By Francis Ewherido
Insurance is based on utmost good faith (uberrima fides); unlike other contracts that are based on let the buyer beware (caveat emptor). So I will start by observing good faith. I am an insurance practitioner and make a living partly from insurance, but today’s article is driven, not by the insurance part of me, but the journalist’s role to inform and educate. Only a selfish person sees what will benefit the mass of the people and keep it to himself.
Insurance is life and ordinarily you cannot avoid insurance anymore than you can avoid eating. Insurance deals with uncertainty and we are in very uncertain times, which makes insurance imperative. There is a new product in the industry which is tailor-made for people in paid employment, especially breadwinners and that is my focus today. It is the salary protection insurance scheme. This insurance protects employees who may lose their jobs suddenly due to the current economic situation. In the last few years, millions of Nigerians have lost their jobs across all sectors of the economy. Recently, a financial institution sacked hundreds of workers and proudly told the world that it paid the sacked staff three months salary. How far can they go with this? For how long can they feed their families, pay children’s school fees, pay rents and sort out other expenses before they run out of cash?
Salary protection insurance enables an employee to insure his salary to a particular limit (N1m limit per month for a particular insurance company). You can insure the full salary or part of the salary, but you cannot insure above your salary because insurance operates on the principle of indemnity, that is, placing you back in the financial position you were before you suffered a loss. Insurance is not betting, wagering or gambling where you can make profit. In the event of losing your job, the insurance company will pay your salary for 24 months in the following order: First six months, full insured salary, 75 per cent of the insured salary for another six months and 50 per cent for another six months. In the last six months, you get 25 per cent of your insured salary. Before the benefit lapses, many people would have secured other jobs or found other sources of income. The policy covers only sudden and accidental loss of job; it does not cover voluntary resignation. It is also not operative if you are sacked due to fraud.
I consider this policy very useful, especially for breadwinners. This policy, like other insurance policies, gives you peace of mind; it provides immediate relief after the occurrence of a destabilizing event. There is nothing as traumatizing for a parent as seeing your children hungry and no money for food; seeing your children ill and no money to get medical care or buy drugs; having your children sent home from school with no hope of getting money to pay the fees. This policy takes care of all that. It brings certainty within an uncertain environment.
Now, let me anticipate and answer questions some readers might want to ask, based on my experience. One, what if I am not sacked, what happens to the money (premium) I have paid? Insurance is a pool and what insurance companies do is to pool the money of all those exposed to a particular risk together and those who suffer losses are paid (indemnified) from the pool. A straight answer is that if you do not suffer a loss, others who did would be indemnified with your money. Incidentally, you never know who will suffer a loss. Which is better, living a good life (insuring) and dying only to find out there is no heaven (not suffering a loss), or living a sinful life (not insuring) and dying (suffering a loss) only to find out that hell is real (no insurance remedy)?
Two, insurance is technical and I do not understand how it works. Insurance professionals know this, which is why the industry is divided into insurance companies and insurance broking companies. While insurance companies are the risk bearers, insurance broking companies act as advisers to the insuring public. An insurance broker will help you shop around underwriters (insurance companies) to get competitive rates, restructure your insurance needs to achieve minimal cost while at the same time guaranteeing maximum cover, give professional advice to help reduce your risk exposure and lower your premium, help you to understand your policy and ensure your claim is not avoided by guiding you against stepping on mines (conditions and exclusions) and help you to process your claim and get your payment out promptly. The good news is that all these services are rendered free of charge. It does not cost you an additional kobo to engage an insurance broker. Insurance brokers get their payment (commission) from underwriters they place businesses with. The implication is that if a proposer (somebody who wants to procure an insurance policy) will pay N100,000 premium, if he goes straight to an insurance company, he might even pay less if he goes through a broker, due to the broker’s professional advice. The list of registered insurance companies and brokers can be obtained from the websites of the National Insurance Commission, The Nigerian Council of Registered Insurance Brokers and the Nigerian Insurers Association.
Three, insurance is 419; they take your money and tell you stories later. The average Nigerian, including the educated, is either ignorant of insurance or distrusts insurance. Insurance is technical, so some level of ignorance can be tolerated. Distrust is also understandable because the early insurance agents who sold life policies did not do the image of insurance any good. Many of them were under-dressed, underfed and underpaid and some also made away with people’s life premiums. There have also been many cases of unethical practices in the past, but all that has changed. Strict regulation by the National Insurance Commission, self-regulation by professionals within the industry, automation of operations and improved technology, coupled with competition, have sanitized the industry, so there is no need for distrust any more.
Are there still any doubting Thomases? Please send a mail and your issues will be taken up with the appropriate body. Any professional advisory service will be rendered pro bono (free of charge).