The Vice President of the Lagos Chamber of Commerce and Industry (LCCI), Mr. Gbenga Ismail, has said only 0.5% of Small and Medium Sized Enterprises (SMEs) in Nigeria hold insurance policies compared to 54 percent globally.
Due to this, he stated that the nation should concentrate entirely on creating an insurance environment that is more welcoming of and appealing to SMEs. He also added that insurance represented a crucial financial cushion to manage shocks and develop financial resilience in the early years of SME growth.
Ismail made this statement during a webinar on the value of insurance for small and medium-sized businesses that Coronation Insurance Plc and Coronation Life Assurance Limited jointly hosted (SMEs).
The virtual seminar was attended by a large number of participants from the insurance industry and Coronation small business clients. Ismail emphasized the importance of Nigeria’s 40 million SMEs for the country’s economic expansion, advancement, and long-term security. Ismail pointed out that the Covid-19 pandemic had caused the loss of two million SMEs in Nigeria, and that many new SMEs fail to grow quickly enough to take advantage of the prospects for which they were designed. He added that irregular and delayed payments are another major obstacle, and as a result, the majority of newly founded SMEs fail within 18 months of operation.
“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 difficulties in mind, a panel discussion featuring Adebowale Adesona, Executive Director, Technical, Coronation Life Assurance Ltd.; Louis Alozie, Country Manager, Wordplay; and Ayo Olojede, Head of Emerging Business, Africa Access Bank, agreed that risks to business property and vehicles, legal liability, general product, key person, and goods-in-transit risks cost SMEs dearly were common for Nigerian SMEs.
They claimed that insuring only a few of these fundamental risks could save Nigerian SMEs billions of dollars each year and vastly increase survival rates.
However, they emphasized the need for SMEs to speak with insurance experts to pinpoint only the risks that are essential to their company’s existence. 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.