This is not so with most African communities, where even a single insurance product could be lacking in a large household. I am not sure whether this could be attributed to the awareness about the risks that abound around us (or lack of the same), if its issues of trust or even crazier, if we have less risks compared to a European setting.
A lot of people do not appreciate insurance as a financial product. In fact many argue it is not one, that it is more of a business or life process product for a few select. This pushes most insurance consumers to the category of those complying with a certain regulatory issue, negating its purpose and relegating the importance of its existence. We engage insurance companies when in fear of clashing with government agencies like the police. This is very interesting.
Life and business have inherent risks. A risk is an occurrence that brings loss of whatever kind to an individual or a business. It could be loss of property, reputation or even lives within an organization. Some of the risks are insurable while others are not. Insurable risks mean that the party involved, for example a businessman, can pass those risks to another party, in this case an insurance company. In the event that an occurrence that brings loss unfolds, one will be compensated. Notably, most of the risks that were initially shun by insurers like riots are now accommodated within legal and industry frameworks for shouldering. However, some risks cannot be covered at all, such as earthquakes or floods, since nobody has control over them. This list is endless.
On the other hand, insurance can be treated as a tool for financial planning. Everybody knows that they will die one day. We don’t like talking about this in Africa. The fact that insurance companies have built products around this phenomenon makes it easier for one to plan beyond passing on. This is equally important to focus on products that create comfort for us even before death. An example is an education policy that prepares one well for the education of their children. With minimal contributions, one builds wealth for the future that guarantees comfort for themselves and the family.
In business, nothing is more critical than considering risks that may take place and ways of mitigating them. This is because most of business risks have far reaching implications once a loss happens. When a businessperson does not transfer such contingencies, they only expose the continuity of their business to oblivion. Lots of businesses have died for lack of insuring a simple loss.
It is important for those who have not yet considered risk transfer to do so. It starts with analysis of the possible risk factors in the business involved. One can then consider what the business can transfer and what they can shoulder.
