Insurers Groan as Forex Volatility, Climatic Change Skyrocket Claims

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Currency dealers at work

By Ebere Nwoji

Insurance industry Operators have in the past two years been battling to keep head above waters owing to huge claims arising from twin problem of high exchange rate, which has seen the Nigerian commodity price index moving at geometric increase rate and the adverse effects of climatic change with its attendant risk of damages to lives and properties.

These combined with the adverse effects of the economic recession, have lured many people into looking at insurance claims as means to weather their storms through filing of fraudulent claims.

Chairman, Nigerian Insurers Association (NIA), Eddie Efekoha, recently expressed concern that underwriters in recent times, have been contending with the challenge of fake claims, stressing that to outsmart the fraudsters, operators now carry out proper investigation to ascertain genuine claims.

He however said despite the harsh economic times, operators must live up to their responsibilities in paying genuine claims, assuring that activities of claims fraudsters cannot  deter insurers from settling claims of those who actually needed to be indemnified.

Other insurance managers, sharing their claims experience with THISDAY between 2016 and first quarter 2017, said since  2016, Nigerian insurers, have  been exposed to  high claims ratio due to uncontrollable social and environmental problems.

The insurers said their claims experience in 2016, more than doubled what it was in 2015 while what they have so far seen in the first quarter of 2017 is unspeakable.

Group Managing Director Royal Exchange Plc, Muktari Auwalu, corroborating what the NIA chairman said on the industry’s claims experience within the period, told THISDAY that by the nature of insurance business, which is periodic and is renewable on annual basis, the high exchange rate of Naira to dollar, has more than doubled what they spent in paying claims to their clients whose properties were damaged during the course of the year.

The NIA Chairman, narrating the operators’ claims experience during the year 2016,  said  during renewals in 2015,when premiums were paid, it was paid based on old Naira exchange rate to dollar which was N196.00 to a dollar but now claims are paid based on current exchange rate which is over N400.00 to a dollar.

He gave instance of third party motor insurance, saying the cost of repairing even the least damage on a vehicle has more than doubled because of high prices of motor spare parts adding that the same goes to other classes of business and claims emanating from them.

Muktari, said the year 2016, came with challenges of huge claims coming the way of the industry operators  particularly as a result of negative impact of climatic change.

He said against the backdrop of the economic recession , premium generation has not really been a serious problem to insurers but  huge claims experience coming their way particularly this year as a result of negative effects of climatic change.

The Royal Exchange boss, said: “In the year 2016, we envisaged a lot of claims coming our way due to climatic change. There has been heavy rain in the northern part of the country, before now, it has not been like that. With the climate change, there is heavy rain in the north this year .We have not seen that before in the north we have only seen it in the south so they are not prepared for it. So many houses have been affected, also, the terrorists activities have caused a lot of pipeline vandalism, the terrorists activities in the north, in form of Gboko Haram, many police, soldiers were killed, and these have group life cover, houses were damaged, all these brought a lot of claims to the industry in the current year. There are a lot of factors that have affected claims rate in this 2016”, he stated.

On the way forward for the industry, Muktari, said the most important thing is how to increase operators’  capacity of doing businesses so that the industry will have larger capacity to  accommodate more risks instead of ceding huge risks outside the local market.

He said with improved capacity, operators can focus and reposition the industry so that they can retain more risk in the local market and with retention of more businesses locally, there will be creation of more jobs for the teeming population of Nigerian youths.

He said with improved capacity, there will also be rapid growth of the insurance industry, and  there will  be a lot of funds for  shareholders to enjoy and the industry will become one of the greatest industry in Africa and part of the world in general.