I must confess that it was after accepting to deliver to deliver this lecture that the magnitude of the assignment dawned on me. The magnitude here is not the scope of the lecture but the task of standing before this distinguished gathering of catholic priests and the religious to discuss insurance; a topic that is arguably worldly and thus may be contrary to the long held view among the deeply religious especially catholic that are known to hold strongly to the faith that Eluigwe ga akwu ugwo. We are all no doubt aware that our predisposition in this matter is strongly rooted in the admonition in Mathew 6: 25 – 34 especially verse 34 which definitively said “therefore do not worry about tomorrow for tomorrow will worry about itself. Each day has enough trouble of its own”.
I am however glad that over time, the benefit of learning and scholarship especially among our clergy has liberalized our understanding and interpretations of religion and theological issues to such an extent that we are now able to appreciate that the mind and body exist to compliment the soul in the true sense of the Holy Trinity.
Our objective in this lecture will be fourfold:
1. To explain the concept, mechanism and dynamism of insurance as a risk management strategy.
2. To draw our attention to the pervasiveness of risks and why it is necessary to eliminate or mitigate risks or to plan for it.
3. To repudiate the notion that a child of God or an institution devoted to God such as the church does not and will not need insurance.
4. To introduce you to how various insurance products can be used to conserve value or create wealth for self and for God’s ordained institutions such as the church.
In addition to the above, I will use the platform of this lecture to answer some of the frequently asked questions on insurance and also to address other issues or questions that may emerge from this discussion.
The Holy Bible tells us that man was created in the image of God and imbued with the infinite creative force of the Almighty. Despite the setback in the Garden of Eden, it is known and believed that this creative force was not intended to be relinquished or traded for dependency and or despondency. The major concern of God all though the bible was that actions of man should be based on equity and love (10 commandments). Our Lord Jesus Christ took time to elaborate on this in the various sermons particularly as per Mathew 5: 21–43.
The spirit of enterprise was also emphasized and rewarded (See parable of the talent Mathew 25: 14–29). Thus as the society grew from primitive stage to modernity, it became imperative that employing the creative force which God endowed man with, man will strive to find a solution to the myriad problems of the society – particularly that of sustaining and adding value of God’s creations.
Insurance is one of the later day institutions created by man to address some of these problems. It has been described as one of the most ingenious creation of man in his quest for a better and more prosperous society. The role of insurance as a stabilizer of the society is well known in advanced society (industrial and post industrial) where insurance has overtime contributed greatly to loss indemnification, growth in capital, money and real estate markets as well as roles in urban risk management. Useful lesions are indeed provided by these advanced societies on how emerging nations such as Nigeria can organize and manage her economy on sustainable growth basis.
THE CONCEPT OF INSURANCE
In simple terms, the concept of insurance derives from our every day understanding of Community, Security, Co-operation, Collaboration, Savings, and Peace of mind. The word of God admonishes us to love our neighbours as ourselves and indeed to be our brother’s keepers. This obviously is intended to be achieved by every person practicing and obeying the Ten Commandments. However, the impossibility of achieving an ideal state in a human society created the necessity for establishing institutional mechanism for managing risks and paying compensation when a loss occurs arising from natural causes or in the course of human relations.
The institutional mechanism for this purpose includes:
1. Setting fund aside for losses and catastrophes:
2. Reacting to losses by begging and seeking for aids. (The churches seem to excel in this):
3. Governmental intervention (social welfare, social security, unemployment benefits, donations and infrastructure renewal):
4. The insurance mechanism.
The limitations of these mechanisms are self evident.
· Setting fund aside for future tragedies and catastrophes may be attractive in an affluent society but it is still a non productive strategy that holds hostage, fund that should be meaningfully engaged in creating wealth elsewhere. Besides, it is also known that in this circumstance, the calculation of risk and the estimation of reserve may not be realistic. The fund also may be prone to abuse and misappropriation or misapplication. An example is the recent discovery of monumental fraud in the management of pension fund in Nigeria.
· The strategy of reacting to losses through begging and seeking for aids is unpredictable in outcome. This is more so in the present world which is buffeted by multiplicity of catastrophes. Thus, to whom shall we run to in a world where every person has his own problem. Let us also remind ourselves that so much abuse of this strategy in recent times has made donors to be now both skeptical and cynical in their response to these situations.
· Governmental intervention is a failing strategy in Africa. Institutions established for the purpose of intervention in situations of disasters and catastrophes are poorly funded and badly managed. Where donations are announced by government, such is trailed by controversies either in the fact that they are self seeking politically or that the donation may not altogether be redeemable.
Therefore, talking about the adversities of this world, the book of proverbs 27: 12 teaches that “A prudent man foreseeth the evil and hideth himself; but the simple pass on and are punished”.
