The impact of Insurance on Nigeria’s recession

With the nation’s economy in recession, most Nigerians are now sacrificing their insurance budget to meet more immediate needs.Worldwide, insurance is seen as the last hope of the common man. This is because insurance prides itself on its ability to restore the insured back to the financial position he was before a disaster struck.

Europe, Asia and South America have progressed remarkably well in insurance adoption and acceptance, and no matter how worse the financial position of an individual still finds a way to foot his insurance bill.But in Africa, except for some few exemptions, insurance penetration has been appallingly low.

Nigeria is not an exemption in this regard, as penetration remains at 0.3 per cent while the contribution of insurance sector to the nation’s Gross Domestic Product (GDP), calls for sober reflection.

With the current financial crisis occasioned by high inflation, and low disposable income, most individuals and corporate organisations are sacrificing their insurance budget to meet their more immediate needs, until things change.

Yet, experience has shown that the best time to procure insurance is during economic hardship, because every day the values of assets increase, meaning, it would cost more to replace an asset bought before.

However, if an individual or corporate organisation had paid a token as premium, the responsibility of replacing such insured asset, no matter how expensive it was, could have been shifted to the underwriting firm who insured such asset.

Experts said most people returned to poverty for failure to subscribe to insurance hence, the need to insure even in a challenging economy.President, Association of Registered Insurance Agents of Nigeria (ARIAN), Gbadebo Olameru, while speaking to journalist, called on Nigerians to take the issue of insurance seriously so that they don’t have to spend more whenever mishap occurs.

He stated that the little money in the economy left people with less disposable income, and this was reducing the level of insurance businesses underwriters were currently getting. People, according to him, don’t have money to purchase insurance cover, while the existing customers were not finding it easy to renew their insurances.

“Most people, who have risen above poverty before, become poor again because their sources of livelihood were not insured. A manufacturer, who fails to insure his factory just for a token premium, will regret not taking that decision, when fire razed down his factory, ”he said.

On his part, the managing director, Anchor Insurance Company Limited, Ademayowa Adeduro, said, “You may think that you don’t have enough money to feed; you only have one car, struggling to pay school fees. What if there is a cut off from that small income you have? The car you bought one year ago, if it is a total write off, how will you replace the car? What if you can’t pay your rent again because all things will move up with the devaluation of naira, whether we like it or not,” he queried.

The reality, according to him, is that the currency of the country has been devalued “So we just have to face it, and I encourage people that are well enlightened, the educated workforce, to embrace insurance. That is the best product I can ever sell to anybody now.”

Former group managing director, Royal Exchange Insurance Plc, Olutayo Borokini, on his part, said a lot of local industries have closed up, because they could not purchase raw materials for their operations, noting that if the new forex regime was perfected and people have access to dollars at a flexible rate, most of those industries would be revamped and then, of course, demand for insurance would also increase ultimately, since the rate of insurance adoption is based on the state of the economy.

On his part, managing director, FBN General Insurance Limited, Bode Opadokun, said while most individuals and corporate organisations were sacrificing their insurance budget to meet their more immediate needs until the economy improves, others were requesting for terminal insurance products, a development that was cutting down on the premium generation of underwriters, hence, affecting their level of profitability.


Source: Guardian