The recent protests against hardship and bad governance in Nigeria have reinforced the overriding need for insurance companies to brace up and restrategise to meet their obligations to policyholders to stem off unpleasant consequences of renege, writes JOSEPH INOKOTONG.
The dust raised by protesters against bad governance and hardship in the country is barely settling down, people and businesses are beginning to count their losses.
Amidst the unfortunate incident, which degenerated to violence in some cities, insurance companies can learn few tips on how to handle similar future happening, although there has not been any reported case of default in claims settlement.
Insurance companies in Nigeria are reputed to honour their obligations to policyholders, even when instances abound where the regulator had to call out an insurer on the need for prompt claims settlement. Generally, non-payment of legitimate claims has not been very noticeable, though there could be isolated cases in the country.
However, experts say insurance companies can easily cope with claims settlement in the aftermath of sudden mass protests resulting in loss of lives and properties by having a disaster response plan to quickly respond to large-scale events. Increasing staffing and resources by bringing in additional adjusters and support staff to handle the surge in claims could turn in enormous relief.
Implementing a claims triage system by prioritizing claims based on severity and urgency; using technology through leveraging digital platforms for claims reporting, assessment, and processing are potent means of getting over the challenge.
Communicating effectively, by keep policyholders informed about the claims process and timeline; collaborating with other insurers via sharing resources and expertise to expedite claims settlement, and working with local authorities by coordinating with government agencies to access affected areas and gather information could assist insurers to weather the storm.
Also, providing additional support like offering assistance with temporary housing, food, and other essential needs; reviewing and adjusting policies through update policies to better cover future events, and maintaining transparency and fairness by ensuring consistent and equitable claims handling are some important measures that should not be ignored by insurers.
Experts reiterate that by taking these steps, insurance companies can efficiently and effectively manage claims settlement in the aftermath of mass protests, while also supporting affected policyholders.
When protests happen unexpectedly, insurance companies may need to tap into various funding sources to settle claims.
Here are some possible sources: Reinsurance – Insurance companies can claim from their reinsurers, who provide additional coverage for large-scale events.
Reserves: Insurers maintain reserves, which are funds set aside for unexpected events, and can be deployed to pay claims if the need arises. Capital buffers – Insurers have capital buffers, which are funds above the minimum regulatory requirements. Emergency funding – Some insurers have emergency funding arrangements, such as lines of credit. Government support – In extreme cases, governments may provide financial support or assistance.
Catastrophe bonds: Some insurers issue catastrophe bonds, which are specialized bonds that provide funding for specific types of events. Industry pools: Insurers may participate in industry pools, which share risks and resources. Reinstatement premiums: Insurers may charge reinstatement premiums to policyholders to replenish depleted reserves.
Investment income: Insurers can use investment income to supplement claims funding.
External funding: In extreme cases, insurers may seek external funding from investors or other sources. Insurers often maintain a combination of these funding sources to ensure they can respond to unexpected events like mass protests, which result to destructions of properties.
If an insurer fails to meet its obligations for claims settlement to policyholders, several consequences as regulatory action can occur. Insurance regulators may impose fines, penalties, or revoke the insurer’s license. Lawsuits and legal action can be taken. Policyholders may sue the insurer for breach of contract, bad faith, or negligence.
The insurance company may suffer reputation damage such that the insurer’s reputation may be severely damaged, leading to loss of business and market share. Financial instability – The insurer may face financial instability, potentially leading to insolvency or bankruptcy. Policyholder protection fund: In some cases, a policyholder protection fund may be activated to cover claims, but this is typically a last resort.
Guarantee fund: Some states or countries have a guarantee fund that provides coverage for policyholders in case of insurer insolvency. Liquidation: In extreme cases, the insurer may be liquidated, and assets sold to pay off claims. Class-action lawsuits: Multiple policyholders may join together to file a class-action lawsuit against the insurer. Media scrutiny: The insurer may face negative media attention, further damaging their reputation. Loss of business licenses: The insurer may lose licences to operate in certain states or countries.
To avoid these consequences, insurers must prioritise claims settlement and maintain sufficient funds to meet their obligations to policyholders.
Insurance companies have several options to handle spontaneous protests that lead to loss of lives and properties. These include parametric insurance offer, which entails insurance products that trigger payouts based on event severity. Catastrophe bonds: Issue catastrophe bonds to transfer risk to capital markets. Reinsurance: Purchase reinsurance to transfer risk to other insurers.
Risk pooling: Participate in risk pools with other insurers to share risk.
Government partnerships: Collaborate with governments to offer specialized insurance products. Contingent business interruption coverage: Offer contingent business interruption coverage to protect businesses. Offer event cancellation insurance to protect event sand terrorism insurance to protect against terrorism-related losses. Offer cyber insurance to protect against cyber-attacks related to protests. Utilize data analytics to better understand and manage protest-related risks. Develop crisis management plans to quickly respond to protests. Engage with local communities to better understand and mitigate protest risks. Establish specialized underwriting units to handle protest-related risks. Collaborate with other insurers to share best practices and risk management strategies. Government-backed insurance programmes by participate in government-backed insurance programmes to provide coverage for protest-related losses.
By exploring these options, insurance companies can better manage the risks associated with spontaneous protests and provide more effective coverage to policyholders.
Additional valuable measures on handling spontaneous protests by insurance companies are to stay informed by monitoring local news, social media, and government alerts to stay informed about potential protests.
Risk assessments: Conduct regular risk assessments to identify potential vulnerabilities. Business continuity planning: Develop business continuity plans to ensure operations can continue during protests.
Employee safety: Prioritise employee safety and provide guidance on protest safety protocols. Property protection: Take measures to protect properties, such as installing security cameras and alarms.
Community engagement: Engage with local communities to build relationships and stay informed about local issues. Review policies: Regularly review insurance policies to ensure adequate coverage for protest-related risks.
Specialised insurance products: Consider offering specialized insurance products, such as protest-related business interruption insurance. Collaborate with local authorities to stay informed and coordinate responses.
Crisis communication planning: Develop crisis communication plans to ensure effective communication during protests.
Data-driven decision making: Use data analytics to inform decision making and risk management strategies. Protest risk management frameworks: Develop protest risk management frameworks to guide response efforts.
Training and education: Provide training and education to employees on protest response and risk management.
Review and update policies: Regularly review and update policies to ensure they remain relevant and effective. Seek professional advice from experts in risk management, insurance, and crisis communication.
By considering these additional factors, insurance companies and organizations can better prepare for and respond to spontaneous protests, minimizing potential losses and ensuring business continuity.
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