Since medieval times, the invention of insurance in Nigeria has had a massive effect on the country’s development and stability. If there is a safer way to perform the tasks and duties that you’re obliged to do to benefit fairly, then why not?
Since the economic activities in Nigeria are being stirred by the commitment and dedication of fellow Nigerians before foreign investors and shareholders, Nigerians feel the urge to be guaranteed a level of safety. However, the insurance industry is the “tested and trusted” safety boat for all to hop into.
Not only is insurance a form of safety for Nigeria’s labor market, but the level of penetration has had a ripple effect on Nigeria’s economic development and stability so far. With about 58 insurance companies, as reported by NAICOM, the role of insurance in Nigeria has quickened the level of productivity in the country, which in turn spurs economic growth.
Suppose you’ve been wondering what other good has insurance companies. In that case, this article will expose you to insurance’s reality, importance, and role in Nigeria, focusing on economic development and stability.
How the Insurance Industry Boosts Nigeria’s Economic Development and Stability
1. The insurance industry works with the financial sector to help achieve economic growth
When you think about insurance, your thoughts should be about financial intermediation. Let’s break it down. An intermediary is a mediator, a go-between. Then, a financial intermediary comes between your finances and whatever thing or activity can destabilize it.
Insurance acts as a financial intermediary to ensure you’re not ripped to pieces when an unforeseen circumstance hits. Your finances contribute to Nigeria’s finances, so if they are protected, Nigeria’s financial sector will have an umbrella.
Similarly, the financial sector (for example, banks) works with insurance industries by monitoring your funds to know the proper way to step in and act.
This automatically shows the relationship between the insurance industry and the financial sector. These two sectors help to keep economic activities running smoothly and also boost Nigeria’s economic development and stability.
2. The Insurance industry covers economic risks
Writing about insurance without mentioning risks is like licking an ice cream without freezing it. Risks are the main reason insurance exists. The insurance industry is responsible for covering the risks and losses of businessmen according to the insurance policy purchased.
Let’s say your company is involved in transport services, and as the manager, you have gone ahead to insure about 70% of your vehicles against natural disasters, accidents, violence, and so on. With the peace of mind that comes from knowing who to call, you will be confident enough to extend your reach. You would even go to the extent of leasing some vehicles for increased income.
All these come from insurance assurance. Insurance covers any economic risks. So far, you have chosen the insurance policy (type) that you need. The role of insurance in Nigeria cuts across every business.
3. Insurance plays a more beneficial role than savings in the economic growth of a country
While savings are for rainy days, insurance is for the changing climate. For Nigeria’s economic development and stability, the lives of Nigerians are of prior importance. However, finances sustain life, whether directly or indirectly.
If you place a particular amount of money into a savings account, you could applaud yourself for being financially wise. On the other hand, it would be the same value that you left it at and accrue maybe just a little. You do not know the extent to which damage can occur to your properties. Insurance companies do not know as well, but they prove more beneficial than savings.
Savings give you something to fall back on after a loss or crisis, but insurance redeems you from the cost of that loss or crisis. What’s more beneficial, then, is reducing the cost of saving against any risk (because people save for many reasons) and putting the money forward into an insurance premium that will save you more. So, by that, the role of insurance in Nigeria supersedes savings.
4. The Insurance industry funds developmental projects that will cause economic growth
You shouldn’t be surprised to know that insurance companies in Nigeria are mostly privately owned. Individuals like you have put efforts and resources towards a business they are interested in and know the best methods used in its business game.
Insurance companies often profit from premiums and claims. Premiums are payments to purchase an insurance policy (or type). They could be paid either monthly or every quarter. Claims could be seen as a “bet” on the insurance company to act when a crisis hits.
These profits are used to run the business, pay the staff, run advertisements, and so on. They accumulate to boost Nigeria’s economic development and stability. Don’t forget that a businessman is always a good investor or has advisers who specialize in investments. Some development projects need funding, and investing in them brings a good yield over time.
Not only is he profiting from the insurance business, but also from his investment projects. Now, imagine how much development and stability will come out of insurance in Nigeria.
Barriers to the Role of Insurance in Nigeria’s Economy
According to Leadway.com, Nigeria’s insurance penetration is only 0.03%. Given such a low score, Nigeria’s economic development and stability through insurance would be hindered. The barriers to this penetration and its role in the economic growth include:
- Lack of knowledge about insurance services
- Low standard of living
- Stories about fraudulent activities that scare potential clients
- Lack of technology
- Lack of skilled personnel/talent crisis.
Conclusion
The value of every economic activity increases Nigeria’s economy’s growth. If the resources that produce these values are protected from damage and crises, then Nigeria’s economic development and stability will be secured.
The message of insurance’s role in Nigeria shouldn’t be kept to oneself. Since we are collectively Nigerians, we should be concerned about insurance’s role in Nigeria.