The evil which the prudent man foresees are numerous and debilitating. They include: Arson, Armed robbery, Famine, Kidnapping, Assassination, Violence and malicious damages, Maritime perils, Floods, Tsunamis, Hurricanes, Earthquakes, as well as Illness and death
In the ancient times, the prudent man managed these risks by not keeping his eggs in one basket (diversification, separation etc) but in the modern time, a really prudent man takes up insurance to “hide himself” while “the simple pass on and are punished”.
The failings and limitations of all other institutional mechanisms that are neither insurance nor insurance based have been mentioned extensively in this lecture. These fallings and limitations provide strong arguments in favour of insurance as the best risk management strategy in modern times.
Insurance has been defined as “the system under which individuals, businesses and other organizations or entities in exchange for payment of a certain sum of money known as premium are guaranteed compensation for losses caused by a certain perils and under specified conditions”. (E. Ozor 2000, Integrated dictionary of insurance).
By its very nature, it is liquid (pooling of fund), it is equitable (indemnity), it is contractual, (actionable) and it is legal (justiceable). Where at all a benefit of doubt exists in insurance transactions, it is often resolved in the favour of the insured.
I am indeed encouraged to describe insurance as a God inspired risk management strategy because the bible made a justification for insurance, particularly the life assurance variety when it stated in Proverb 13:22 that “a good man leaveth an inheritance to his children and the wealth of the sinner is laid up for the just”. The book of 1st Timothy 5:8 also warn that “if anyone does not provide for his relative and especially for his immediate family, he had denied the faith and is worse than an unbelievers”.
The basic principles of insurance are in tandem with biblical teachings on equity and justice. For instance, it is a standard requirement in insurance transaction that the risk you want to insure must be insurable. It is also a condition precedent to insurance that you must:
1. Have insurable interest in the risk insured
2. Make equitable contribution in premium
3. Always act prudently as if uninsured
4. The event that leads to loss must be fortuitous and not self inflicted
The claims that you may make are also treated on the same basis thus:
1. The loss must have been caused by the insured perils
2. Your claim must not be more than indemnity – The whole idea is to restore you to the exact position you were before the loss.
3. The proximate cause of your claim must be the insured risk
Proximate cause as classically defined in the case of Pawsey V Scottish Union & National (1908) “means the active efficient cause that sets in motion a train of events which brings about a result, without the intervention of any force started and working actively from a new and independent source.
The raison d’être of insurance is risk. Thus without risk, insurance will find it difficult to justify its relevance in the value chain of managing life and limb and that of wealth sustenance and preservation. Risk is pervasive, thus no person is immuned from the impact or effect of risks.
· Thus the holiest person may as a matter of God’s design die a motor accident or plane crash or be hit by a moving object.
· Priests and other religious have been known to be killed or injured armed robbery situations or even through assassinations and kidnaps.
· The situation in the Northern part of Nigeria is a classical example of the risky situation the Christian Church has found itself in recent times. Thus churches are being bombed and worshipers killed in thousands by the Boko Haram sect.
· Cars bought for priests and for other evangelical assignments are not immune from theft and vandalization.
· An earthquake or flood or heavy windstorm in a locality may not discriminate in the destruction of properties in the locality including churches and schools and hospital owned by these churches.
· No person, including the top echelon of the church is immune from crimes of violence such as kidnapping, assassination and armed robbery.
Thus, for emphasis, risk is pervasive and does crystallize in varying times and intensity. Therefore, the understanding and appreciation of risk should be same for all groups though approaches to risk management may differ. These approaches will necessarily be dictated by the expected financial impact or consequence of the risk at time of occurrence.
In these days that you require millions and indeed billions of naira to rebuild a burnt church or millions to replace a stolen car or millions and or thousands of naira to do surgery following accident, the dependence on God to help in this matter will have to be in creative ways such as taking up appropriate insurance covers for foreseeable risks. Were it possible, the best option would have been to eliminate risks altogether but how do you eliminate risks in a rapidly changing world like ours? For instance our clergy men used to trek to for places to celebrate masses and most times were carried in hammock to these places but as technology evolved, they rode on bicycles, motorcycles and cars. Some Pentecostal church Pastors are even said to now own jets. These are risks in themselves and even if you are sleeping in your house, there is no guarantee that an aeroplane will not fall on you. Trailers have been known to ram into people’s houses and killed them while asleep. The increasing sophistication of the society also tend to neutralize some efforts at risk mitigation. The bible admonishes us to turn the other cheek, if slapped. The wisdom in this action is to stop the spread of violence but only time will tell how the church will handle.
