Role of Insurance in Minimising Fire Waste
By Darlington Mgbojikwe
There is no doubt the exponential growth of the number of fire incidences in Nigeria. This phenomenon has posed great threats to the country's economic well being and industrial development.
Let me firstly define, in insurance terms what constitutes "waste". It is economic property lost or destroyed by fire and its associated perils such as lightning, tornados earthquakes, storms, hurricanes, floods, industrial strikes and even riots. On the occurrence of any of these perils, if on catastrophic levels, they leave behind serious economic consequences that run into billions of Naira. We are lucky, in this part of the world, that such natural perils are not common in Nigeria. If any of them ever happens on a large scale, the economic effect on our country should be better imagined. We may recover if we do, it would take a long time.
In a nutshell, wastes are basically the property lost by fire or associated perils that leave the debris economically useless after their occurrence.
There are many known occurrences or incidences most of which are publicised by the print and electronic media. Recently, there are reported cases of fire to public institutions, such as the damage occasioned to the Central Bank of Nigeria, zonal office building, Kano. A serious fire incident occurred a few days ago in the heart of Lagos, precisely Iganmu, where a bonded warehouse in which many organisations store their imported goods worth about N3 billion was lost. This is just one out of many already recorded or unreported cases this year. Obviously, there are hundreds of other incidences which are not captured by the mass media. The above stated incidents illustrate the ever increasing wastes sustained by individuals, corporate firms and the county. There is no doubt that some of these losses can be minimised if not completely avoided.
Over the past few years, our country has been plagued by various serious fire incidents, some of which causes are criminal in origin. Sometime ago, the Federal Government recognised this particular negative factor and the adverse effects on our economy, promulgated a decree against deliberate setting up of fires to public buildings and property, a capital offence. We all know that such legislations or laws are probably there as deterrents as, to date, I am unaware of celebrated cases of convictions by our law courts, bearing in mind our antecedents in terms of obvious arsons.
Fire Waste
Fire waste is a loss to the economy and in a country like Nigeria, relying so much on large importation of general goods for her consumption and development, concerted efforts should be made to minimise its effects. If these goods are destroyed by fire and the extraneous perils as listed earlier on in this paper, it then means that the foreign exchange used on them had been wasted. Thus, our foreign reserves are reduced by such unfortunate incidences.
Major fire incidents in commercial outfits and government concerns, involving loss of millions of Naira, always attract lots of publicity by the media. This brings to the fore, the high risks and attendant losses we are all exposed to in our country. Smaller incidents do not necessarily attract as much publicity but, I can tell you, they constitute an appreciable volume of national fire waste. They do not ordinarily hit the print and electronic media headlines and there are, in many cases, no insurance policies in place that would have been called upon in such circumstances. It is a pity that many of us cannot afford and do not take up many of the available insurance covers due to obvious factors such as meager disposable incomes. We thus rely and pray to God for divine protection of our lives and our properties.
In a factory, retrenchment follows any major industrial fire losses, if business interruption insurance policies are not in place to cushion the employers' outlay during the period of temporary closure or the period of re-activation.
Catastrophic fire losses do contribute to economic stunt of a nation by way of reducing employment opportunities and adding further burden to the government's economic resources in temms of outlays in amelioration of the affected persons or orgamisations.
In the developed and advanced economies, where advanced technology has taken over virtually all aspects of life and living, wastes arising from fire incidents do exist. However, the levels are reduced to the barest minimum due to readily availability of advanced facilities for immediate mitigations. The pre- operative watchword is "control" and/or "minimise" of the fire wastes by implementation of recommendations made by risk management consultants.
Causes
According to e xperts, almost all fire incidents are caused by somebody's carelessness. Some of these factors are careless disposal of lighted cigarette stub, misuse of electrical apparatus, electrical wiring defects such as the use of substandard materials and overloading of electrical sockets. Other causes are misuse of gas cooker, refueling of lighted kerosene lamps and cookers, storage of flammable substances in dwelling houses, spontaneous ignition and arson.
