets such as shops, vehicles, and even children’s education.
Similarly, Lola Cardoso, Group Managing Director of Tangerine, described insurance as a cornerstone of financial planning. At the Tangerine Life Seminar, she highlighted the role of insurance in helping Nigerians navigate uncertainties and achieve financial security.
Abimbola Tiamiyu, Registrar of the Chartered Insurance Institute of Nigeria, warned against underinsurance, urging businesses to regularly update their policies to reflect current asset values. She also advised consulting licensed intermediaries to select the right insurance providers, considering factors such as customer service and claim settlement records.
To address trust issues, the National Insurance Commission (NAICOM) has mandated that all outstanding claims be cleared promptly. The regulator has warned of penalties for underwriters who fail to comply, aiming to restore confidence in the industry and boost penetration.
For Nigerian businesses, especially SMEs, insurance is not just an option but a necessity. It protects against unforeseen losses, ensures stability, and helps navigate tough economic conditions. As experts point out, incorporating insurance into financial planning can mean the difference between thriving and merely surviving in today’s unpredictable world.