Vol. 1(2), pp. 008-013, June, 2013 Available online@http://www.uniqueresearchjournals.

org/UJBMR 2013 Unique Research Journals

Unique Journal of Business Management Research

Review

The role of flood insurance in providing benefits to flood victims in Nigeria

Sunday C. Nwite
Department of Banking and Finance, Ebonyi State University Abakaliki, Ebonyi State, Nigeria. E-mail: nwitewhite2006@yahoo.com, sunnynwite@gmail.com. Tel: 080-37743134.
Accepted 15 June, 2013

Flooding poses tremendous danger to both people and property. Although, flooding does not frequently occur in Nigeria, whenever it occurs, it often claims many lives and damage properties worth millions of naira. The 2012 Nigeria flood disaster is a typical example. About 303 persons died, while 2100,000 people were displaced between July and November 2012. The metrological society of Nigeria has also predicted that there could be another flooding in Nigerian this 2013 at the peak of the raining season. Hence, this study evaluated the role of flood insurance in providing benefits to flood victims in Nigeria. This study shows that insurance industry is expected to play a significant role in the management of flood risk in Nigeria by providing various flood insurance policies that would be beneficial to flood victims. That insurance industry apart from financial benefits provided to flood proffers other management strategies to control flooding in Nigeria. That some of the flood disasters were due to human factors or activities such as deforestation, bush burning, poorly constructed dams, indiscriminate dumping of waste materials, poor town planning among others. Recommendations were made that dams and drainage ditches should be well constructed, people should avoid refuse dumping along water ways/channels, there should be proper urban planning to prevent avoidable urban flooding, dry dams should be constructed for flood control, government should provide forest reserves on strategic watersheds and encourage regular environmental sanitation. Key words: Flood, insurance industry, dam, reservoir, flood victims and drainage.

INTRODUCTION Flooding poses tremendous danger to both people and property. Since 1900, floods have taken more than 10,000 lives in the United States alone. This is because it is often difficult to judge the depth of water or speed of the current, flood waters can be deceptive (Hamilton, 1987). In Nigeria, the 2012 Nigerian flood killed about 363 people and displaced over 2,100,000 people as at November 3rd 2012. The Ogunpa River flood in Ibadan in 1997 also claimed so many lives and properties (Adeniyi, 2012). The Big Thompson Canyon (Colorado) flood, which killed 139 people in 1976, proved a tragic illustration of a sobering statistic. 95% of those killed in the flash flood try to out run the water along their path rather than climbing rocks or going uphill to higher grounds (Amanda, 2006). Beyond the risk of fatalities, floods devastate homes, towns, and even entire regions. The great Mississippi River flood of 1993 covered an area 500 miles long and 200 miles wide. More than 5000 homes were damaged and 12,000 miles of farmland were washed out. According to Broad (2005) June 1972 was a traumatic month. In the Black Hills of South Dakota, a series of thunder storms caused heavy rains along the Eastern slopes, resulting in flash flooding along Rapid Creek, which flows through Rapid City, South Dakpta. The

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flooding caused more than #100 million in damage and at least 237 people died. During those same months in the East the remnants of Hurricane Agnes caused torrential rains across the Mid-Atlantic States, especially from Virginia through New York. In the subsequent flooding and flash flood, 118 people perished and the entire community inundated. In November 1977, heavy rain helps to weaken an earthen dam near Toccoa, Georgia. This lead to the death of 40 people, half of them children. While in the loss Angeles area in 1978 over 20 lives were lost therefore, this study examine the impact of flood on economic development of Nigeria, and the expected role of insurance industry as a management strategy. THE CONCEPT OF FLOODING Oxford advanced Learners Dictionary defined flooding as a large amount of water covering an area that is usually dry. According to Sordlin (2007), flooding can be defined as the accumulation of excessive quantity of water in an area without flowing away easily. TYPES OF FLOODING There are five main types of flooding and they are briefly highlighted as follows: 1). Tidal flooding: This is a type of flood that is caused when both sea and river defenses may be overtopped or breached by a combination of low pressure weather systems and peak high tides. Storms with high wind speeds cause tall and powerful waves and low pressure fronts cause sea levels to rise above normal levels. High tide levels vary through the lunar and solar cycle and when superimposed upon other tidal variations exceptionally high tides result. The onset of flooding from the sea and tidal rivers is often sudden and the strong forces driving it present a significant danger to life. It is often possible to forecast, with reasonable accuracy this type of flooding due to the predictability of the tide and tractability of low pressure systems. 2). Ground water flooding: This type of flooding occurs when low lying areas sitting over aquifers may periodically flood as ground water level rise. This type of flooding is often seasonal and therefore can be forecasted with good accuracy. It is often slow in its onset. 3). Fluvial flooding: This type flooding occurs in the floodplains of rivers when the capacity of water course is exceeded as a result of rainfall or snow and ice melts within the catchments areas further upstream. Blockages of water course and flood channels or tide locking may also lead to pounding and rising water levels.

