Non-settlement Of Claims By Nigerian Insurers: Myth Or Reality?

Probing Into The Notion That Nigerian Insurers Don't Pay Claims

It is common knowledge that insurance is not very popular with the Nigerian populace and that the nation is grossly underinsured. Especially at the personal and informal business sector levels, the ratio of coverage to the risk potential is obviously negligible.

In effect, much of those segments of the market is without insurance protection, signifying a high uncovered risk profile. Because disasters do occur nonetheless, the annual loss to the economy is monumental. Remember that if risks are covered by local insurers, these risk can still be spread through reinsurance to institutions abroad, meaning that they participate in bearing the burden of any disasters that occur.

That Notion That Nigerian Insurers Don't Pay Claims
The low insurance penetration could be attributed in part to that notion that Nigerian insurers don't settle claims. Image is more about perception than reality and rightly or wrongly, the insurance industry has had to live with that reputation. Many believe that they feel little or no obligation to claims settlement and will do everything to shrug off the responsibilty. Is this the reality, you ask? The following points could help to put this in perspective:

  • Before now, regulatory controls were relatively weak and some unprofessional insurers possibly took advantage of the loopholes to the detriment of the insuring public. Hence they could drag on with a claim until the claimant/insured lost the zeal and patience to continue the claim pursuit.

  • Insurance knowledge is very poor among the populace and it is difficult to credit the insurance industry with any concerted effort at educating the public. This has several implications: the insured can easily invalidate his policy by an innocent action that violates the terms of the policy; they may fail to take the appropriate steps to file a valid claim; they may not insure adequately or understand the scope or value of the cover, erroneously expecting more than they have paid for. These and more, often lead to dissatisfied customers who spread the wrong vibes in the market.

  • Also before now, many insurers were too undercapitalised to effectively bear serious risks. This capital inadequacy limited their ability to respond promptly to claims.

  • The role of various shades of middlemen and business canvassers, who, at times, failed to remit premium collected from clients or engaged in other sharp practices, contributed to the unhealthy perception. The individual who paid for a cover was sometimes left in the cold as no effective policy was in place.

Steady Transformation And Recapitalisation
The insurance sector has seen a marked improvement in recent years, even while the old notion hangs on. Major investments in the sector, especially by banks, has created new insurance companies that have shown a break from the past and are approaching business with a new culture of quality service delivery and good corporate governance. The recapitalisation exercise, induced by regulatory authorities, is strengthening the system and enhancing the capacity to deliver, especially on claims payment. The current recapitalisation and consolidation phase should see the emergence of relatively well-funded insurance and reinsurance companies that should effectively discharge their obligations to clients.

The Public Needs To Know More
While we look ahead to a more robust post-consolidation insurance sector, it's good to put on record that a lot of claims settlements go unnoticed by the public. The effort of the Nigerian Insurance Association (NIA) at publicising claim payments may not have gone far in achieving a change of perception, perhaps for reason of not being aggressive. The reality is that the insurers pay out huge sums on claims. That's a fact that is not much known. A review of the NIA's detailed 2004 report (see NIA's 2004/2005 Annual Report) on claim settlements exceeding N1.5 million, clearly identifying the claimants, paying insurers and amounts involved, shows impressive payout.

Still, A Lot Of Work To Do
It is clear that the sector has a lot of work to do to shore up public perception. With the on-going capital injection and enhanced capacity, the sector will need to expand the market by drawing in the huge majority of the citizens who have little or nothing to do with insurance currently. A deliberate, well-articulated and concerted campaign will serve well in this direction. Individual companies also need to wake up to the need to clean up the poor image of the business and get the average person interested in insurance. Today, insurance stocks are averagely the least-priced on the Nigerian Stock Exchange, a reflection of their low revenue and profit capacity. Growing the market should therefore be a compelling objective.

Copyright © 2006. Acceler8now.com. All rights reserved.

If you would like to receive coaching for launching and growing your online business or advisory support for building your offline small business, Acceler8now.com will provide the hand-holding to ensure your success. Contact us now for more information or visit www.acceler8now.com for online resources.