Chief Executive Officer of the Nigerian Council of Registered Insurance Brokers, Mr Tope Adaramola, speaks to TEMITOPE ADETUNJI on the relevance of insurance because of the recent explosion at Ibadan and the Mandilas building fire in Lagos
A major incident that happened recently was an explosion in Ibadan and a lot of properties and lives were lost. In a situation like this, how does insurance come into play?
Human beings face daily risks on the road, in the house, and in the air; there is the risk of water, and risk is everywhere. The Ibadan explosion is quite unfortunate but it is part of the risks that insurance should naturally respond to. There was destruction of homes, and there was damage and destruction to several motor vehicles as can be seen even on social media and traditional media; we also had injuries and deaths resulting from the incident. Ideally, if insurance is in place, it should be able to respond to this. We also have the destruction even of electrical poles and power installations and some government properties.
Of course, we have a stoppage of trading in goods and services, which falls within the risks that insurance could have carried if one was in place. Then we had what I can call consequential losses that came in the form of wreckages, evacuation on the road, and so on, as well as pollution, contamination, and release of harmful substances and chemicals that are dangerous to human lives. If I can remember, there was also loss of homes and income to families and breadwinners, and all these are risk exposures or losses that insurance naturally could have responded to if there was cover in place by the people who were affected.
For the Mandilas building fire incident, what would be the fate of those who had insurance coverage before the incident?
Except for the initial emotional shock and depression, those insured will stay afloat by having the peace of mind that insurance will indemnify them, and insurance companies will pay their claims. The NCRIB went to the Mandilas after the fire incident. Part of the reasons why we went is to ensure that if there is anybody insured but doesn’t know their rights, they can approach us, and then we can advise them for the image of the industry and the good of those clients to be able to get their compensation. And of course, different types of losses occurred in that place. There was looting of shops; some people’s shops were looted. The entire building itself has to undergo an integrity test.
If the building was insured, there is hope that there will be compensation. For the owners, there are some service organisations inside that complex that we saw. Those people cannot work, so there are consequential losses. Some policemen told us that there were some goods that some people promised to deliver, and the place had been cordoned off, so there was no operation, leading to cessation of operation and income loss. If there is insurance, an insurance policy that covers consequential losses will also be activated. Additionally, some people’s goods were destroyed by smoke and pollution, and such people can also trigger insurance claims. If there was anybody injured in the inferno, they can also be compensated. Of course, all these things are interconnected, but the only thing we can say is that for those who are insured, there is hope. These kinds of incidents also send a signal of caution to everyone; it can happen to anyone.
What kind of insurance cover can entrepreneurs take for their businesses?
Generally speaking about broad categorisation, I will say that they can focus on three types of insurance covers; we are talking about general insurance, we are also talking about life assurance, and then you can also talk about health insurance. Under general insurance, of course, we talk about motor and money insurance, we talk about goods that you keep in your store, we talk about goods in transit and several other non-life insurances that you can undertake; we also talk about business interruption. See what has happened in the Ibadan explosion, some of those people made promises to deliver goods and services to customers, but now there is a stoppage; there is loss of income; and there is loss of profits.
So, all those can fall under general insurance coverage, and of course, under life Insurance, we have cases now where some people have lost their lives, some people have become physically incapacitated, and permanent disabilities have occurred. Some have the loss of limbs, and all these are under life insurance that could also have been responded to. Of course, under health insurance, there are several of them, which could have been responded to. There are critical illnesses to which health insurance could respond, so there are several of these insurance out there.
When disasters happen, people cry to the government to come to their aid, but there is compulsory insurance that can alleviate such hardships. Why should the government ensure the enforcement of the statutory laws?
I think it is high time that the government stopped playing the ostrich; there is over-politicisation of everything, including the willpower to back up the insurance industry to assist the people in the event of a loss. Governments all over the world in ideal times encourage and empower the insurance industry to be able to respond to such losses. And, if there is any form of support that they want to give, which in most cases doesn’t even equate to the quantum of the losses that have been suffered, it is done by the government to maintain goodwill, and it is not the first line of consideration by the government, unlike what we have in Nigeria.
I can say that a lot of times when you have a huge quantum of losses, I can bet it that by the time there are considerations for who gets what, maybe someone will be getting N100,000 from the government, and what is that compared to N20m, N30m or N50m that somebody may have lost. And then, you use propaganda to begin to highlight it and give an impression that you have done something. Instead of deploying the same instrumentalism by the government, they should encourage people to buy insurance. Ask them to pay a small premium so that in the event of this type of loss, insurance will help everybody. Insurance is the last hope of the common man.
