PROTOCOLS
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:
- Setting fund aside for losses and
catastrophes:
- Reacting to losses by begging and
seeking for aids. (The churches seem to excel in this):
- Governmental intervention (social
welfare, social security, unemployment benefits, donations and infrastructure
renewal):
- 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:
- Have
insurable interest in the risk insured
- Make
equitable contribution in premium
- Always
act prudently as if uninsured
- 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.
RISK
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.
Ø
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.
Ø
Priests
and other religious have been known to be killed or injured armed robbery
situations or even through assassinations and kidnaps.
Ø
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.
Ø
Cars
bought for priests and for other evangelical assignments are not immune from
theft and vandalization.
Ø
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.
Ø
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 SUSTAINANCE
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:
Ø
To
create peace of mind (in the belief that there is a fall back)
Ø
To
restore (after a loss) (e.g.) indemnity
Ø
To
create assets for dependents or estate when deceased
Modern day objectives include the
following:
Ø
To
achieve efficient tax planning (life premium policies are tax deductible)
Ø
To
create annuities for post retirement well being.
Ø
To
create collateral securities for possible loans from financial institutions.
Ø
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.
CONCLUDING
REMARKS
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.
Thank you.
ABOUT THE AUTHOR
Paschal
Emeka Egerue B.Sc. (Hons), M.Sc., MBA, ACII, FCIB is a Chartered Insurance
Broker whose impact on the Nigerian Insurance market is widely acknowledged.
He
is currently the Managing Director/CEO of Mainstreet Bank Insurance Brokers Co.
Ltd (formerly Afribank Insurance Brokers Co. Ltd); a company he nurtured to
eminent position in the Nigeria Insurance market.
An
active professional, Mr. Egerue is currently a member of the Membership and
Professional Standards Committee of the Chartered Insurance Institute of
Nigeria and also the Publication and Publicity Committee of the Nigerian
Council of Registered Insurance Brokers. He has attended numerous courses and
presented papers locally and internationally in various aspects of insurance
underwriting and management. To his credit are now three books and over 100
published articles.
Apart
from his recent endeavours at creating local capacity in oil and gas insurance
through his highly rated book on Oil and Gas Insurance in Nigeria, he is also
credit with the development of the novel and revolutionary product – Rent
Assurance policy now in the market in partnership with NEM Assurance Plc as the
underwriter.
A
devout catholic, Egerue s married with three children and holds the chieftaincy
title of Ugomba I of Umuezeala and Obiudo of Nkumeato.