Saturday, June 22, 2019 / 08:59PM / By Ekerete Gam Ikon* / Header Image Credit: Alero Ogor-Awoyemi
If you have been on a "private road show' in Nigeria to raise money from families and friends for your dream or idea lately, you would have discovered what the business clinics do not tell you; that, in reality, most people contribute readily towards a burial than they do to investing in your business idea or dreams!
The only explanation for this is ‘our culture’; that ubiquitous term used to explain away the attitude of most Nigerians who do not have any form of insurance.
The acceptance of this narrative needs to be interrogated. Any culture that denies his/her people modernity and prosperity needs a deep dive into the formative motives or reasons of its existence and relevance. That said, it is undeniable that culture plays a significant role in determining insurance consumption generally.
The generic use of the word culture disguises the actual drivers of this misnomer between growth rates and the underdevelopment of the market in terms of insurance density and penetration. This makes it compelling to examine, understand and identify the specific cultural influence on insurance consumption and aggregate them in clusters for product and service development.
It could be as simple as changing the narrative from a tradition subtext to a financial survival/protection context i.e. adjust and separate the demand related factors from the supply related factors. This is the research study, Third Party Media and Proshare are working on modalities to deliver on.
There is another cultural issue that however needs no research but risk-based regulatory supervision and enforcement. It is the corporate culture that has morphed into an industry culture – the increasing denials of claims due to policyholders by some insurance companies. This is a self-limiting practice that does nothing but raise red alerts in the minds of the consuming public and creates a barrier far bigger to cross. It is nothing short of an imposed censorship enabled by regulatory inertia.
Lest I digress, I must return to the subject of harmonizing existing cultural practices, albeit one that is one of the most expensive (relatively) budget most Nigerians agonise over, dread and yet acknowledges is inevitable.
In recent news, some state governments have had to make pronouncements to warn (for lack of a better word) about the practice of building up insurmountable debts related to burials and funeral ceremonies, some of which are week long. There have been cases reported of people taking extreme measures to raise funds to meet this pressure point.
As one of those who has contributed to funerals and burials, ‘invested in’ and equally benefited from the contributions of others, while unable to get angel investors into business growth ideas, I thought it was about time we have an open conversation on what is possible – how to take what we have and put a safety ring around this inevitability, the very reason insurance serves society and helps it confront risks and inevitabilities.
Funeral Insurance Defined
A simple Google search reveals that "Funeral insurance is a contract whereby the insurer guarantees to cover the funeral costs of the insured. Moreover, the policy may also cover related expenses, such as costs of the wake, burial fees, cremation costs, and grave-digging charges."
However, Insuranceopedia explains thus: "a typical funeral insurance requires a policyholder to make monthly premium payments until they reach a certain age. Premiums may be fixed or could increase every year, depending on the conditions of the insurance policy. Often, the result is that the insured pays more than what a person’s funeral would have cost."
It continues, stating that "Because of this, a similar type of product emerged. Known as pre-paid funerals or pre-need funeral insurance, this allows a person to pay for the cost of the funeral today and make small contributions each month until the value is completely paid."
In other markets, like Ghana, Funeral Insurance has been generating growing premium as a result of the importance the citizens attach to funerals just as Nigerians. Some insurers in Nigeria have equally taken advantage of the ‘excitement and exuberance’ attached to funerals/burials to offer Funeral Insurance in the market. Yet, many Nigerians are yet to come to terms with the advantages of having a Funeral Insurance. Is this also the challenge of plugging cultural factors or the industry’s self-limiting practice of unpaid claims?
Who Needs Funeral Insurance?
Readily, promoters and marketers of Funeral Insurance respectfully announce that persons above the age of 50 are advised to purchase such contracts for themselves. This is to ensure that their burials can be funded without any pressure on the ones left behind.
Yes, you can buy Funeral Insurance for yourself! Indeed, it is the prudent thing to do as part of sound financial planning and post life plans. Given the median life expectancy rate in Nigeria set at between 52-54 years; it would appear that the proper cause of action and responsible thing to do is to plan ahead; even as you take steps to live a healthy, active and rewarding life.
