Some victims of the recent floods across the country may have difficulty making claims from their insurance companies due to underinsurance and ignorance errors, BusinessDay has learnt.
Sources in the insurance industry revealed that some clients in flood-hit areas are filing flood claims with their insurers, even when their insured risks were not extended to cover floods.
Some of the industry players who confirmed the increasing number of claims reports in the past weeks said there are likely cases of failed claims because of underinsurance or ignorance.
They, however, said they are willing to settle all genuine claims on flood as long as there was proper insurance of such assets, with flood as an extension.
Tope Smart, group managing director/CEO of NEM Insurance Plc, who confirmed that his company has received some claims reports from clients, said: “We have started receiving claims from some of the victims, and they are being verified before payments are made.
“Provided that the client has the right cover, in the sense that maybe someone takes a fire policy for instance and there is an extension of flood, definitely the individual is covered.”
He, however, noted that if there was no flood extension, then the insurance firm may not be able to come to the rescue of the victim.
According to him, the public needs to be properly guided when taking any insurance policy and envisage the kinds of risk they are exposed to and make sure that those risks are taken care of.
Given the magnitude of losses arising from floods across the country, Smart said there is a need for the government to support the flood victims, as over 98 per cent of those in the rural areas do not have insurance cover.
For the corporate bodies that took up insurance policies in such affected places, insurance companies would surely step in to restore their losses, he said.
On the capacity of the insurers to meet claims obligations that may arise from the flood incidents, he said Nigerian insurance companies, backed by their reinsurers, have the capacity to bear the losses that might arise from the floods or any other disaster.
Chika Onwunali, managing consultant at Premium Debate, said the reason why some claims on flood may fail is that flood insurance is a special peril that is covered under a policy extension. “In that case, the insured is charged extra premium for this extension, though it could be a small amount added to the original premium.”
According to him, without this policy extension, even the comprehensive motor cover does not include damages resulting from flood.
What this implies is that if the owners of the vehicles affected by flood did not take flood insurance as an extension, claims may be denied (repudiated) by the insurance companies.
“Yes, having insurance, particularly motor cover would seem enough protection for damages on the vehicle, sure it is, but not inclusive of flood, except there is cover extension at the inception of the cover,” Onwunali said.
Mayowa Adeduro, managing director of Tangerine Insurance, had said during an interview that the level of patronage by individuals and house owners on flood insurance was still very low as many people were yet to appreciate that climate change is here.
“After the rains of past years, many corporate organisations and churches are beginning to take flood insurance and we are only hoping that more households consider this risk as a necessity,” Adeduro said.
For the market to provide cover for this specialised risk, it is important that house owners are included in the package so that payment of claims to affected people can easily be managed, an insurance broker said.
According to him, in a normal traditional insurance, insurers use the economic law of large numbers to charge a relatively small fee to large numbers of people in order to pay the claims of the small numbers of claimants who have suffered a loss, and this makes it a manageable risks
He said unfortunately, in flood insurance, the number of claimants is larger than the available number of persons interested in protecting their property from the peril, which means that insurers are unable to cover their costs in flood insurance, and this underscores why some insurers do not want to get involved in it.
Read also: Floods worsen MSMEs’ woes
Floods have ravaged many parts of the country in recent months, killing people, submerging residential homes, sending people packing and sweeping farmlands.
Already, Benue, Jigawa, Nasarawa, Taraba, Kano, Bauchi, Niger, Anambra, Kogi and Ebonyi have recorded flooding incidents within the last month.
Just recently, Ade Adefeko, vice president of external relations and stakeholder management at Olam Agri, revealed that the company’s 10,000-hectare land in Nasarawa, with investment worth about $140 million had been submerged by floods.
GIG Logistics, a courier and logistics services company, also notified its customers recently via its social media handle that the flooding was affecting their business.
“The last few weeks have been challenging due to the unprecedented and enormous flooding, which has limited road access to the South-South, South-East and the Northern regions of the country, causing delays in the delivery of shipments,” it said.
Amanda Etuk, co-founder at Messenger Ng, a full-service supply and logistics company, said logistics businesses will not be able to deliver to their customers, thus affecting their sales and growth.
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