In all this, while it is absolutely necessary that we pray to God to keep us and our earthly belongings safes, it is essential that we plan to hedge the effect of risk through insurance as a risk management measure.
THE CHILD OF GOD AND INSURANCE
The foregoing raises the vital question; where lies our faith in God, if we now opt for worldly arrangement such as a risk management measure.
Alternatively, we may be asking does a child of God need to take insurance.
For sure, this concern is not new but biblical lessons abound to assist us to explore and understand the need to use the creative intellect God has endowed us with to solve some of our earthly problems; it is not for nothing that God created us in his own image and like (Gen 1)
Though God has promised to wipe away every tear from our eyes (Rev: 21.), to provide all our needs (Philippians 4:19) and has allowed us to cast all our anxieties on Him (1Peter 5:7) but he did confirm in the parable of the talents (Mat. 25:14-30) that we are expected to take all prudent care to sustain and propagate anything that God graciously put in our care. Therefore, to avoid to take up insurance in the presumption that as a children of God, it will not be our portion to get injured or die in an accident or to have our houses burgled or maliciously damaged is to live fatalistically. God abhors such attitude to life hence he ordered that the worthless servant in the parable of the talents should be thrown outside into darkness, where he will be weeping and gnashing his teeth (Mathew 25: 30).
INSURANCE PRODUCTS, VALUE CREATION AND SUSTENANCE
This segment of this discourse will achieve the objective of introducing you to how various insurance products can be used to conserve value or create wealth.
The earliest insurance products addressed issues like fire and allied perils, maritime risks and burial expenses. Over time, other insurance products or solutions have evolved to tackle diverse risk exposures. The principal objective of these products however remained the same as follows:
· To create peace of mind (in the belief that there is a fall back)
· To restore (after a loss) (e.g.) indemnity
· To create assets for dependents or estate when deceased
o Modern day objectives include the following:
· To achieve efficient tax planning (life premium policies are tax deductible)
· To create annuities for post retirement well being.
· To create collateral securities for possible loans from financial institutions.
· To satisfy statutory requirements of nations state, i.e. taking up insurance covers that are compulsory by law).
Thus, it is necessary to evaluate insurance product offerings in terms of whether the products fit into value creation objective or value sustenance objective.
VALUE CREATION OBJECTIVE
These are products that by their nature create instant values at the inception. Example:
Life Assurance Policies include: Group life assurance, Endowment policies, Investment linked policies, and Term assurance, etc.
VALUE SUSTENANCE OBJECTIVE
These are products that by their nature restore you to statuesque after the occurrence of loss. All other insurance policies fall into this category: Fire, Burglary, Marine insurance, Householders, Liability policies, Machinery breakdown/Engineering policies, Construction risks policies, Consequential loss, Motor insurance, All risks etc.
Within these two objectives are insurance policies that are compulsory by law. In Nigeria, the insurance policies that are compulsory by law are as follows:
1. GROUP LIFE INSURANCE – In line with the PENCOM act 2004
Pencom Act 2004 makes it the sole responsibility of the employer to take up the policy on behalf of his/her employees. The policy provides security to the employees while in employment and provides compensation (300% of annual emolument) to employee’s beneficiaries in case he/she dies while in service. This policy is good for Priests, (especially those on defined salaries); workers in parishes, seminaries, church owned schools and hospitals. Other affiliated organizations including business owned by our church members should be encouraged to take up this policy.
2. Builders Liability Insurance – in line with Section 64 of the Insurance Act 2003
This policy is taken out by the owner/contractor to insure the building before the commencement of work at the site for the purpose of providing compensation to workmen or third party on site who may suffer loss, bodily injuries or damage to third party property.
This policy is most ideal of the various construction work going on in the church such as Construction/renovation of churches, building of hospitals and schools.
3. Occupiers Liability Insurance – In Line with Section 65 of the Insurance Act 2003
It is the responsibility of the owner/occupier of a building or premises to insure the building against the hazards of collapse, fire, storm, earthquake and flood for compensation to any member of the public or third party who may suffer any loss, death or injury caused by those mentioned hazards.
The church, especially the Catholic Church has onerous responsibility in this regard. More than any other organization in the country, religious organizations (Christian, Muslims etc.) have massive capacity buildings that at prime times hosts between 1, 000 to 5, 000 people including those that are outside the buildings together with the numerous cars and lorries which conveyed people to those buildings.