Insurance would have been able to help them respond commensurately to their losses; the basic principle of insurance is that insurance is expected to bring you into the place that you were before the loss. That means that you may not gain from insurance, but you will also not lose from insurance. All these palliatives and handouts by the government are disproportionate, and it is a disincentive honestly speaking, and I feel it is part of the demonstration or exhibition of failure by the government. If for instance, we have compulsory insurance, the laws are there but the impetus to drive those laws is not just there. Even as we speak, the government itself doesn’t insure, or the government is poor on insurance and they are supposed to lead the trail because the government is the largest spender and the largest engager of the public.
So when it happens like that, you have discordant arrangements; we feel that the government should allow the insurance people to bear the risk; it is their duty, it is their calling all over the world, that is how it is done rather than giving palliatives that are only higher up on politics than on actually meeting the welfare of the people affected by the losses.
People feel that insurance is expensive. How expensive is it?
One of the greatest image problems of the industry that we are trying to combat is the ‘somebody told somebody’ syndrome. Most of the people who talk about insurance and badmouth it are not people who have made any tangible effort to break the overload and engage with insurance. So, if you say that to insure your house, and you have a small percentage of the actual cost of your building, how much does that premium translate to? When you look at most of the premiums paid, they are less than the losses or compensation that you will get. You will start wondering if insurance people are magicians, and I think that that is why some people find it too complex to believe.
Take, for instance, the third-party motor insurance that everybody can relate to by its nature and popularity. When you pay N15,000, and at the end of it, your car causes damages to another car, the insurance company has to indemnify the other person’s car to the tune of N3m. It is too high-value for some people to believe and understand how N15,000 can now be used to procure an indemnity of N3m. But exactly, that is how insurance works, because it operates on the law of large numbers for as long as there is a pool; it also operates on the principle of probability that not everybody will lose their cars at the same time, and not everybody will die at the same time, not everybody will have their shops burnt at the same time. So, the premium of insurance is not expensive; I want to disabuse the minds of the people about that. And it doesn’t make any rational sense for anybody to invest heavily in anything and that thing is not insured. That is the message that we should push across. Insurance will give you the peace of mind that is required for just a token premium that you pay.
Who are insurance brokers?
Insurance brokers are the professional intermediaries in the insurance value chain, and what I often tell people is that however sharp you are, intellectual and argumentative you are or good in spoken English, when it comes to litigation, you are not in a good position to stand and defend yourself, but rather you contact a lawyer who is going to stand in for you as your intercessor because the lawyer understands the language of the judge; he also understands your language and that is the position of what insurance brokers do in the insurance value chain. Remember that before you become a broker, you must have demonstrated enormous experiential knowledge in the insurance industry and many of them have been on the side of the underwriters. They have also been risk assessors, loss adjusters, etc. But because they became brokers, they have seen it all, they have understood the technicalities, and they carry big loads of experience that they are bringing to play to serve their clients, so what do they now do for their clients? They advise them on the type of insurance they should undertake, they advise their clients on the best possible rates which they go to insurance companies to find out.
They also continue to render advisory services; even when you don’t have a claim, they advise you on how to maintain your risk. If you insure your house, they come to continually remind you to have your fire extinguisher, where are you putting your gas, all those things that can complicate your case in the event of a loss. The insurance broker is your must-have companion when it comes to insurance placements, and people who engage insurance brokers don’t have stories that touch (pardon my use of the street lingo) because they have engaged as their partners insurance brokers who can decode the technicalities, and who can also partner them when it comes to claims settlements. You don’t need to be pursuing an insurance company up and down when you have a claim; that is what your insurance brokers are there to do, and do you know conclusively, you will even pay less by engaging a broker. It is the underwriter who pays the broker; the broker’s role is to negotiate the best rate that you can get.
Are you saying that clients should go through brokers to get insurance coverage?
Yes, they should go through registered insurance brokers, and I mark that word, registered insurance brokers; the Nigerian Council of Registered Insurance Brokers, where I operate as Executive Secretary and CEO, keeps a register of all registered brokers in Nigeria, and they are highly credible and responsive, and we ensure that they are very ethical with their practice. So, if you have any issues, you are free to come to us and then we will sort out the issues, but I can bet you that 90.5 per cent of people who have issues at the point of engagement in the insurance industry don’t use brokers.
What advice do you have for different stakeholders on insurance matters?
The advice that I have for all the stakeholders, including the government and business people, is that the negligence of insurance is an implication of lack of peace of mind because; one of the things that insurance ensures in every society is to guarantee peace of mind by taking care of calamities and risks that can come at any point.
