Business Insurance provides safety
Because Business Insurance acts as a safety net when something unexpected happens to your business. Let’s take a look at some of the reasons why you need business insurance if you live in Nigeria, and why many Nigerians do not have insurance at the moment.
Mr. Ib, an Example of Lack of Business Insurance
Mention the word “insurance” to a random Nigerian and you will soon find out that it is an alien concept to many. But then, why is insurance important? Do I even need business insurance? And if so, what type of business insurance do I need? How do I get it and how much does it cost? If you need free advice on business insurance, set a free appointment here with our insurance brokers, and they will help you at no cost.
Let’s take a real-life example of a person whose confidentiality is kept anonymous for this article; we will call him – Mr. Ib.
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Mr. Ib’s small business grew to the point that he acquired enough profit to diversify into a new venture from which he purchased a brand new facility plant. Barely a year after this venture, his plant was razed by fire. Even worse, he never got insurance for it.
“It’s still one of the worst days of my life because I spent a lot to get this business running and now I’ve lost everything,” he recollects sadly. Funds were not easy to come by; besides saving for years, he resorted to borrowing money from his bank . Mr. Ib was constructing a great part of his future and his family’s, yet his dreams vanished, forcing him to start all over again due to a small but important decision: not taking business insurance coverage.
Mr. Ib´s case is just an example of how not having insurance can affect your business. The truth is that you never know what could happen tomorrow, and for that reason it´s always recommended to have a safety net to protect what’s important for you.
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Mr. Ib is not an exception: Insurance adoption in Nigeria
Indeed, Mr. Ib’s decision was made based on a feeling that many locals are well acquainted with in a country with high levels of insecurity and uncertainty. And yet, even though Nigeria offers many reasons to insure one’s valuables more than most countries, locals continue to steer clear from insurances.
To put numbers into perspective, approximately only 1.5% of all Nigerian adults are covered by insurance today, according to a report from PwC. Although the industry is still growing and developing, Nigeria’s Insurance premium penetration only contributes to 0,7% of the GDP, which is much lower when compared to the markets of South Africa with penetration levels of 12% approximately. Uninsured Nigerians face risks and require better mechanisms to mitigate these risks instead of the informal arrangements currently in use. The low insurance penetration in Nigeria is, in part, a consequence of the lack of trust and confidence in insurance companies and the limited knowledge of insurance amongst the population.
Amongst Mr. Ib’s reasons for not getting insurance in the first place was the myth that insurance companies do not pay claims. This perception amounts to up to 50% of Nigeria’s insurable adults reasons why not to take an insurance policy in the country. As Mr. Ib endorsed:
“It just didn’t make sense to spend extra money insuring the business considering I had already spent so much on building it. I did not want to lose any more money to insurance companies. I kept asking myself: would they pay me when I have a claim?” he finished.
Yet, despite many Nigerians thinking just like this, the industry reported claims paid out which were worth ₦215 billion in 2019 alone as stated by Statista. It is clear that reasons such as lack of trust, funds, or perception of policies being too expensive, act as strong barriers for consumers to purchase insurance coverage in Nigeria. As Mr. Ib said:
“I did not have additional funds to part with at the time. However, now I know that the risk of not doing it outweighs whatever amount is being paid”.
Indeed, just like Mr. Ib’s experience and as Enitan Solarin,MD at YOA Insurance Brokers defines it:
“The value of Insurance as a risk management tool for SMEs cannot be over emphasized. It is a crucial tool for success, growth and sustainability of Businesses”
Enitan Solarin, MD YOA Insurance Brokers.
But, why wait until you are in Mr. Ibs’ position to understand the importance of business insurance coverage? One of the main reasons why people do this is a lack of knowledge (on business insurance prices, types, costs, and coverage) as well as a lack of information provided by insurance companies and brokers. Jus as Mr. Ib mentioned, he did not have enough knowledge on insurance companies that were easily available to him:
“I was a bit lazy to do my digging, and people do not hear testimonials like mine. Insurance companies should go out and educate people on what the insurance industry does and how much it can help before people fall into a situation like mine”.
There is scope to develop a revised market strategy centered on educating the public on the mechanism of insurance and conveying the benefits inherent in its provision to engage and make people aware before they experience Mr. Ib’s plight, that insurances and risk management in Nigeria are important and, as Enitan Solarin truthfully says, they are there to act as your “safety net”.