He made this known at the Business Journal 10th anniversary lecture and awards on ”Infrastructure and economic growth: Exploring the strategic alliance” held in Lagos.
He said through the protection, firms’ financial stability was enhanced by the insurance company which cover.
Smart said the industry also promotes entrepreneurship, encourages innovation and the vitality of the market; offers relief and, by so doing, reduces pressure on the government; increases financial intermediation through the creation of liquidity and savings through life insurance products and promotes of risk prevention, thereby contributing to sustainable and responsible development.
He said: “In the absence of a risk transfer mechanism like insurance, economic activities would be much lower and hence will result in economic loss. Insurance also helps to smooth out the volatile economic condition. Also, in the absence of insurance, human behaviour, particularly risk aversion would either lead to avoiding these activities or excessive precaution and both of these actions would result in an economic loss.
“Also to be noted is that risk transfer mechanism will reduce fear, anxiety, frustration or demoralisation which can reduce productivity in the environment. It encourages creativity, innovation, entrepreneurial activities and trade that are vital for sustainable growth.”
On insurance contribution to world’s Gross Domestic Product (GDP), Smart said: “According to Swiss Re, insurance contribution to the world’s GDP was 6.23 per cent in 2016. Insurance contribution to the GDP of developed countries is very significant. For instance, in Japan, the GDP is 11 per cent, while in areas, such as North America, it is about eight per cent. In United Kingdom and the Netherlands, the figure is about 12 per cent, while for France, it is about 10 per cent.
“However, in Nigeria, the penetration rate is still very low. Insurance contribution to the GDP is still less than one per cent. Efforts are on to increase this figure significantly in the coming years. Researchers have concluded that based on their findings there is a significant and a positive relationship between insurance and economic growth globally .”
He said it was also interesting to look at another perspective of insurance, relative to investment in infrastructure; various forms of benefits can be mentioned.
“Also, good roads will reduce the number of accidents thereby leading to reduction in claim on motor insurance, goods in transit Insurance and group personal accident insurance, among others. This will, ultimately, lead to a better, stronger and a healthier insurance industry,” he added.