By Francis Ewherido
Those who started the legitimate EndSARS protest against police brutality could not have imagined the deaths and destructions that followed. Officially 69 people have been confirmed dead at the time of writing. The value of properties either stolen or destroyed is not yet available, but it is in billions. My condolences to families who lost loved ones. Bereavement, especially sudden deaths like these, are very tough to deal with. I also sympathise with those who lost their valuable properties and investments. Many businesses, especially SMEs, were looted, vandalised and emasculated by hoodlums.
What do these deaths and destructions portend for the insurance industry? You can say, on the one hand, very adverse effects on an industry, still reeling from the negative effects of COVID-19. In addition, insurance companies, which are working towards meeting recapitalisation deadlines, will now be saddled with large claims. Do not be surprised if some insurance companies record losses or are unable to pay dividends to their shareholders at the end of this financial year.
You may also choose to look at impending claims from a positive perspective. The carnage of the last few days bring to fore the importance of insurance protection for individuals and corporate bodies. The destruction can lead to an upsurge of demand for insurance products. What the events of last week have shown is that insurance is an essential aspect of our daily individual lives and our business or corporate life.
We shall naturally start with people and deaths. Human life is invaluable and irreplaceable. Any loss of life diminishes, not only the immediate family, but our common humanity. While insurance will not resurrect a dead loved one or replace a lost limb, it does provides some relief. The family of an insured, who has a life policy and died during the protests and carnage that followed, is entitled to the full sum assured of the life policy. For instance, if an insured had a N30m life policy, his family is entitled to the full N30m. It does not matter whether he took the policy only three weeks before his death and had paid only a fraction of the N30m. Also, if an employee is part of group life insurance policy of his company and tragically loses his life within the last one week, his family is entitled to his death benefit. A lot of the time, the benefit is three times the annual emolument of the employee.
Also, if a holder of a personal accident insurance dies and the cause of death is traced to an accident, his family is entitled to the benefits. This also applies when the person is part of a group personal accident insurance cover. If the person suffers a broken limb, loses a limb, etc., he is entitled to compensation according to the terms of the policy. Such accidental situations covered include being knocked down by a vehicle, falling off a building or staircase or falling into a drain, etc. But if an insured dies as a result of the aggravation of a pre-existing ailment, like an asthma patient having an attack while running away from hoodlums during the mayhem, the family cannot claim under this policy because such a death cannot be classified as an accident.
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Also if a person dies or suffers injuries during this period, the employers’ liability policy of his employer’s insurance company will be liable, provided the death or accident happened in the course of employment. That is to say the employee died while carrying out official duties. Any deaths, accidents or illnesses outside official duties is not covered under this policy. During the week, we also saw videos of people, who were knocked down by vehicles during the chaos. If the vehicles concerned can be tracked, the insurance companies that insured the vehicles are legally liable for third party bodily injuries and death. If it is third party property damage, they are liable to the tune of N1m.
Which brings us to the import of material damage on insurance since the protests were hijacked and degenerated into arson, looting and violence. Many private and public properties were burnt and looted. There are two issues. Do these properties have insurance and do the insurance policies adequately protect these assets against all the risks that just occurred? Let us start with the fire and special perils insurance. A typical fire and special perils policy excludes fire resulting from “… riot, civil commotion, war invasion, act of foreign enemy, hostilities (whether war be declared or not), civil war, rebellion, revolution, insurrection, military or usurped power.” But you can get an SRCC (strikes, riots and civil commotion) extension to your fire and special perils policy.
The implication is that those with fire policies, but without the SRCC extension, whose buildings and contents were destroyed, are not entitled to insurance compensation. Those who also insured their building only with SRCC extension, but did not insure their contents against fire, will only be compensated for damage to their buildings. They will have no remedy for loss of, or damage to, contents. This also applies to owners of vehicles that were burnt, stolen or vandalized during the mayhem. Those with third party insurance have no remedy at all. Those with comprehensive motor insurance policies, but without SRCC extension, are not entitled to insurance compensation based on the terms of their policies.
We have business premises, malls and shops that were looted and set ablaze. Which peril caused the loss/damage, fire or theft? That will be for the loss adjusters to determine. The fire policy will pay for losses/damage caused by fire, while theft insurance will pay for damage/loss caused by theft. Usually, some businesses purchase combine fire and theft insurance. At times like this, it is a very wise decision.
Having a business interruption insurance at times like this is also very sensible. When business premises are damaged or looted, it takes a while before some of the affected businesses re-open shops. Their fire policy will take care of material loss and damage caused by fire, while the theft insurance policies will take care of losses and damage as a result of theft. But while the business is inoperative, fixed costs are still being incurred, salaries are still being paid and there is loss of profit. All these are what business interruption insurance, AKA consequential loss insurance, covers. But I have an uneasy feeling that many of the affected businesses do not have consequential loss insurance because it is not widely patronized.
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From our analysis so far, some people and organizations, affected by the carnage, will not get insurance compensation, not because they do not have insurance, but because the insurance policies they have were not adequate or appropriate. The insurance industry will get a bashing for being “deceptive” and “dodgy,” but the real problem is that policyholders dabbled into a technical and specialized terrain, without expert advice and guidance. It is like a plaintiff or defendant going to court to defend himself instead of engaging the services of a lawyer.
There are many professionals in the insurance industry with different functions. The main function of registered insurance brokers is to act as intermediaries between policyholders and insurance companies, providing expert advice and guidance to the insuring public when purchasing insurance. And the regular services of insurance brokers are rendered free of charge to the insuring public. So, potential policyholders should not just sit down on their own and decide to purchase insurance. They should seek the assistance of a registered insurance broker. The insuring public can get the list of registered brokers at: https://www.naicom.gov.ng or https://ncrib.net/member_list.
Now, some people are asking, will insurance companies make ex-gratia payments to policyholders without adequate cover? That would be a great piece of CSR (corporate social responsibility). But my worry is, will insurance companies that have paid out billions in genuine claims still have resources for ex-gratia payments? We shall see.
Francis Ewherido is the Managing Director of Titan Insurance Brokers Limited