31.2 C
Wednesday, March 29, 2023

Insurance Industry Should Focus on SME Segment – Stakeholders

Must read

Listen now
- Advertisement -
- Advertisement -

The Nigerian insurance industry should increase its focus on the Small and Medium Sized Enterprises (SMEs) as they are pivotal to economic growth, according to participants at the webinar event organized by Coronation Insurance Plc.

The webinar event themed “Importance of Insurance for SMEs: Insurance Requirements for Growing Business,” focused on the importance of small businesses and the risks attached to them.

In his opening remarks, Chief Executive Officer (CEO) of Coronation Insurance Plc, Olamide Olajolo, said the importance of insurance to the economy cannot be overemphasized as it is important to mitigate against future risk associated with small businesses and limit exposure to cyber risk.

Vice Chairman Lagos Chambers of Commerce and Industry, Gbenga Ismaila, is of the view that insurers should reposition their efforts towards small business as they are pivotal to the country.

He added that 90 percent of SMEs do not pay taxes and they find it difficult assessing bank credit as they are perceived as being very vulnerable.

“Some insurers feel it is a difficult sector to cater for. Insurers should offer standardized and simple products,” said Ismaila.

“They must let us know what we are paying for and bring value to the SMEs,” adds Ismaila.

SME is a privately owned business operated with few employees and a relatively moderate sales volume.

However, this definition varies from country to country, depending on the level of development and the economy’s strength.

For example, Hallberg (2000) posits that the upper limit for medium scale enterprises is between 100 and 250. Further, the lower limit for SMEs lies between five and ten workers, and the upper limit is between 50 and 100 workers.

SMEs are exposed to all business risk categories: property risk, liability risk, income risk, and personal risk, including political riots.

A large number of SMEs do not have insurance cover to manage their risks.

It is important to note that these informal sector operators face challenges in utilising insurance as a risk mitigation mechanism due to several factors ranging from delay in claim settlement, incomplete compensation to SME claimants, high cost of premiums and lack of proper information dissemination and sensitisation by insurers.

SMEs in Nigeria make valuable contributions to the economy. They make about 49.78 percent contribution to the national Gross Domestic Product (GDP), account for 96% of businesses and 84% of employment.

However, the total number of SMEs have reduced to 40 million in 2022 from 42 million in 2017, according to data from the National Bureau of Statistics (NBS).

Executive Director, Technical, Coronation Life, Adebowale Adesona said it is imperative for small businesses to dimension all the risks associated with their business and that they should seek professional advice on areas that are not clear.

He also added that the Group Life, which is affordable and accessible, covers the risk of death, critical illness, and temporary or permanent disability even if they do not occur during the course of the work.

“With insurance, there are lots of risks pertaining to your business. You must identify the most cost efficient cover that you want,” said Adesona.

The ratio of gross premium written to gross domestic product remains low in Nigeria, which indicates the sector is still in its embryonic stage, and underscores the myriad of challenges bedeviling the industry.

In ranking terms, the Nigerian insurance industry contributes 0.02 percent to world premiums and ranked 81st (previously 71st) out of the 88 countries profiled by the Swiss Re Institute in

The sector’s insurance penetration (GPW as a % of GDP) was relatively at the same level from the previous year—printing at 0.3% relative to the modest performance of South Africa (13.7%), Morocco (4.5%), Brazil (4.1%), and Kenya (2.2%).

Participants at the event said insurance products should be made mandatory as mortgage insurance is compulsory globally.

“In Europe and the United States they are making these products flexible and accessible. Embedded insurance in coming to Africa. This involves the use of technology to carry out transactions,” said Adesona.

Country Manager Workpay, Louis Alozie, said small businesses should pay attention to cyber-attacks or risks and that it is critical for them to avoid divulging confidential information.

“Technology is growing geometrically and the only way we can survive is to mitigate those security risks. We should protect our intellectual rights,” said Alozie.

In his closing remarks, Managing Director, Coronation Life Assurance Limited, Akinolu Akinleye, thanked participants and panelists that made the sessions successful.

- Advertisement -
- Advertisement -

More articles


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

- Advertisement -

Latest article