We need insurance to cover political risks — Borokini

In this interview with NIKE POPOOLA, the Managing Director, Royal Exchange General Insurance Company Limited, Mr. Olutayo Borokini, speaks on the effects of huge claims in insurance operations

What are the retail policies suitable for small and medium scale enterprises?

These people are exposed to different risks and they can take covers against fire and burglary, among others. A lot of them are also running businesses without any form of insurance cover. The most painful aspect is that they don’t even know that they need to insure their businesses. There was a particular incidence involving a person operating a pure water factory. There was a fire outbreak that gutted half of her business and she did not have any form of insurance policy. Her friend told her that if she was insured, she would have gotten compensation that would have helped her to get back into business quickly. He friend came and organised insurance for her. So, we resurveyed the place and told her what to do. The issue of enlightenment is cogent. A lot of people are exposed to risks and are not doing anything about it. We have to keep educating the people.

How can building insurance be more effectively enforced?

A lot of public buildings are not insured, and the law is that they must be insured. Also, most hotels in Abuja as well as schools are not insured and they fall under the public building category. As such, there is huge potential for building insurance in the country but the government needs to help. For instance, by the time they seal up one or two uninsured buildings, virtually all the operators will wake up. These are the things I think the regulators should be doing in major cities. If buildings don’t have insurance, seal them up. If you seal them up for one or two hours, they are going to pay. Like what Lagos State government is doing in respect to tax, if you don’t pay your tax, and they have written to you, by the time they come and seal up your premises for even one hour, you will pay. Get people to visit some of these hotels, public places and find out if they have insurance. If they don’t have, seal them up. Enforcement is lacking, and I believe it is only the government that can do something about it. Just get one or two examples, everyone will fall in line and comply.

Are underwriters providing cover against political risks in Nigeria?

The fact is that the products that will cater for incidences such as political risks are already there. For example, property damage policies are available. If you have a property in every part of the country, you should insure the property against the risk of fire, burglary and allied perils. The policy can be extended to cover riots, strike, malicious damage, and to some extent, terrorism. It is just that you have to pay additional premiums for all the extensions. Nigerians are not insurance conscious, so it is left for us to educate them on this fact especially as the election is coming. If you are going to participate in the election, you may be a target of malicious damage. So you should ensure that you are adequately covered. For instance, personal accident policy is there to ensure compensation against injury or death as a result of an accident which could happen. Even if you are not into politics, whatever goes on in the environment can happen to you. There have been cases of stray bullet, but personal accident policy will cover you.

Why do some motorists still keep fake insurance?

It is also as a result of ignorance. The law says you are not permitted to drive your car on the road without having a minimum insurance policy, which is supposed to cover you against the risk of accidental damage to other people’s cars and injuries. Because Nigerians are not conscious of their rights, most of those rights are not pursued by Nigerians themselves.  A man’s vehicle is damaged by another through his negligent act, the man comes out and is just begging you, he needs not beg but to produce his insurance certificate and say: this is my insurance company, can you please let’s contact my insurer because my car is insured? But what we have in most cases is that most of the people driving on Nigerian roads are carrying fake certificates, which is a mere police pass. The law enforcement agents themselves cannot verify the genuineness of the certificates motorists are carrying. So it is left for the insurance industry and law enforcement agencies to ensure that the insurance certificates that people carry are actually genuine. And, I think the Nigerian Insurers Association can educate the public more on this by publishing the lists of registered insurance companies in the country, on a regular basis, to let Nigerians know the registered insurers. I think it is more of enlightenment because a lot of those carrying these certificates do not know that they are fake. The Police too don’t know until when something happens and they are trying to get claims. That is when they know they have been carrying a fake policy.

In recent years, there have been single claims in billions of naira recorded in the industry, most of them led by your firm. What effect have these had on the insurance industry and your operations?

There have been huge claims but the beauty of it is that insurance companies have lived up to expectations in all of these major claims. We give kudos to insurance companies in Nigeria.

The fact is that as an insurance company, you can take on any risk if you have adequate reinsurance backup. Royal Exchange is a company that is well structured, and we have adequate security to back up our business which is our reinsurances. We have a robust reinsurance programme that is led by Swiss Re. In our programme, we have notable reinsurance companies like African Re, Continental Re, who are there to back us up, in case of any eventuality. And we don’t joke with our reinsurance arrangements, as a company, we try to ensure that our reinsurance programme is up to date, so that if a claim occurs, we can always have a back up. That is how we have been able to cope. We have been able to build up our reserve, over the years, because we have a very good reinsurance programme. We also have good investments that we can resort to if there is a claim. So, that has been the strength of Royal Exchange.

We are one of the leaders in terms of general insurance. We have a pedigree for settling claims. In 2009, we settled the biggest claims in the insurance industry in Nigeria: the Nigerian Bottling Company’s claims. In 2010, we also led the Consortium of insurance companies that settled Friesland Campina WAMCO claims. The NBC claims was settled for over N8bn while the WAMCO claim was settled for over N4bn. Royal insurance company led the consortium of companies that settled that claim. So we have always done what we know how to do best.

How’s the industry faring under the ‘no premium no cover policy’?

There has been a strict enforcement of the ‘no premium no cover policy’ and industry conduct is actually predicted by the market wave. It may shrink initially as there has been a major challenge for us because some of our clients did not renew due to this policy. Now, it is cash and carry. So you can see that at the beginning of the year, a lot of them were actually watching how the policy would play. Some of them never believed then that it was going to work, but as time goes on, it’s like everybody is going to key into it, and gradually, some of the businesses lost are actually coming back. But, the interesting thing about ‘no premium, no cover’ policy is that it has actually helped to increase our cash flow. This is because the premium collection has improved. Though the business shrank a little bit, we believe that the full impact of that policy can only be assessed in 2014, this year being only a test case for the policy.

What are you doing in retail insurance development?

Of recent, we have tried to develop market penetration through the retail segment of the market. Virtually, 90 per cent of our business port folio was corporate, but this year, deliberately, we decided that at least 20 per cent of our revenue would come from the retail end of the market. So we have been busy trying to restructure our retail operations through two principal means: agency and e-platform. We want to use these platforms to reach individuals and encourage them to take up insurance policies. What we have done is to ensure that all our products are put on the electronic platform. All the life products that we are selling will be marketed through the Internet, and the agency system. We are recruiting agents nationwide to sell these products as a way to address the retail end of the market. Don’t forget that there is a huge potential for retail insurance in Nigeria because 99 per cent of Nigerians don’t have insurance policies. This means that insurance penetration is less than one per cent of a population of over 150 million. That is a huge potential. So we want to tap into that huge potential and we are putting the necessary structures in place to tap into that huge retail potential in the market. We have a full office dedicated to retail and it is separate from the normal operations of the company and that office is based in Ikeja to address that segment of the market.

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