Amaka Obiefuna

Insurance experts have decried risks faced by businesses and individuals due to ignorance of the benefits embedded in various packages offered by the Industry to both cushion the impact of risks and build wealth.

In a webinar hosted by Olamide Olajolo, Managing Director of Coronation Insurance Plc, experts maintained that insurance remains critical both to small and scale businesses.

According to the panel discussion a situation where an event can be so damaging to wipe out a lifetime’s work insurance becomes vital to make up for the loss.

The panel explained that a pool of capital by many saves the few that encounter disasters in so much so that people would not rely on their savings or assets to cover for risks.

The panel pointed out that in an economy of over 40 million small businesses accounting for approximately 84 per cent of employment and 50 per cent of Gross Domestic Product (GDP), Nigeria’s low rate of insurance penetration meant that most small businesses and individuals were relying on cash to manage daily risks.

“Yet even in large, successful businesses with substantial assets and secure cash flow, it was impossible to have investments or cash sufficient to cover your entire risk portfolio.

“This kind of financial recklessness often challenged the ability of Nigeria’s small business sector to drive sustained growth and long-term prosperity. Just N250,000 cover, for example, could secure over N1 billion in risk. What business could set N1 billion aside to cover their own risks?” the panel asked.

However, the panel hinged the responsibility of changing the narrative in Nigeria on the Industry by providing practical examples of how simple insurance products could sustain financial inclusion by protecting income and investment.

For instance, “simple, affordable, products like health and life insurance for business owners, for example, could save a family or a small business owner from being wiped out by the ill health of the bread winner or single business operator.

“Access to credit was a key driver of business success across all businesses in Nigeria. Small businesses, however, struggled to access credit. Here too, insurance had a critical role to play.

“Small businesses with adequate insurance cover presented at much more secure credit proposition to reputable financial institutions, like banks, and other grade A lenders. As such, small businesses with just a few basic covers were far more likely to access credit on much more favorable terms.

“Moreover, with most insurance providers able to advise on the risks that specific individuals or businesses faced, the simple process of purchasing insurance acted as a powerful force for financial education in Nigeria.

“In short, by deepening financial literacy, Nigeria’s Insurance sector was ensuring the survival of far more businesses and the prosperity of far more families.

“Finally, especially in tough times and volatile exchange rates, insuring assets purchased at more favourable US dollar values was critical for businesses that relied on imported equipment, insight or services.”

The panelists also noted that technology had made accessing insurance in Nigeria much easier and cheaper as many insurers now offer simple, effective risk products, simply by downloading apps onto handheld mobile phones.

The webinar was moderated by CNBC Africa Anchor Wole Famurewa, with Adedeji Olowe, Founder and CEO at Lendsqr; Babatunde Akin Moses, CEO of Sycamore.ng; and Yemisi Isidi, CEO of Triift Africa as members.