By Ebere Nwoji
The Managing Director/Chief Executive officer ofÂ NEMÂ Insurance Plc, Mr Tope Smart, recently took a look atÂ ways the insurance industry can promote economic growth and infrastructural development in the country.
According to him, investment in infrastructure will result in the growth of any economy and would also enhance activities of the insurance sector.
Smart spoke at the 10th anniversary lecture and awards organised by Business JournalÂ Magazine in Lagos.
He also added that other factors such as macroeconomic environment, technological development, market size are also very important for the growth of the sector.
On the need for infrastructural development, Smart, said investment Â in infrastructure could stimulate organisational and management changes.
According to him, public infrastructure, provides the geographic concentration ofÂ Â economic resources, wider and deeper markets for outputÂ and employment.
“Public infrastructure is generally seen as a foundation on which to build the economy, e.g the development of infrastructure is one of the most important aspects for sustainable socio-economic growth.
â€œA research conducted by Aschaer in 1995 confirmedÂ that public infrastructure is the basis of quality of life;Â for example, good roads reduce the number of accidents and increase public safety;Â water supplyÂ systemÂ reducesÂ theÂ levelÂ ofÂ disease;waste management improves the health of the environment.
“Also, social capital infrastructure has a significant positive impact on earnings”, he observed.
Smart, who delivered the key note address at the lecture which has the theme
“Insurance is the backbone of any economyÂ because of the basic role it plays which is toÂ restore someone, firm, government to the position it was before the occurrence of an insured peril.
â€œFor a consideration (premium) insurance ensures the continuity of an enterprise notwithstanding the occurrence of an unforeseen event,” he added.
He highlighted channels throughÂ which the insurance industry can promote economic growth and structural developmentÂ as offering protection to firms and organisations.
This would enhance their financial stabilityÂ as insurance companies are compelled to take over any damage or interruption in the production process occurring as a resultÂ of the insured event.
He also said insurance promotes entrepreneurial attitude, by encouraging investment innovation and the vitality of the market, offers relieve and by so doing reduces pressure on government,IncreasesÂ financial intermediation through the creation of liquidity and savings through life insuranceÂ products.
Highlighting other channels through which insurance promotes economic growth, the NEM Insurance boss said: â€œInsurance, through life insurance companies provide funds for long-term investment in the real economy.
â€œIn the absence of a risk transfer mechanism like insurance, economic activities would be much lower and hence will result in economic Â loss. Insurance also helps to smooth out the volatile economic condition”.