Nigerian Insurance Industry  Under-Sourced, Under-Capitalised And Has Less Than 2% Penetration to The Economy   

By Lateef Adegbite

For years  there have been several cases of collapsed buildings’ with loses of lives in different parts of Nigeria. From Lagos, the nation’s Commercial nerve centre , PortHarcourt, the oil city to Abuja, the Federal Capital Federal Capital Territory, CT, the story is the same: reported  cases of collapsed buildings.

This is evident  with the collapse  of a three storey,  seven -storey building and a 21 storey building under construction in Lagos  including  a two-Storey building at the FCT and many more. There is no gain saying the fact that in 2019, there 43 recorded building collapses while in 2022, alone 62 buildings had collapsed with loss of lives. The Lagos state Emergency Management Agency, LASEMA, had reported that 30 buildings’ collapse occurred in Lagos alone between January and July 2022, which was said to have put  Babajide Sanwo-Olu, the state governor on a high jump.

Collaped 21 Storey Building Under construction In Ikoyi, Lagos

The situation was so worrisome that Idris Salako, the state Commissioner for Physical Planning and Urban Development who was under pressure from several quarters over the collapsed buildings’ was forced to resign his appointment. The Punch had reported that  a staggering  figure of 115  incidents  of building collapse   had been recorded  in Lagos within the last 10 years.

Many had attributed  the causes of the  building collapse in Nigeria due to bad design, faulty construction methodology, extraordinary loads,  foundation failure,  unexpected failure mode, natural disasters, use of substandard building materials.  This is in addition to poor workmanship by  contractors, use of incompetent contractors, non-compliance with the state building specifications/standards by developers/contractors, inadequate/lack of supervision /Inspection /monitoring and structural defects.

Given the repeated cases of collapsed buildings in Lagos state may have informed why the Sanwo-Olu’s government had embarked on a state-wide   sensitization Campaign   to educate residents and contractors on building regulations and control to stame the problem. There are indications that an estimated 36,00 other buildings, across the 36 states of the Federation and the FCT, currently face impending collapse.

Tony Eumelu, a well-known African philanthropist and Chairman United Bank for Africa, UBA, plc, a Pan African Bank, may have taken advantage of the National Insurance Commission, NAICOM, Conference which is an avenue for all stakeholders ‘’to discuss  al the critical issues  affecting  the nation’s insurance industry  and position it for sustained growth to unbared his mind  on how to chart a course  ‘’to a significant  increase  in the country’s  insurance  penetration’’.

Giving his business background, the UBA Group, Chairman, had made participants at the NAICOM, annual conference to understand that the Insurance industry to get the desired patronage from customers, requires significant information, describing it as ‘’a foundation for the country’s infrastructural development’’.

According to him, a vibrant Insurance industry will support businesses, investments and enables savings, noting that it will generate tax revenue for the country. He had alluded to  Austo &Co , report that says that  the contribution  of  the insurance sector  to the nation’s Gross Domestic Product, GDP,  was less than one percent instead of five percent as expected and below two percent penetration for a country of over 200 million people.

Elumelu, who was said to have been invited to the NAICOM Conference   on Insurance Solutions for Public Buildings under Construction’’, may have started the discussion with the collapse of the 21-storey building under construction in Ikoyi, a high -brown area in Lagos  state, killing many, including the promoter of the multi-billion naira project. He noted that there is a role  for the nation’s Insurance industry,  Professional Associations  like the  Council  for the Regulation  of Engineering  in Nigeria, COREN, the Nigerian Institute of  Estate Surveyors and Valuers, NIESV and the Nigerian Society of Engineers , NSE. He asserted that the solution to ending building collapse’ in the country. He had said the country’s insurance industry in the future requires a multi-sectoral  approach  ‘’to holistically  deal with the root cause  of the problem’’.

Going by the  2003, Insurance Act,  sections 64 and 65,  that specify  that  ‘’no person  shall  construct  any building  of more than two floors  without insuring  with a registered insurer  and that the duty  to insure  shall arise  when a building is under construction   by the promoters of such projects. The question on the lips of most was: How many of the public buildings in Nigeria are insured as mandated by the country’s 2003, Insurance Act. Other questions being asked by people was the Compliance level to the Laws, and who is monitoring the compliance by project promoters.

Aware that Nigeria needs to build ports, roads, power stations, schools and Hospitals, including dwelling homes, may have encouraged the Pan African Bank Chairman, to give a poser to the relevant government ministries and agencies at the state and Federal levels to know   the awareness level for the provisions of the law on insurance of Public Buildings and the punitive actions for non-compliance.  His major worry was that the insurance companies do not seem to understand what is their actual role in the country’s economy.  Giving an insider information, he averred that the country   has ‘’a poor insurance culture   and low insurance penetration which was not too good for the economy.

Elumelu , who could not hide his feelings had attributed the poor insurance culture and low penetration ‘’to poor Legislation that does not have proper enforcement  of insurance Laws , including enforcement of  compulsory  insurance’’,  Inefficient  Insurance  processes and  lack of database  for settlement of Claims, which may  have fostered  people’s lack of confidence  and trust in insurers. He would want the Nigerian government to take another look at the country’s Insurance Regulatory framework, mindset of insurance PR actioners, and the poor Capitalisation requirements in the industry to N1 billion to give it a new lease of life as obtained in the nation’s banking industry. He noted that that Nigeria has built a banking sector that had penetrated  across the African  Continent , North American Country of the United States, US, United Kingdom, UK, France, Dubai,  but the Insurance sector  had failed woefully  because ‘’it is under-sourced and undercapitalised’’.

The Leadership of NAICOM, may have known that the agency can only bark without biting, may have given Elumelu, the boldness to say that there is need for the National Assembly to overhaul the 20 year-old Insurance Act, to drive the implementation and enforcement of compulsory insurance in the country. He had told those that cares to listen that if the Lawmakers at the national level could take the bull by the horn ‘’to re assess and eliminate all the stifling policies, roadblocks and complacency in the country’s insurance system’’, it would encourage innovation and provide Nigerians with simple and accessible insurance as a fundamental right to secure their future, within a regulatory framework that serves both clients and the industry PR actioners.

He is optimistic that if the National Assembly could take the bold initiative to do so, ‘’it will result in increased insurance penetration in the country, and stronger punitive enforcement measures for people that avoid contractors’ insurance in construction to ensure that due process I followed in the event of any unforeseen incidents’’, noting that Insurance is there to act as a mitigant’’. The UBA Group Chairman, may have enjoined the Insurance practioners to step up their marketing and awareness Campaigns when he said that a society where people are not insured are ‘’exposed to financial uncertainties that not only affect them but their families and Communities’’. An optimistic Elumelu had said that ‘’with the right enabling environment, ‘’ We will se the transformation of the country’s Insurance sector’’, insisting that that government have a critical role to play in making insurance common right of every Nigerian citizen’’.

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