Depending on the stage you are in life, you can choose to buy Funeral Insurance for your aged parents, in-laws and other relatives that your contribution would be required towards their funeral or burial.
If only we can consider today, to buy Funeral Insurance at a sum much lower than that sum we contribute after receiving the call/text which conveys the plea, surely, we will then free up some money to support the dreams and ideas of our young ones.
So, it does seem the young and budding entrepreneurs amongst us, not just the older folks need to consider the use, purpose and benefit of buying a Funeral Insurance; as part of their ‘cultural’ responsibility!
Arguments Against Funeral Insurance
Cultural concerns bothering on just proving (showing off) that one can give his/her late parents and/or in-laws very befitting funeral outings/ceremonies have made some people argue that Funeral Insurance only serves the poor.
While that may not be a stretch of the reality, it is important to note that with a widening base of the poor, this argument falls flat on the basis of evidence. The numbers simply makes a reverse argument of this premise.
If funeral expenses and the minimum requirements has not dropped in decades but the income capacity of the majority has been heavily compromised (inflation held static), it stands to reason that the gap will have to be filled somehow, someway and from somewhere.
If Funeral Insurance can be the first insurance product that really and truly addresses one of the challenges of the poor, then we could be on our way to sustainably providing levers upon which the truly vulnerable in our society can achieve some decency while moderating excess and the perils of the practice of taking loans to execute funerals/burials.
A Template for Solutions Based, Recapitalised Insurers
The concept of Funeral Insurance whereby a person can make annual or monthly payments towards the time of burial offers a very interesting slant to the recapitalization goals of many insurance companies in Nigeria. Though not in the same context, these insurers can prepare better for those critical months of 2020 by reflecting on the merits and demerits of Funeral Insurance; as an example of home-grown insurance products and services that readily meets the needs of the consuming public.
These insurers can be placed in two broad categories:
Quite unfortunately, these insurers are financially weak because their shareholders' funds have been eroded, and are therefore incapable of meeting their obligations to policyholders, employees and contractors. They are either under the management of the National Insurance Commission (NAICOM) or faced with imminent insuring public scrutiny and reputational issues from aggrieved customers, especially on the social media.
Making a case for new investors with fresh funds into these insurance companies or merger with others would remain a herculean task for them. For the sake of the culture, they need to be excused from the scene.
Somehow, these group of insurers have somewhat managed to create the right impression and positioned themselves as being good enough for M & A talks.
They survived the last regulator-induced recapitalization of 2007 and their institutional memories of the lessons learnt have been dusted up for consideration this time around. They understand the workings of the market and they can reach the "Mr. Fix-it" when necessary.
They just want to survive this trying period or simply cross the hurdle come 2020! They are realizing that the culture must change and may or may not yet know how to go about it; hoping that this recapitalization process will offer them the opportunity to confront it without collateral damage.
Hoping for Good
Notwithstanding the stark reality confronting these insurers in Nigeria, there is a growing sense of hope and optimism amongst the insurance consuming publics that there exist greater opportunities for a transformed insurance industry; thanks to the bold steps of some market leaders to invest in improved customer experience, more convenient distribution channels and need-based products and services.
Culture, it is now being understood, is not the go-to excuse but the reason for the growth and transformation that will come.
We are happy to support this process of introspection and self-awareness by continuing to offer research based insights to aid decision making.
We can support the budding entrepreneur and meet our ‘cultural’ responsibilities by simply learning how to mitigate the risks along life’s journey (see below).
Source: Alero Ogor-Awoyemi, Proshare Foundation Model For Financial Inclusion, Planning & Solutions (Life Value Chain). Credit: email@example.com
About The Author
Ekerete Olawoye Gam-Ikon, MNIM, CPP is a management consultant with specialization in Strategy and Insurance. He can be reached vide telephone on +234-806-648-1111 and +234-802-585-0344 or by e-mail vide firstname.lastname@example.org
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