River defense may then be overtopped due to increased water levels or breached by large objects of debris at high water velocities. The flooding at onset can be quite slow in some catchments with steadily rising water levels. This type of flooding can usually be predicted with good accuracy. 4). Pluvial flooding: This type of flooding is caused by surface water flooding due to rain water run-off from urban and rural land with low absorbency. Increased intensity of development in urban areas has given rise to land with a larger proportion of non-permeable surfaces, a problem often exacerbated by overloaded and outdated drainage infrastructure. There circumstances combined with intense rainfall, can give rise to localized flooding. This type of flooding occurs mainly outside of recognized flood plains and because it is caused by quite localized weather conditions is very difficult to forecast. 5). Flooding from sewers: Flooding from sewers can occur where there are combined storm and foul sewers and their capacity is exceeded due to large amount of surface run-off in a short time. Poor cleaning and maintenance can lead to blockages that can also cause local flooding. This type of flooding is hard to predict, has significant sanitary consequences for those affected, and can occur very rapidity. 6). Flooding from manmade infrastructure: Canals, reservoirs and other manmade structures can fail causing flooding to nearby downstream areas. Industrial activities, water mains and pumping stations can also give rise to flooding due to failure. CAUSES OF FLOOD IN NIGERIA The major causes of flooding in Nigeria are; heavy rainfall, severe winds over water, unusual high tides and failures of dams and other structure that return the water (Aina, 1989). 1). Heavy rainfall: During times of steady heavy rainfall, periodic floods occur on many rivers, forming a surroundings region known as the flood plain and the rest travels over the land as surface run-off floods occur when ponds, lakes, riverbeds, soil, and vegetation cannot absorb all the water due to heavy rainfall. Water then runs off the land in quantities that cannot be carried within stream channels or retained in natural ponds, lakes and manmade reservoirs. 2). Severe wind over water: Even when rainfall is relatively light, the shorelines of lakes and bays can be flooded by severe winds - such as hurricanes that blow water into the shore areas. This is not often experienced in Nigeria. 3). Unusual high tides: Coastal areas are sometimes flooded by unusually high tides, such as spring tides especially when compounded by high winds and storm

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surges. 4). Influence of urban planning: Adeloye and Rustum (2011) analyzed the causes of flooding problems being encountered to recommend sustainable management solutions to them. Data on climate, drainage infrastructures and physical planning regulations were collected and extensively analyzed. The investigation revealed that contrary to popular wisdom, climate change or unusual high rain-fall is not the primary cause of the flooding problem in Lagos. Rather, the increased urbanization, lax planning laws in flood plains and the lack or inadequate storm drainage facilities in the city are to blame. FAILURE OF DAMS AND OTHER MAN MADE WATER INFRASTRUCTURE Dams, canals, reservoirs and ponds can fail causing flooding to nearby coastal and downstream areas. Industrial activities, water mains and pumping stations can also give rise to flooding due to failure. Infact the flooding experienced in Nigeria in 2012 was largely attributed to failure of dams both in Nigeria and our neighboring country Cameroon. MECHANISMS OF CONTROLLING FLOOD According to Adeloye and Rustum (2011); some methods of flood control have been practiced since ancient times. These methods include planting vegetation to retain extra water, terracing hillsides to slow flow downhill, and the construction of flood ways (manmade channels to divert floodwater). Other mechanisms include construction of dams, river defenses, coastal defenses, lakes reservoirs, self closing water barrier to hold extra water during times of flooding. 1). Dams: Many large dams to have flood control reservations in which the level of a reservoir must be kept below a certain elevation before the onset of the rainy /summer melt season so as to allow a certain amount of space in which floodwaters can fill. Many dams are designed completely or partially to aid in flood protection and control. 2). River defenses: In many countries, rivers are prone to floods and are often carefully managed. Defenses such as levees, bunds reservoirs and weirs are used to prevent rivers from bursting their banks. When these defenses fail, emergency measures such as sand/bags or portable inflatable tubes are used. 3). Coastal defenses: Coastal flooding has been addressed in Europe and the America with coastal defenses, such as sea walls beach nourishment, and barrier islands.

