By Favour Nnabugwu
Many floods cases may not be paid claims due to insurance gap as many who are exposed to flood risk are not covered by flood insurance
Flood insurance is a type of property insurance that covers a dwelling for losses sustained by water damage specifically due to flooding but after simulating the insurance uptake decisions insurance is able to assess the level of flood risk that is not covered, also known as the insurance gap.
Floods which cost the global economy more than $82 billion in 2021, the reason for insurance gap is that flood insurance is a special peril that is covered under a policy extension.
This, the Commissioner for Insurance, Mr Olorundare Sunday Thomas said that if insurers have to pay the enormity of the floods claims, it will shake the financial stand of the companies except the right premium is changed for flooding
But for those who have insurance, Thomas said, their claims would be paid soon for as long as they submit the right document for their claims.
“The enormity of damage caused by flood is massive. There is insurance gap where what is covered and what is not covered also comes in, he said”
“Floods in the country is certain, it comes year-in year-out. And insurance is not based on certainty”
There are about 18 states of the federation submerged in flood whilst many people were exposed to flood risk that are not covered by flood insurance.
The states are Kogi, Niger, Plateau, Benue, Ebonyi, Kano, Kaduna, Niger, Benue, Adamawa, Jigawa, Taraba, Bauchi, Anambra, Ebonyi, Yobe, Edo, Delta, Kogi, Lagos, Ogun, Ekiti and Plateau
Insurance covers only a fraction of the resulting economic losses. Insured losses from floods have averaged about N600 million yearly. And the protection gap is widest in emerging markets, where insurance covered just 5 percent of economic losses from floods compared with 34 percent in advanced economies.
In that case, the insured is charged extra premium for this extension, though it could be a small amount added to the original premium.”
Managing director of Tangerine Insurance, Mayowa Adeduro had said during an interview, that the level of patronage by individuals and house owners was still very low as many people were yet to appreciate that climate change is here with us.
Adeduro stated that since after the rains of past years, many corporate organizations and churches are beginning to take flood insurance and we are only hoping that more households consider this risk as a necessity.
For the market to provide cover for this specialised risk, it is important that house owners are included in the package so that payment of claims to affected people can easily be managed, an insurance broker said.
According to him, ‘In a normal traditional insurance, insurers use the economic law of large numbers to charge a relatively small fee to large numbers of people in order to pay the claims of the small numbers of claimants who have suffered a loss, and this makes it a manageable risks
Unfortunately, in flood insurance, the numbers of claimants is larger than the available number of persons interested in protecting their property from the peril, which means that insurers are unable to cover their costs in flood insurance, and this underscores why some insurers do not want to get involved in it, the broker also said.