4. Motor Third Party Insurance – In Line with Section 68 of the Insurance Act 2003
This is an insurance taken up by vehicle owner/user for compensation to third party in the event of death, bodily injury or damage to property. This insurance cover is one of the earliest (since 1940s) to be made compulsory due to the obvious fact that a moving vehicle poses a lot of danger to third parties in terms of causing death, bodily injury or damage to third party. Please note that what is compulsory is third party insurance and not comprehensive insurance. Thus comprehensive insurance (which is inclusive of third party) is necessary but optional. It is also important to note that while this insurance policy tried to establish a limit to the compensation that can be paid for third party property damage, compensation for bodily injury and death are unlimited and are at the discretion of the court or the negotiating party. This is a potentially dangerous situation to organizations especially if claimants are very knowledgeable about the law and their rights. The best way out is to shift this potential liability to insurance companies through ensuring that our vehicles have at least a genuine third party insurance cover.
5. Health Care Professional Liability Insurance – In Line with Section 45 of the NHIS Act 1999.
This is a policy taken out by a healthcare provider to provide protection/compensation to patients who may suffer injuries, loss or death arising from the negligence of healthcare professionals.
The church has continued to play a leading role in healthcare provision through owning hospitals, running clinics, health advisory service etc. It is incumbent on the church therefore to where applicable take up this insurance.
In concluding this section of my paper, it is important to draw the attention of the church in Nigeria to why she should proactively and impulsively obey these laws.
To start with, our Lord Jesus Christ led the way on matters of the state and the church when He declared in Mathew 17:27 “But so that we may not offend them, go to lake and throw out your line. Take the first fish your catch, open its mouth and you will find a four drachma coin. Take it and give it to them for my tax and your”.
A second important point is that there is a rising wave of rights consciousness and litigiousness in the world of today. The Catholic Church as a very wealthy organization is a sure candidate for litigations and heavy awards on matters of liabilities. Therefore, it is wiser and more prudent to insure these liabilities both for corporate defense and in deference or obedience to the law of the land.
Finally, it is also a social and civic responsibility of the church to advise members to obey the law.
FREQUENTLY ASKED QUESTIONS ABOUT INSURANCE ADMINISTRATION
From my experience as an insurance practitioner, most of the frequently asked questions about insurance administration in Nigeria bother one the following:
1. The small print and the hidden caveat
Quite frankly, this was a problem in the early up to late seventies. Insurance policies were then pre – printed and thus were victims of the quality of printing including typefaces and font sizes of this era. It was indeed tasking to read these policies as they were not friendly to the eye. Beyond this basic problem, these policies had clear provisions about conditions precedent and subsequent to liabilities. Modernity has however added flavour to insurance practice. With computers and the various software available, insurance policies are now printed in modern English, friendly font sizes and with explanatory notes. However, all these positive development notwithstanding, it will always be advisable to transact your insurance through an expert intermediary – The Insurance Broker.
2. Insurance Companies – Fast to collect premium but slow or reluctant to pay claim
Honestly, this problem existed in the past when all manners of people were permitted to open shops as insurance companies. These were poorly capitalized, ill equipped and inappropriately staffed companies that were more or less operating as sole proprietors.
Today, insurance operations are better regulated and complaints channels are more efficient. The regulatory and self regulatory channels that maintain keen oversight on insurance matters in Nigeria are follows:
· National Insurance Commission (NAICOM)
· Nigeria Insurance Association (NIA)
· Nigeria Council of Registered Insurance Brokers (NCRIB)
· Institute of Loss Adjusters of Nigerian (ILAN)
· Professional Reinsurance Association of Nigeria (PRAN)
· Chartered Insurance Institute of Nigeria (CIIN)
The Nigerian Insurance Association, the Umbrella body for underwriters has as a step forward set up an insurance ombudsman bureau headed by a retired Supreme Court judge to look into complaints by consumers.
We need also to point out here that as a commercial contract, insurance policies can be determined in the court. It is also important at this juncture to distinguish between genuine complainants and blackmailers who cry wolf because they have been stopped in their track to defraud insurance companies.
The highest point of insurance practice today is the payment of genuine claim. That is the best advertisement for the efficacy of their products and no serious minded company can toy with an opportunity to gloriously settle genuine claims.
I do hope we are all now agreed on the fact that insurance is a God’s inspired risk management strategy. The church and indeed all and sundry should embrace it and seek guidance on how it can be used to create and sustain wealth including fostering good neighborliness. Just like any other institution created by man, insurance institution is neither perfect nor expected to be. However, judicial and other regulatory processes have been evolved to make insurance the best platform for indemnification and compensation.
The hallmark of insurance is equity and of course its associated maxim that he who comes to equity must come with a clean hand.
The above is manifestly evident in the insurance principles of insurable interest, indemnity, contribution, proximate cause, subrogation etc.
The church should be happy with a business like insurance that is founded on these equity based principles hence without hesitation, I hereby seek that the couple-insurance and the church be now wed.