4). Self-closing flood barrier: The self-closing flood barrier (SCFB) is a flood defense system to protect people and property from inland waterways floods caused by heavy rainfall, gales or rapids melting snow. The SCFB can be built to protect residential properties and whole communities as well as industrial or other strategic areas. 5). Other control mechanisms: Other proactive measures for prevention and control of flooding include; proper town planning to ensure that buildings are not erected in flood pains and the incorporation of sustainable drainage systems in the flood prone areas. THE IMPACT DEVELOPMENT OF FLOOD ON NATIONAL

Flooding has many impacts; it damages property and endangers the lives of humans and other species. The Impact of flooding could however be specified or highlighted under the following headings. 1. Loss of life: In extreme cases, flooding may cause loss of life. When flooding occurs in its extreme cases it poses tremendous danger to peoples life. 2. Damage to property: beyond the risk of fatalities, flood devastates homes towns and even entire regions. The great Mississippi River Flood of 1993 covered an area 500 mile long and 200 miles wide. More than 50,000 homes were damaged, and 12,000 mile of farmland was washed out. 3. Flooding results in health hazards: Portable water supplies may be lost or contaminated in a flood and this can have immediate health effects upon people and animals because of environmental pollution. 4. Flooding also interrupts socio-economic activities: The socio-economic and emotional costs due to flooding can also be significant and are widespread and indiscriminate in flooded areas. 5. The economy can also be severely affected by flooding: Business may lose stock, patronage, data and productivity. 6. Flooding makes human and vehicle movements difficult: The disruption to transport infrastructure can have knock on effects to wider area. 7. Vital infrastructure may also be damage or disrupted: Electricity and gas supplies can be interrupted to individual properties but also to wider communities if sub stations and transformers themselves are flooded. FACTORS WHICH DETERMINE THE EFFECTS OF FLOODIND 1. The level of predictability: This affects the timing, accuracy and communication of warnings given before a flood.

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2. The rate of onset of the flood: A flood that rises rapidly, with little or no advance warning is called a flash flood. Hence how quickly the water arrives and the speed at which it rises will govern the opportunity for people to prepare and respond effectively for a flood. 3. The speed and depth of the water: This dictates the level of exposure of people and property to a flood. It is difficult to stand or wade through even relatively shallow water that is moving. Flood water often carries debris and can apply devastating force to property and other receptors. 4. The duration of the flood: This is another important factor in determining the extent of flood impact, particularly on individuals and affected communities. THE CONCEPT OF INSURANCE Modern insurance is a legal contract between two parties, the insured and the insurer. It is effected when the insured transfers from his own shoulders the financial burden of some potential misfortune, to the broader shoulders of the insurer who in return for agreeing to assume a potential risk of loss, receives a payment know as premium (Nwafor, 2005). According to Ivamy (1986), a contract of insurance in the widest sense of it may be defined as a contract whereby one person called the insured undertakes in return for the agreed consideration called premium agree to pay to another person called the insured a sum of money, or its equivalent on the happening of a specified event, where the payment is discretionary and not obligatory the contract is not one of insurance. The insurers, by collecting sufficient amount of premium, rely on the probability that only another some of the losses they insure against will actually occur within any given period. FUNCTIONS OF INSURANCE The process of insurance has been evolved to safeguard the interest of the people from uncertainty by providing certainty of payment at a given contingency. The insurance principle comes to be more and more useful in modern world. The importance or functions of insurance to an individual and the nation cannot be overemphasized. They are briefly stated as follows; 1. Provision of financial security or guarantee. The primary function of insurance is provision of financial security; that is to pay sum insured or compensate an individual or organization for financial loss resulting from the occurrence of the insured events. 2. Insurance engenders confidence and eliminate fear. 3. Insurance promotes industrial safety and general loss

prevention measures. 4. Insurance also encourages international, multinational and global trade. 5. For the economic growth of the country. Insurance provides strong hand and mind protection against loss of property and adequate capital to produce more wealth. 6. Insurance provides employment opportunities to citizens of a nation. 7. Insurance provides revenue to government. The profit of insurance companies is taxed by government. 8. Insurance eliminates dependency. At the death of a father or husband, destruction of property and goods, the family would suffer. Insurance is here to assist such victims by providing adequate amount at the time of loss. 9. Life insurance encourages savings and creation of wealth. Life assurance is a long-term contract with elements of protection, saving and investment. 10. Adequate capital from insurance accelerates the production cycles, both manufacturing and construction industries as well as the agricultural sector etc. VARIOUS WAYS INSURANCE INDUSTRY CAN AID FLOOD VICTIMS Insurance industry can assist or aid flood victims in two main ways; through corporate social responsibility or by designing insurance policies that would best suit the needs of flood victims. a. Social responsibility: In this regard, insurance industry can be of help to flood victims by way of providing relieve materials such as drugs, food, clothes, mosquito nets, provision of drinking water and other amenities after a flood disaster. The second aspect of this sub-heading leads us to the discussion of various insurance policies the insurance industry could design to aid flood victims. The policies are briefly discussed as follows; 1. Idleness insurance/business interruption insurance: This is a type of insurance policy that covers an insured against loss of future earnings due to destruction of business property by fire, flood and breakdown of machines(s) used for business purposes or death of keyman. This type of insurance could also be called comage or consequential loss insurance. 2. Engineering insurance: Engineering insurance covers the insured against the risk of losses or damages and injuries inherent in the operation of machines. It covers damages to engineering equipment due to fire or flood disasters. 3. Fire insurance: This is a type of insurance policy designed to cover the insured against losses by or incidentals to fire. 4. Motor insurance: Nigerian insurance Act (2003) states

