Why Fake Insurance Thrives in Nigeria

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Monday, November 11, 2019   /  12:22AM  /   OpEd By Ekerete Ola Gam-Ikon  /   Header Image Credit: IndiaMART 

 

If you DECIDED to procure insurance for yourself or the company, how would you proceed? Where would you go to? Who would you reach out to? Why would you reach out to him/her?

 

This is the "dilemma" of most people that have had a reason to get an insurance contract and little wonder, the insurance industry in Nigeria is full of opportunities for problem solvers, solution providers and tech companies.

 

How you DECIDE to get your insurance policy determines, to a large extent, the experience you will have on the journey!

 

Compared to a couple of other financial services, it has been observed that insurance presents a wider gap to be filled thus providing opportunities for experts in diverse areas beside insurance.

 

Interestingly, operators of the fake insurance market have boldly been the greatest beneficiaries and might remain so, until governments at Federal, State and Local Government decide to adopt insurance as a critical instrument for economic recovery and growth.

 

 

Size of the Fake Insurance Market

 

Contextually, the size of the fake insurance market can be determined both in the missing numbers (opportunities) for the genuine operators and the "power" behind what they do.

 

First, consider Motor Insurance which is compulsory based on the Third-Party Motor Regulation 1945 that requires every vehicle on Nigerian road to be insured with a Third Party Motor Insurance policy. The legal cost is N5,000 (approx. $16) per annum for private vehicles and N10,000 for commercial ones.

 

Last year, the National Bureau of Statistics (NBS) reported that as at April 2018, there were 11.7m registered vehicles in Nigeria while the Nigerian Insurers Association (NIA) also announced that there were less than 3m vehicles with genuine insurance on its Nigerian Insurance Industry Database (NIID). By implication, do we 8.7m registered vehicles or more bearing fake insurance certicates? If you work the numbers, as I have done, N43.5b is amiss using the appropriate premium (legal cost) of N5,000 for registered private vehicles and more using the cost for commercial vehicles. Even where the fake insurance operation charges were 50 percent of the legal cost, a princely sum of N21.75b or more sits outside the genuine insurance records and the coffers of government annually.

 

If this will not cause the Federal Government and the insurance regulator, National Insurance Commission (NAICOM) to be upset and mobilize to address the malady, then there is no need to discuss the gross abuse of marine insurance certificates at the Ports, where the fake operation thrives while the NIA is spoiling to confront it with the help of the Central Bank of Nigeria (CBN).

 

For over two decades, fake insurance operation has survived side by side with the genuine industry which we all know, obviously because the "powers" behind them are overwhelming! Past efforts by NAICOM through a well-coordinated task force proved abortive and some insurance professionals who were involved in the battles managed to escape with their lives from the suspected operational outlets of the fake market.

 

Most interestingly, NAICOM is not one of the regulators at the "Points of Sale" of either Motor or Marine insurances. Why? 

 

 

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Credit: DHFL General Insurance  

 

How We All Contribute to This Situation

 

1.     As a potential or existing insurance policyholder who truly seeks insurance for the VALUE it offers for the protection of our wealth, why would you not seek to validate the insurance you paid for?

 

The Vehicle Licensing Offices can only be trusted to give you a genuine vehicle licence and are not accountable for any insurance obtained from them. Only an insurance company can issue a valid insurance certificate and the NIA offers its NIID platform where you can ask and ascertain the validity of your motor insurance policy.

 

Patronising the process where your insurance policy cannot be validated is the sure way to claims that will be declined!

 

How very painful and utterly embarrassing it has been for many who were involved in third party cases and could not make any claims due to the fake status of their insurances. Simply irritating. Avoid it, dear policyholders.

 

2.     For the genuine insurance operators, it is quite sadly, a game of expectations! The employees that see the opportunities lost to the fake operation market expect their companies to ACT, the companies expect their association and regulator to ACT and together, they all expect the government to ACT! The expectations are current and increasing, even graduating to demands.

 

Unfortunately, governments at all levels are constrained, particularly by poor knowledge of how insurance can solve current problems and thus deploying their scarce resources to priority areas.

 

So, insurance operators (insurers, brokers, agents) must seek to take advantage of emerging digital solutions to overcome the fake market operation. Just imagine if the latter digitised its operations before the former!

 

3.     The biggest promoter of the fake insurance market, though inadvertently, is the government represented by NAICOM due to the failure to take appropriate position at the "Point of Sale" of insurance.

 

The fight against fake insurance market is worth any investment that the regulator and operators are making, however it must begin with the right level of enlightenment and education focused publicity. Citizens have not been engaged either through traditional or new media on the hazard of the fake insurance operation.

 

We have not read or seen reports of meetings between NAICOM and other regulators, like Vehicle Inspection Office and Nigeria Customs Service, where these discussions ought to be taking place.

 

Without putting in more efforts to let the public know that the fake insurance market exists, further campaign for citizens to buy insurance only increases the size of that fake market.

 

 

Closing Thoughts

 

For all of us, I hope we know enough not to continue to patronize the fake insurance operation.

 

Sometimes, the poor image of the insurance industry in Nigeria can also be traced to the "no payment on claims" stories that follow when policyholders with fake insurance certificates cannot receive attention when they have claims.

 

Enough of "feeding the wrong horse", let us all get back to doing the right thing!

 

If you cannot find a genuine platform for all the information you need on insurance today, right there is an opportunity in the insurance industry in Nigeria. Take it!

 

 

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 olagamola@gmail.com

 

 


Proshare Nigeria Pvt. Ltd.

 

 

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Proshare Nigeria Pvt. Ltd.

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