Building trust in insurance to bolster Nigeria’s financial inclusion

• Experts at Coronation Insurance webinar
• Highlight cost-saving benefits of insurance 
• Through risk reduction

Cynthia Ezekwe

Experts have recommended insurance coverage as a way for Nigerians to protect their businesses and finances from risks such as theft, fire, natural disasters, and other unanticipated events, as the country continues to grapple with economic difficulties.

Despite the benefits of insurance, the coverage remains low in Nigeria, with less than five percent of Nigerians having any type of insurance policy, and a smaller percentage of small businesses being insured. This leaves many individuals and businesses vulnerable to financial losses when disaster strikes.

Against this backdrop, insurance experts at the recently held Coronation Insurance webinar, highlighted the cost-saving benefits of insurance through risk reduction and urged Nigerians to take advantage of the opportunities and potential of the insurance industry.

Adedeji Olowe, founder and chief executive officer, Lendsqr, a cloud-based lending platform, noted that the current economic challenges in Nigeria make it essential for individuals to get insured to mitigate financial risks and safeguard against unforeseen events.

“With the kind of economy we have, it is vital to plan ahead of time, and one of the ways to do so is by having insurance coverage, to help mitigate financial risks in the case of uncertainties. Now, if you don’t plan for these uncertainties thinking that nothing is going to happen, and a huge financial loss takes place as a result of an unforeseen circumstance, how do you bounce back? Everybody has to change their narratives about insurance, and embed insurance into our everyday lifestyle,’’ he said.

Olowe stressed that insurance is essential, giving the example that when financing goods and services, it is imperative to insure them against any unforeseen circumstances.

“If you’re a consultant and I’m giving you a loan to service the company, you must have professional indemnity because if you misbehave, you will lose that entire money,’’ he added.

The Lendsqr CEO said that affordable insurance products like health and life insurance for business owners can be a lifesaver for families and small businesses if the breadwinner or sole operator becomes ill. He also highlighted the importance of access to credit for small businesses in Nigeria, noting that insurance can play a critical role in helping them secure the necessary financing.

Olowe noted that small businesses with adequate insurance coverage can present a more secure credit proposition to banks and other lenders, as insurance is an essential component of lending and credit.

Olowe explained the different types of insurance available to businesses and individuals, and the benefits they provide in terms of financial stability and shared prosperity. He said: “For businesses and individuals, there is insurance for every eventuality. Anything that can cause trouble should be insured.”

Olowe said that individuals should consider taking out health, burglary, third-party car, comprehensive car, and personal accident insurance. He added that as a business owner, the company’s premises must be insured against risks such as burglary, fire, and floods. He stressed that having adequate insurance coverage is crucial to survive any potential financial setbacks caused by unforeseen circumstances.

He stressed the importance of professionals and consultants having professional indemnity insurance, while also noting that not having insurance can put businesses at risk of failing. He also urged contractors to consider insuring their businesses against potential risks from unforeseen events.

Babatunde Akin Moses, chief executive officer of Sycamore, a peer-to-peer lending platform, said that financial inclusion through insurance is vital for businesses and families. He stressed the importance of educating people about the benefits of having insurance coverage, adding that increasing financial literacy will ensure the survival of businesses and the financial well-being of families.

Moses pointed out that without insurance, business owners have limited access to funding and put themselves and their businesses at risk. He added that insuring assets purchased at more favourable US dollar rates is crucial for businesses that rely on imported equipment, expertise, or services, as not having insurance will limit one’s ability to generate wealth.

He also observed that technology has made accessing insurance in Nigeria easier and cheaper, with many insurers offering straightforward, cost-effective risk products via mobile apps.

“Technology has really advanced how we can access insurance. On our mobile phones, we can get access to different insurance services that we need. For example, my health insurance is connected directly from my app. Some insurance companies also make services available directly on their websites aside from their apps. In terms of access, there would be no excuse of transport fare to get to the insurance company, as one can access insurance services from any location using the mobile phone,’’ he said.

Yemisi Isidi, chief executive officer of Triift Africa, described insurance as “pay now, save later,” adding that paying for insurance now will save one a lot of money when needed later.

Isidi explained that in an economy where over 40 million small businesses account for 84 percent of employment and 50 percent of GDP, Nigeria’s low insurance penetration rate means that most small businesses and individuals rely on cash to manage daily risks.

She maintained that this kind of financial recklessness often challenged the ability of Nigeria’s small business sector to drive sustained growth and long-term prosperity.

“Less than four percent of Small and Medium-sized Enterprises (SME) owners have access to finance. As such, small businesses with just a few basic covers were far more likely to access credit on much more favourable terms. When there is a fire outbreak in the market, their business, which is their source of income, is damaged, but with  insurance, you’re more confident to provide them with funding, even in the midst of possible risks,’’ she said.

Isidi urged business owners to stop viewing insurance as a waste of money and start seeing it as an investment to mitigate financial risk.

Overall, the financial experts attributed the lack of insurance coverage to several factors, including a lack of awareness of insurance benefits and a general mistrust of the industry.

They said that by providing practical examples of how basic insurance products can help people financially protect their income and investments, Nigeria’s attitude towards insurance can be transformed. This, they believe, will build trust in the industry and make insurance more accessible and affordable to the average Nigerian.

They also recommended educating the public about the benefits of insurance and making the process of obtaining coverage easier and more transparent.