Is Insurance All About Claims?


Friday, November 06, 2020 / 01:15 PM / By Ekerete Ola Gam-Ikon / Header Image Credit: i-Sight

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Suddenly, many more people are talking about insurance and desiring to know how the insurance companies will deal with mounting claims after the mindless destruction of private and public properties by violent uninsured Nigerian protesters. 


No one seems interested in those that had no insurance, not even the insurers that may now have the opportunity to insure them; every medium is focused on claims. 


What Is Insurance Without Claims? 

There are numerous individuals and businesses that have had insurance policies for many years, they pay their premiums when due, but have never had any claim reported to their insurers. 


Sometimes, they have described their experiences as "good" and their insurers have also considered such policyholders as "very good", wishing all their clients were like these ones. However, the question would be: "What is the essence of buying something and not put it to use?" Or "Would you know the value of what you have without using it?" 


Insurance customers (policyholders) with minimal understanding of the philosophy and principles of insurance have repeatedly and increasingly queried the insurance system about not getting any benefit after the year(s) of no claims. The simple response remains this: You have been contributing to the relief of another policyholder who made a claim, someday it might be your turn to make a claim! 


Further explanation then usually follows but the enquirers are left wondering if it makes financial sense. Only claimants that actually get their claims payments promptly appreciate the essence of insurance and look forward to the future with assurance. 


Using Claims As A Marketing Tool 

Traditionally, insurers had used "No Claims Discount (NCD)" to encourage policyholders to remain loyal to them but unhealthy and unprofessional practices have since removed this from marketing and sales discussions within and outside insurance parlance. 


For the benefit of those who might not know what NCD means, I will explain: 


Until 23 years ago in Nigeria, if you sought cover for your vehicle, the insurance company representative will inform you that after your first year as policyholder without any report of damage or loss, you will be entitled to 10 percent No Claims Discount as you renewed for the second year; 20 percent the following year, 33.3 percent, 40 percent and as you are entering the sixth year of your relationship, you will be entitled to 50 percent NCD! 


So, if your premium was N200,000 at inception, after five years of insuring continuously with an insurer without any claim, your premium would have reduced to N100,000 where the value of the vehicle does not change, which was unlikely as the insurers would insist on appropriate valuation. 


Compared to the prevailing market practice, today, where the sales representatives of ALL insurance companies offer you a rate or price equivalent to what was given to the policyholder that had been loyal to an insurer for six years, then you will understand why payment of claims continue to be a critical part of conversations about insurance. 


In Nigeria, policyhoders' loyalty to insurance companies is rare and often impracticable because price, not even claims payment, determines which company gets the deal. 

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What The Protests' Claims Have Taught Us 

As the discussions on the resultant claims from the violent protests continue, both insurers and policyhoders are learning the hard lessons of ignoring the future benefits for immediate gains. 


The "competitive" rates given by insurers to win the unsuspecting policyholders to their side did not contemplate the volume of claims payouts now estimated, so many insurers are biting their finger for their poor aggressive decisions. 


The policyholders, on the other hand, are going to ignore whatever understanding they shared at the time of inception of the policy and seek for settlement of the claims as the world desires to see. 


Where the insurers see that they will lose and the policyholder will gain, the arguments that are usually unimaginable to industry watchers will begin, and you really cannot blame them because shareholders are not willing to wait again before getting returns on their investments. 


In an experience many years ago, my company once had a customer who asked for a "no claim" policy, intended to fulfill the requirement of a financial institution. Surprisingly, it was accepted. Shortly before the expiration of the policy, the customer suffered a huge loss caused by fire outbreak but could not approach us and we never knew how the issues were resolved; meanwhile, the customer's business has since ceased to exist. 


Yes, insurance is so much about claims because when policyholders are promptly paid, they can return to business, retain people in employment and families are saved while the government enjoys the tax revenues. 


Delays and denials of claims have led to economic hardships that the insurance industry have probably not imagined and the government that seeks to reduce poverty are completely unaware of. 


Non-payment of settled claims has become the (dis)ease of doing business with the insurance industry in Nigeria and the seeming challenges presented by these protests' claims are the opportunities to correct the impression many have held for so long. 


Easing the process of claims is the best indicator that the insurance industry is ready to grow. 


This is the time to know more about claims, that aspect of insurance that either convinces or confuses the buyers and policyholders. 


Only through claims is one able to ascertain that the insurance policy you have is good. 


The days ahead will determine whether the industry will earn its name or receive calls for change of name.  


About The Author 

Ekerete Olawoye Gam-Ikon, MNIM, CPP, is a management consultant with a specialization in Strategy and Insurance. You can contact him via e:mail and mobile +234-806-648-1111 

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