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Only 0.5% of SMEs in Nigeria Operate with Insurance Cover, Says LCCI Boss
The Vice President of the Lagos Chamber of Commerce and Industry (LCCI), Mr. Gbenga Ismail has revealed that only 0.5 per cent of Small and Medium size Enterprises (SMEs) in Nigeria have insurance policy, compared with 54 per cent globally.
Owing to this, he said the country should focus squarely on developing an insurance environment more accommodating of and appealing to SMEs, adding that insurance represented a key financial cushion to manage shocks and build financial resilience in the first years of SME growth.
Ismail said this at a webinar organised jointly by Coronation Insurance Plc and Coronation Life Assurance Limited on the Importance of Insurance for Small and Medium Enterprises (SMEs).
The virtual seminar was widely attended by a host of participants from the insurance sector and Coronation small business clients
Ismail highlighted the significance of Nigeria’s 40 million SMEs for the growth, development and future security of the Nigerian economy.
In addition to noting that Nigeria had lost two million SMEs to the Covid-19 pandemic, Ismail also noted that a lot of new SMEs struggle to achieve scale quickly enough to realise the opportunities for which they were created. Irregular and delayed payments are also critical hurdle, he said, adding that the result was that most of the newly established SMEs fail within 18 months of start-up.
“Despite 90 per cent of SMEs currently not paying tax, SMEs represented a huge potential to drive economic inclusion, broaden prosperity and power the future growth of the Nigerian economy,” he added.
As such, Ismail argued that it was critical to provide SMEs with the support to ensure survival in the first critical years.
With these challenges in mind a panel session that included the Executive Director, Technical, Coronation Life Assurance Ltd, Adebowale Adesona; Country Manager, Wordplay, Louis Alozie, and Head of Emerging Business, Africa Access Bank, Ayo Olojede, agreed that Nigerian SMEs were facing a lot of risks, damage to business property and vehicles, legal liability and general product, key persons and goods-in-transit risks cost SMEs dearly.
Just insuring a few of these basic risks could save Nigerian SMEs billions annually and improve survival rates significantly, they stated.
They, however stressed the need for SMEs to consult insurance professionals to identify only those risks that are critical to the survival of their business.
Insuring only one to two key risks doesn’t cost a lot but could make a significant contribution to survival and growth rates, they stated.
“Coronation Insurance is working with Access Bank, for example, to develop Business Protection Bundles including basic fire, flood, and limited liability cover as well as limited employee life insurance – providing three years’ annual income – to enable Nigerian SMEs to affordably cover the basics of successfully operating their businesses.
“More generally, Nigeria needs to look to the experience of other markets that have developed successful SME insurance ecosystems where government coordinated policy and legislation in tandem with the insurance industry and large and small businesses. While some of this involve compulsory insurance, costs are minimal as it is so widespread,” a statement quoted the panelists to have said.