Aviation Insurance experts have said airline operators in Nigeria should stop benchmarking their premium rates with those of Nigerian neighbours like South Africa, London and other western countries arguing that safety culture in Nigera is very poor when compared with those of other countries.
The aviation insurance experts, spoke against complaints by Nigerian airline operators that aviation insurance operators in Nigeria charge high insurance premium whereas their counterparts in other counties charge lower rates.
The airline operators spoke while answering questions from insurance journalists on why some of them violate the federal government’s local content law which requires them to cede their businesses to indigenous insurance firms and get clearance from the National Insurance Commission (NAICOM) before taking their business surplus abroad.
A member of the Airline operators of Nigeria (AON) who spoke in this regard said that some of their members sneak abroad to buy their insurance policy despite the local content law because insurance rate in Nigeria is very high and operators are looking for ways of cutting cost.
The operator, who however said his statement did not mean his airline insures abroad, said Nigerian insurers, should look for ways of reducing their rates to encourage those who sneak abroad for their insurance needs to patronise them.
But in a swift reaction to this, Chairman Nigeria Insurers Association (NIA), the umbrella body of insurance underwriters in Nigeria Eddie Efekoha, in a recent interview with THISDAY in his office said there is no basis of comparison between Nigerian aviation insurance providers and their foreign counterparts because the level of risk exposures of both differs.
According to him, countries’ risks differ.
“All these aviation operators over there, do they pay premium on monthly or daily basis and when you get to the airport, look at our airports, with all the touts and what have you so everything is wrong with it so the rates cannot but be high. When we get our things right, the premium can reduce. Of course size is an issue. You are generating a premium for instance that cannot buy one plane but like the likes of BA, their premium can buy three Planes. So size is an issue,” he explained.
Continuing, the NIA boss stated:” You find out that we have multiplicity of problems when it comes to aviation insurance in Nigeria and you must take all of these into account in your rating. What is rating? First of all, it starts with underwriting; look at the good features and look at the bad features and all these help you to determine your average rate, The good ones will help you to determine your discount rate, the bad ones will help you to blow the rates in order to come with the rates that apply to that particular risk.
He added: “When you bring all of these into specific operators, you then look at their managements. We had issues; I don’t have to name them. Number one, airline has problem; and when there are financial problems, what happens; what do you do, you begin to cut corners. So, what do you expect the rates to be? Do you expect the rates to be lowest compared with emirate, or compare with BA, who are they comparing with? Emirates that had a fleet of almost a thousand or if you want to compare them, the largest we had in Nigeria before was about 28, today, the largest is not more than 15 .Is that what you want to compare is it up to fleet an individual will own in America. So there is no basis of comparison.”
Speaking, Managing Director, Boof Africa Insurance Brokers, Olumide Fatagun, said there is general poor attitude of airline operators towards insurance premium payment.
He said apart from the issue of insuring abroad due to high premium rate, most aircraft flying in this country are probably flying without cover.