Control and Minimisation of Fire Waste
In Homes, keeping matches away from the reach of children, avoiding the use of defective gas cooker/kerosene stoves, guarding against overloading of electrical sockets, avoiding smokingin feud and avoiding the storage of flammable liquids like petrol, diesel and kerosene in homes. Ventilating kitchen early before the use of cooking gas/cooker, maintaining clean environment, providing non-combustible solid base for any lighted candle or mosquitoes coils,keeping passages or corridors free from blockages by any household materials,purchasing one or two multi-purpose fire extinguishers for use in the house for first aid fire defense and informing the fire service department of any fire outbreaks without delay.
In offices and industrial concerns, switching off all electrical points or sockets and removal of plugs from their sockets after office hours and production shifts or when not in use, disposal of refuse bins before closing houses, restriction of smoking to areas other than filling areas, storage and accounts divisions as well as disclosure of all staff of available emergency exists in the building where they work, with directional arrows. Other measures are avoiding the use of multi-purpose adaptors in any of the of fices or factories, teaching all staff the use of available portable and other extinguishing appliances in the building/factory as well as providing non-combustible ash-trays where smoking is allowed and informing the fire service on any outbreak of fire.
However, it should be noted that there is indeed a danger to the public if they are not correctly advised of the proper equipment necessary for fighting a particular type of fire. Use of the any wrong equipment can cause serious and total destruction of the property it is intended to save. In most cases, it could even result into injuries and possible death of an individual using the wrong equipment. National Electric Power Authority (NEPA) facilities contribute their "quota" in fire origination and the attendant wastes.
From my experience as a Loss Adjuster, many fires in factories, offices and residential properties are electrical in origin due to sudden short circuitry in machinery or supply system. For such fires, water type extinguishers must not be used. If mistakenly used for fighting such fires, they lead to very serious and disastrous consequences.
On the order hand, an important factor is the use of public enlightenment campaigns to enable the citizenry get acquainted with the hazards inherent in fire and possible control measures that should be put in place. The fire service do run series of courses ranging from basic to advanced fire fighting methods. Periodic lectures should also be organised by them on fire prevention and safety limits. They also offer free advices on types and quantities of fire equipment that should be installed in a premises. There are different types of fire extinguishers in use depending on the nature of the fire. These include water (H20), Carbon dioxide (C02), Dry Chemical Powder (DCP) and Foam.
As commonly displayed on multi-storied buildings, the fire service information states procedures that should be taken when fire outbreaks:
Raise an alarm to alert everybody in the building and attract outside help, call the fire service, evacuate the building, assemble at a pedestrian point or pre-determined location outside the building, call the roll to ensure no one is left in the building and ttack the fire with the available first aid fire appliances without endangering oneself.
Apart from the above procedures, certain precautions are usually recommended for specific buildings to make fire fighting operations easier in case of the unlikely event of fire incident.
These include the following installation of fire warning systems (such as break glass or any other alarm) to alert building occupants in case of fire outbreak. Provide fire-fighting equipment of the right type in each building, ensure easy access to fire fighting men and appliances and contact the fire service immediately on discovery of fire. Provide firemen external lift (especially in high-rise buildings), which can be used both for special and general use. Display fire exit notices on prominent positions as well as instructions on steps to be taken upon discovery of fire, installation fire alarms to alert occupants, raise alarm and call the fire service and ensure equipments are in perfect working condition at all times and seek advice on your design from fire service or specialist such as risk surveyors before and during building construction for appropriate locations of fire exits and installation of fire fighting equipments.
The Role of Insurance in Minimising fire Wastes
The role of Insurance in minimising fire wastes will be considered under two separate areas namely pre-loss (pre-acceptance) and post -loss measures.
Let me define the basic meaning of the term insurance. Insurance is a contract whereby one party, called the insurer, in return for a consideration, called premium, undertakes to pay to the other party, called the insured, a sum of money or its equivalent in kind upon the happening of a specified event that is contrary to the interest of the insured.
Insurers are therefore in the business as collectors funds called premium which are judiciously managed by investments that will grow the funds from which the few unfortunate insureds would be indemnified in the case of valid misfortunes. How do they manage this business? They firstly access the present risk and ensure that the right rate is applied to arrive at the right premium payable. Part of the risk is spread to other insurers and reinsurers.
