As an offshoot of our previous ed-post (read here) on the values and challenges of having insurance in a recessed economy, below is an in-exhaustive list of the values Insurance stands to add to individuals and organizations alike in a recessed economy:
- Enhancing financial security and peace of mind: One of the main advantages of having insurance protection is the peace of mind associated with it; knowing that there is a Plan B, a backup plan should unforeseen circumstances arise to interrupt ones business or way of life. Take for an example, the owner/user of a vehicle which he has purchased for N2m but whose cost price has been shot up to N3m as a result of the recession/devaluation of the Naira; should the vehicle be totally damaged or stolen, how would he recover from his loss financially? Recall that this recession has had many people out of jobs or with salary slashes. Therefore, chances that this man would be able to purchase the same vehicle at a significantly higher price are almost non-existent. Insurance being a risk transfer mechanism would help to bridge this gap and for a token in annual premiums, insurance would pay the full cost of the vehicle subject of course to the policy terms, conditions and adequacy of cover.
- Free-up of capital/reserves/funds: The recession and accompanying increase in the cost of assets and commodities have got everyone saving extra in reserves to guard against the chance that a loss might occur but the valid question is why cage up funds that would serve everyone’s’ interest better in investments and such. For the payment of insignificant premiums, insurance gives individuals and organisations the opportunity to invest their reserves and purse opportunities as they arise.
- Insurance as a Risk Management service: Insurance is not all about paying claims and chasing premiums. There are quite a lot of services insurance companies render even prior to the inception of policies such as pre-loss surveys, risk profiling, risk improvement recommendations, etc. and these services stands to serve individuals and organisations well in this recession because as the famous saying goes, ‘prevention is better than cure’.
- Contribution to the Country’s GDP: It has been said time and time again that one of Nigeria’s major short-comings is its over-dependence on crude oil and the need to diversify the economy. Unfortunately, Insurance is yet to take its rightful place in the country’s financial sector as has been mentioned before, the penetration of insurance is less than 0.6%. A deeper penetration in this sector means more premiums which directly results in an increase in the amount of tax contribution the sector has to offer to the development of the nation.
- Reduction in Operational downtimes when losses crystalise: One obvious result of the current recession is the reduced purchase power of the Naira or the reduced face value if you will. When a loss occur which interrupts the business of an individual or organization, the next step is to rally all available funds or explore all available options to ensure that the business is restarted as soon as possible not only to reduce the financial loss that is sure to follow as a result of loss in revenues/profit but also to reduce the chances of losing customers’ loyalty. It is general knowledge that the sourcing of funds can be a lengthy, frustration and expensive adventure. However, Insurance aims at reducing the overall downtime experienced by individuals and their businesses/organisations when a Business Interruption occurs. This in turn helps to slowly (yes) but steadily even help a Nation out of recession if all the cogs in the economic wheels of the nation are eliminated.
- Tax Benefit: One further advantage of possessing insurance protection in this recession apart from the obvious ‘protection’ element of cover is that some polices e.g. some Life Assurance polices grants the holder some tax exemption/alleviation benefits.