• Thursday, June 20, 2024
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BusinessDay

Are effects of floods covered in car insurance?

The persistent rains in the past weeks have resulted in heavy flooding in many parts of the country, particularly Lagos where many of the drainages have been blocked due to rising human and economic activities worsened by the surging population.

Pictures of vehicles, streets and compounds submerged by floods in some parts of Lagos like Victoria Island, Ikoyi and Ajah, have gone viral on social media.

Some of those vehicles submerged by flood definitely would have experienced damages, which may affect the engine.

The question, that many people are asking is, whether insurance companies will pay for damages caused to those vehicles by the flood if the owners had taken comprehensive insurance before the incident?

Yes, comprehensive insurance covers for damage or loss of the policyholder’s vehicle, but could cover losses due to Civil Commotion, Risk of Strikes, Flood and Riots, but requires payment of an additional premium.

What this implies is that if the owners of the vehicles affected by the 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, says, Chika Onwunali, managing consultant, Premium Debate.

“The reason 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, the comprehensive motor cover, let alone motor third party cover does not include damages resulting from flood.

Mayowa Adeduro, managing director, Tangerine Insurance had said during an interview, that the level of patronage by individuals and house owners was still very low as many people were yet to appreciate that climate change is here with us.

Adeduro stated that since after the rains of past years, many corporate organizations and churches are beginning to take flood insurance and we are only hoping that more households consider this risk as a necessity.

For the market to provide this 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 be easily managed, an insurance broker said.

Read also: Insurers see rising motor insurance claims on high inflation

According to him, in 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

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, the broker also said.

Mansur Bako Matazu, director general/CEO of the Nigerian Meteorological Agency (NIMET) at the public presentation of the Disaster Risk Management Implications of the 2022 Flood Predictions for the year 2022, said the rainfall has already been established in all southern states and most parts of the central states in line with the predictions.

He said the rainfall amount is generally expected to be normal in most places, however, short-duration, high-intensity rainfall that characterised the onset months usually comes along with flash floods due to excess runoffs and disastrous wind gusts.

“In-season, likely flood occurrences as a result of cumulative rainfall and other factors as highlighted by Nigeria Hydrological Services Agency (NIHSA) must be taken seriously. I therefore call on the States, the Press, private entities, and all Nigerians to carefully consider the 2022 Disaster Risk Management by NEMA for proactive decisions ad policies that will help avoid losses and strengthen mitigation, adaptation and reduction of risks associated with floods, Matazu stated.