Risk improvement measures are recommended and introduced in order to minimise the likely occurrence of such events that may eventually lead to fire waste. These, very important measures, could be achieved by way of regular pre-loss and post-loss management of the risk.
Pre-loss
This entails carrying out inspections of risks being proposed and presented for insurance coverage. Such physical inspections, otherwise known as surveys, are usually conducted by specialist or trained surveyors who basically obtain and supply facts that allows insurance companies to reach a decision on the acceptability of such a risk either at the point of proposal or at renewal of a policy and subsequently charge the appropriate premium.
Presently, most insurance companies in Nigeria today do not have in-house, trained surveyors. Hence, they engage or out-source these services to consultants, independent loss adjusters or surveyors for such assignments whenever the need arise. Other uses of the services provided by surveyors may come directly from big multinational clients or any organisation for presentation to their insurers for premium reduction or rebates on a good risk.
The Surveyor is expected, among other recommendations, to identify most of the factors which will expose all the low and high risks potentials and recommend the possibility of minimising the wastes that may arise if an insured peril gave rise to a valid claim.
I think, in this presentation, it is necessary for me to discuss two types of hazards associated with insurance business. They are physical hazards and moral hazard.
Physical Hazards: These are features, when introduced, can increase the possibility of a loss arising from a peril or one that may influence the extent of a loss and its eventual spread to third party properties. These include the following nature of occupation,construction of the building - details of height materials used etc, lighting and process heating, plant - type of machines in use, materials used and stored - hazardous materials and liquids should be identified and fire extinguishing appliances available in the premises.
Moral Hazards: This aspect deals with hazards arising from the possible behavior of the insured or members of his family and/or employees which may increase the possibility of loss by reason of carelessness or dishonesty.
Information relating to the composition of the company whether it is completely Nigerian or if foreign partners are involved in which case, their nationality, how long the business has been established, record of previous fires and details of house-keeping. We are all aware of certain nationals who are rated very high in such hazards. When sales or their businesses are on the downside of the hill, and their bankers are on them to service loans advanced to them, their stores and warehouses become very high risk of fire incidents.
After highlighting the above facts, the Surveyor is expected to make recommendations for risk improvements. All unsatisfactory fixtures are recorded and opinion on how these can be remedied. These requirements and recommendations must be practical and capable of implementation by the insured or proposer. These risk improvement measures are roles aimed by insurers at minimising losses and waste arising therefrom.
Post-Loss
A loss is an event that gives rise to a claim under an insurance policy. When such situations arise, independent loss adjusters are usually appointed by the insurance company.
A Loss Adjuster is an independent professional by training, who though appointed by an insurance firm, is habitually employed in the negotiation and settlement of loss by fire or other contingencies. In performing this role, he is expected to investigate the circumstances under which the loss occurred and relates his findings to the contract between the parties, that is policy document, before advising the insurers of their liability if an insured peril was in operation. They visit the scene of loss, investigate and thereafter assess the extent of loss sustained. In large claims adjustment, adequate measures, such as salvage procedures are introduced for the fire wastes reduction.
By their training, Loss Adjusters specialise in the various aspects of building, plants, machinery and verification of stock. In some firms, full time quantity surveyors, civil engineers, chartered accountants are employed to handle complex claims. In addition to their academic qualifications, they also train and pass the requisite professional Chartered Insurance Institute of Nigeria (CIIN) examinations.
In their presentations, they are expected to identify salient areas where risk improvements measures are necessary and usually recommended them for immediate implementations. Reasonable savings or reduction of fire wastes are achieved by immediate involvement and skills exhibited by loss adjusters.
Conclusion
I was unable to provide you with vital statistics of fire wastes our country has incurred over the years but I should, at least, remind you of "wastes" such fire incidents to visit on government properties such as old defence building, NITEL building at Marina, Apapa and Ikeja telephone exchanges and a host of others which, I am sure, most of us can easily remember and stagger figures against them.
I wish to commend the Nigerian insurance industry for efforts towards minimising insurance wastes by way of enlightenment to private, public and government organisations. The insurance consciousness in our country is very low,
Mgbojikwe is the Managing Director of the Chartered Loss Adjusters Limited
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