Unlike Davido, give your ‘baby’ insurance

In his recent hit song, the Nigerian hip-hop juggernaut, David Adeleke aka Davido, promises his lover, Chioma, ‘assurance’. But what does this mean? An assurance is some kind of protection against something that is guaranteed to happen like death. Insurance, on the other hand, protects you against unforeseen events that may or may not happen. It is not a given that one will have a car accident, but if you do, your car insurance will protect you against losses.

900 years before the birth of Christ, on the island of Rhodes, “the practice of preventing a great loss for any one individual by the acceptance of a small loss by all members of a group” gave birth to what we now know in its modern form as insurance. Initially the losses recognised by the community were the value of ships at sea and their cargo but later on, they began to put a value on the life of the ship’s crew as well. And thus was life insurance born. It is when you probe into the development phase of today’s rich countries that you see how much of a role insurance played.

In 1926, the value of insurance contracts in America was $79bn (81% of GDP) at a time when the population of the country was less than 120 million. Since life insurance was effectively a form of forced savings, it allowed ‘policy loans’ to be made available to people and small businesses. It also boosted public health in the sense that once an insurance company had sold a life insurance contract, it was in their interest for the policyholder to live as long as possible. So they began doing things like distributing millions of pamphlets telling people how to avoid disease and look after their environment.

If you take Nigeria today as the same level of economic development as America circa 1900, insurance is almost completely missing from the Nigerian story. According to a PwC report in 2015, less than 2% of all adults in Nigeria have insurance (in 1915 in America, almost 100% of adults had insurance cover) and insurance contributed less than 1% to Nigeria’s GDP. More amusingly, the Insurance Act of 2003 and other legislation made 7 types of insurance – life, employers liability, building construction, occupiers liability, motor third party, aviation third party and healthcare professionals liability – ‘compulsory’. Something does not compute when a thing is compulsory and yet less than 2% of the adult population have any contact with it.

The Insurers Committee, made up insurance companies and the regulator NAICOM, has now decided to take the case to Nigerians. Since the option of making insurance compulsory by law has not worked, they are adopting the only option left – persuasion. In their words “the
Insurers’ Committee seeks to redefine the face of insurance in Nigeria. We will tell the story of insurance, its importance, benefits and roles in the economy. We will also highlight the advancements made within the sector”.

To this end, they have launched a media campaign with the tagline ‘live with freedom’. It’s a daunting task – their own surveys show that 43% of Nigerians have never heard of insurance. And yet, events like sickness and accidents, that can be insured against, are some of the key drivers of poverty in the sense that they wipe out poor people when they happen, causing them to start all over again.

The need for insurance in Nigeria could not be clearer. A fascinating new study by scholars in Ghana and France found that people contribute less to their churches when they have access to insurance. That is to say, they are, consciously or unconsciously, buying insurance from their churches. This is a failure of the insurance industry to make its case properly but churches need not see it as a threat to their organisation – everyone is better off when they can ‘live with freedom’. Much is also made of ‘cultural barriers’ to insurance adoption in Nigeria. But again, none of this is unique to Nigeria – when insurance began centuries ago in Europe, it was also derided as gambling which was socially unacceptable at the time.

Nevertheless, the industry managed to overcome that stigma and eventually made insurance mainstream. There’s also the belief that insurance companies won’t pay out when you make a claim but figures show that claims paid have gone from N87bn in 2014 to N148bn in 2017.

Life takes its toll on all of us but having insurance can release us from many of these worries by letting us know that there’s a safety net there when needed. We can also note that Nigeria having less than 2% insurance coverage and the recent ignominy of becoming the poverty capital of the world are surely interlinked. There is much low hanging fruit to be plucked here. Look out for the media campaign and visit insuranceandyou.ng for more information.

If like Davido you love your baby and want her to know that, should the unthinkable happen, you’ll always have her back, then what you need to do is give her insurance.