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Protect your source of livelihood – Francis Ewherido

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By Francis Ewherido

The sudden loss of a source of livelihood by the breadwinner of a family can put the entire family in financial uncertainty. Daily upkeep, school fees, rents, medical attention, etc., all become endangered. That is the fate that has befallen many traders in markets located in Onitsha, Anambra State, Benin in Edo State and Ughelli, Delta State. Parts of these markets were raised by fire within one week recently.

Majority of the victims are going to need help from external sources to get back on their feet and that is a major worry. They will look up to family members, friends and government. They will be lucky to get family members and friends, who have the means and are willing to help. We have had many of such fires in the past where state governments made promises, but how many of such promises have been fulfilled. The only one I can recall was when a token was given to each victim, far less than what they lost. So, it is not likely they will get financial support from their state governments. In fact, as at the time of writing, the victims of the fire in Onitsha were lamenting that the Anambra State governor, Chief Willie Obiano, had not visited them.

There are many variables involved in these fires which are outside the control of the traders, but one of them is firmly within their control. That variance is fire and special perils insurance, which will get them back to business with ease after a fire-related loss without external support from family, friends or government. The traders, as a group, can take up a fire and special perils insurance to protect themselves against losses by fire, storm, flooding, explosion (qualified), etc.

This will ensure that anytime any of the insured perils occurs, the insurance company will indemnify them; that is, restore them back to the financial position they were before the loss. I advise that traders go as a group because that will give them more bargaining power and help to reduce the rate of premium. But where other traders are not willing to insure as a group, individual traders have an obligation to protect themselves from loss by fire and special perils. The premium is quite small compared to the value of your goods. It can be as little as N10,000 per annum. That is less than what some traders spend on lunch and drinks weekly

Beyond insurance, traders need to be in control of other variables. They should come together and set up a fire service station in their markets. I do not know the modalities for setting it up, but it should be possible. It is also not out of place in Nigeria. After all, for a long time now, Nigerians have constructed roads for themselves, provided drinking water for themselves and also provided security for themselves. All my life, I have been hearing about the absence or inefficiency of the fire service Very few people have had good stories to tell about the fire service.

The most recent one I witnessed was in my estate. A building caught fire. Luckily some of us in the estate had functional fire extinguishers with which we mitigated the fire. By the time the state fire service came, they had no water! So why exactly did they come, some of us wondered. Luckily, with collective efforts of neighbours, we were able to put out the fire, although we lost a security man, who was badly burnt, a few days later. So traders will fare better with their own fire service for now, just as some companies in the oil and gas sector do. In addition and as an immediate measure, traders should have functional fire extinguishers in their shops. This can be used to put out small fires before they snowball.
One more thing, traders need to refrain from blocking entrances and the roads in the market. We have had cases where fire devastated markets because the fire service could get to the areas of the market on fire.

If traders are able to do these, they will enjoy some benefits. For instance, the insurance companies will reduce the premium rate for fire insurance because the presence of a fire station within the market and fire extinguishers in individual shops, would reduce the risk of fire incidents and losses. Also, note that even with a fire and special perils insurance, only material damage is covered when there is a loss. Meanwhile, the traders will suffer loss of income, profit, etc., while they are rebuilding and trying to get back to business after a loss. A fire and special perils insurance will not compensate them for loss of profit. There is another insurance policy that does that. It is called Business Interruption Insurance or Consequential loss insurance.

Business interruption insurance covers profits that would have been earned had business operations not been disrupted. To ensure that the insurance principle of indemnity is upheld, the profits from prior months are used as a yardstick in the event of claim. This ensures that the insured is placed in the exact position he would have been financially had the loss not occurred. Business interruption insurance also covers operating costs and other costs still being incurred by the business based on previous statements of costs and employee wages.

The insured might have some vital staff he does not want to lose while the business is closed. Consequently, he continues to pay their wages. Also during the closure, the insured might lose some key staff. The policy provides for training of new staff. In addition, if the old staff are not familiar with the new machines used to replace the damaged ones, the policy also covers the cost of training the staff.

The challenge insurance practitioners have is that marketing fire and special perils to traders is already a tough task. Marketing a consequential policy (Business Interruption Insurance) is even a more difficult task. But in all honesty, what the traders should actually aim at is a combined policy of fire, special perils and business interruption insurance.

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