Three days ago, Ladipo, a popular auto spare parts market in Lagos, South West Nigeria, was razed down by a deadly inferno. Goods worth hundreds of millions of Naira (NGN) were destroyed in the fire.
News of fire incidents destroying homes, public buildings and most especially business property is one too many in Nigeria. Remote and immediate causes of these fires have been attributed to faulty electrical wiring, zero adherence to fire safety measures and so on and so forth.
However, while fire outbreaks cannot be totally prevented, risk management tools have been employed over time by business people all over the world. The most potent risk management tool against fire outbreaks is: ‘insurance’. Insurance is the only safeguard that protects businesses from going under as a result of fire, burglary and other natural disasters.
While news of major markets burnt to ashes by fire is tragic, the worst tragedy is that virtually all traders whose property were destroyed did not have any protection such as insurance to mitigate against such risks.
One of the traders who gave his name as Chinedu told The Nation Newspaper that “I have lost my hard earned money and wares to this tragedy which I know nothing about. The goods are the investments that I have worked several years for. I don’t have insurance because I don’t know that it can help me at a time like this.”
So the question is, what are Nigeria’s insurance companies doing? From Chinedu’s statements and other traders, it is clear that while there is ignorance amongst traders who are mostly semi-illiterates and informal entrepreneurs, it is glaring that insurance companies in Nigeria have a long way to go.
Fire, burglary and other business risks are major challenges confronting traders in the informal sector. Nigeria’s annual premium has been stagnant around USD 1 billion and South Africa with less than half of Nigeria’s population and a smaller informal sector, rakes in USD 50 billion in gross premium annually.
For Nigeria’s insurance sector to grow, the major growth area is the informal sector. Insurance companies have their work caught out for them. They need to first understand that segment, their motivations, goals and peculiarities. How to communicate with them and what fits their business.
First published in NextGen, A Newsletter of SBI Media