Consumers of insurance services, particularly corporate clients are still holding onto their covers and meeting their obligations on premiums, despite economic headwinds occasioned by falling oil prices and a depreciating naira, BusinessDay investigations reveal.
Experts say this trend shows rising enlightenment on the part of the Nigerian publics, as a contrary decision would leave them perilously exposed in these hard times.
Consequently, this is reflecting on companies’ new-year renewal report and performance tables, indicating business growth as well as addition of new businesses, according to information sourced by BusinessDay.
The development is at variance with analysts’ predictions of bad times for insurance business in 2016 as new openings are coming up which are able to compliment shortfalls from oil and gas businesses.
Their hopes are also hinged on the 30 percent capital expenditure from the N6.08 trillion budget proposal, of which 10 percent is expected to go to the insurance industry.
They further anticipate that the budget will trickle down to insurance premiums of N185billion or 10 percent from the capital expenditure, through the ‘Contractor All Risk Policy’, which typically supports infrastructure and engineering projects.
Company Risk Managers are however facing budget cuts in their various organisations, following a lull in the economy. They believe that rather than stop insurance placement totally, re-adjusting their risk quality and representing them for insurance would help them remain covered.
Julius Uchendu, a risk manager in a manufacturing firm, said this is not a time to drop insurance because it could lead to painful exposure, should the risk crystalise. “What we have done in our low budget situation is to represent the risk to our brokers so that they could get us cover at cheaper premiums and we have taken cover for the year.”
Uchendu further observed that “replacement cost is huge, that is why we cannot abandon insurance at this time.
“There are ways to do it and our brokers are helping us in that regard. You can stagger the payment, maybe quarterly or half yearly, and you will still get the same value and it is usually easy when you are dealing with an insurance company that you have been with for some time”, he argued.
Adetola Adegbayi, executive director, Business Development, Leadway Assurance Company Limited, said business runs with the times and could not confirm that insurance contracts were being cancelled in response to economic headwinds, but stated “it may be delayed or adjusted to suit current financial/economic realities.”
Adegbayi further observed that Oil and Gas assets still have to be insured. “The pressure on revenue means that oil and gas business owners are looking to save on insurance premiums and do achieve the savings once they are able to represent their risk quality to insurers/reinsurers, or structure their risks in ways that allow them to enjoy lower premiums.”
Auwalu Muktari, acting GMD, Royal Exchange plc said 2016 is looking more favourable than 2015, adding that in the midst of challenges there are opportunities.
Muktari said he was not aware of cancellation of insurance uptake by clients because of the biting economic situation. He rather observed that 2016 is looking more favourable than 2015 so far. “As far as I am concerned, and based on the knowledge I have from my company, we have exceeded our January and February performance, compared to last year.
“Even though there are challenges, any focused company will devise strategies, position its self, diversify its sources of income, create new income channels and you are there”, he stated.
Modestus Anaesoronye
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