There is a good deal of interest in insurance stocks at this point. The daily transaction volumes show it: insurance stocks are being heavily bought, each day. No clairvoyance is needed to figure out that this trend will continue in the immediate future. It is possible that you have bought some, too, or may consider doing so. If that happens, it certainly ties your interest, at least to the extend of that investment, to the fortunes of the industry. So this piece should interest you.
Increased investment in insurance stocks is purely on the expectation that insurance companies are at the threshold of a new era, given the changes the sector is undergoing. The calculation is that these companies will restructure their operations, grow their business and generate increased revenue that will result in rising returns to investors. Every investor that has taken a position in that sector believes this will happen and, possibly, is praying to that effect. But beyond praying and hoping, there is a question to ask about developing the insurance business sector in Nigeria. Investors that readily throw money into insurance stocks but shun insurance products may have to ask themselves how the earnings of the sector will grow.
A Potentially Huge Market
Though official figures are not available to us now, it's doubtful if up to 10% of the business potentials of the insurance sector is currently realised. That means a huge dormant market out there, especially given the size of the population. Insurance is big business elsewhere and could easily rival banking in status, but you know it has been dwarfed here. How will that market be activated?
Lots of Risks to Cover
Beyond population size, there is the irony that our circumstance very much lend to extensive need for insurance. Without social security and other institutional safety nets, the individual is fully exposed - as we say, "on his own". That means total exposure to all the risks of life, without any meaningful protection from the government. With infrastructural weaknesses in tow, the risks are accentuated. Bad roads lead to frequesnt accidents that leave losses, injuries and disabilities in their wake. Fire disasters are rampant, with a failed fire service providing no succour. Compute the damage to the fortunes of traders at the Tejuosho (Lagos) market that recently got gutted by fire. Many victims will face a hard time recovering from the disaster. Which is where insurance could be handy, helping mitigate the loss. That way, individuals can easily get back on track. Most times, the premium cost for such trauma-saving policies is not as back-breaking as we tend to think. Yet, most Nigerians avoid the protective cover of insurance, preferring to literally stand in the way of the moving train. Now, this is not about selling insurance, since it's not part of our responsibility. But insurance is an important part of a strong personal finance plan. Hedging against risk is as crutial as the quest to raise growing income. When you don't protect against potential losses by securing an indemnity, mishaps that would otherwise be easily overcome could just prove crushing.
Think About it
Disasters are a part of life, though we do pray against them. But things will happen when they will, and it's regretable that most people are caught napping.
While leaving the insurance sector to do its work, especially of educating the people and packaging attractive products for the market, we think the investors logging into that sector now must realise that recapitalisation per se will not bring returns. If insurance business is not developed and made to grow, our investments might well stay stultified. One way each person can help is by cultivating a more positive disposition to those much-needed insurance products. Disability insurance for instance. Auto insurance. Life policies. Fire policy. Protection against other losses. Think about that, especially as an investor, or potential one, in the sector.
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