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that motor insurance is an insurance against loss of or damages to or arising out of or in connection with the use motor vehicles including third party risk. 5. Goods in Transit insurance: This is a type of insurance policy designed to cover losses or damages to insured goods during transit due to accident, theft, fire or flood disasters. 6. Theft insurance: Theft insurance is the type of insurance policy which covers the insured in respect of loss of or damage to the property insured which results from entry to or exist from the premise by forcible and violent means (Nwite, 2004). 7. Accident insurance: The reason for this policy is to make available compensation to an insured in the event of an accident resulting to injury or death. Compensations are usually termed capital sums in case of death or stated injuries such as loss of limbs or sight (Okonkwo, 2005). 8. Sickness insurance: This is a type of insurance policy designed by the insurers to cover the insured against certain types of sicknesses. Usually, the coverage is to reimburse the insured against all medical expenses incurred due to the insured sickness. 9. Disability income policy: disability income insurance is a form of health insurance that provides periodic payments when the insured is unable to work as a result of illness, disease, or injury. THE IMPLICATIONS OF FLOOD MANAGEMENT Effective flood management has tremendous positive implication to individuals and the economy at large. 1. Effective flood management helps in detection, forecasting and prediction with good accuracy the occurrence of flood disasters. This will help to reduce the loss of life and property during flooding. 2. Flood management reduces health hazards during flooding. 3. It helps to reduce pollution of the environment due to deposition of debris. 4. Flood management helps to reduce economic waste. 5. Effective flood management encourages economic development. 6. It promotes general safety, risk management consciousness and flood prevention measures. 7. Effective flood management eliminates or reduces to the barest minimum dependency rates after flood disasters. 8. It increases the safety of vital infrastructure such as electricity ,roads railways etc 9. Flood management improves food security in the country. This is because most irrigation farming is done in the coastal areas. 10. More funds will be made available for other

developmental projects instead of being diverted to assist flood victims due to lack of flood management and prevention. CONCLUSION Based on the findings of this study, we conclude that flooding has significant negative impact on economic development of Nigeria because of its adverse consequences. Flooding often result in the loss of lives and properties as in the case of Ogunpa River flood in Ibadan in 1997 and the recent 2012 Nigerian Flood which affected about 30 states out of the 36 states of the federation. Properties worth billions of naira were lost in 2012 Nigerian flood. However, this study shows that insurance industry is expected to play a significant role in the management of flood risks in Nigeria by providing various insurance policies that would aid flood victims and other flood management strategies or measures. RECOMMENDATIONS Based on the findings of this study, the following recommendations were made to help combat the negative impact of flooding in Nigeria. 1. There should be proper urban planning to prevent avoidable urban flooding. 2. There should be legislation against indiscriminate dumping and erection of building in swampy areas. 3. Providing forest reserves on strategic watersheds. 4. Regular environmental sanitation to drain culverts 5. People should avoid refuse dumping along water channels 6. There is need to carry out public enlightenment campaign on the effect of flooding. 7. Dams, reservoirs and drainage ditches should always be well constructed to avoid over flowing. 8. Dry dams should be constructed for flood control. Dry dam refers to a dam that serves purely for flood control without any conservation storage. REFERENCES Adeloye A, Rustum R (2011). Flooding and influence of urban planning in Lagos; Journal of urban design and planning (ICE), 164(3): 175-187. Adeniyi EO (2012). Development and Environmental Management in Nigeria Industries; Ibadan. Aina OA (1989). Environmental Pollution Problems. The Nigerian Business Law and Practice Journal Notes on Environmental Edict No. 13 of Lagos State.

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Amanda R (2006). Floods, tornadoes, Hurricanes, Wildfires, Earthquakes--- why we dont prepare. National institute for occupational safety publication. pp. 90-123. Broad WJ (2005). High-Tech Flood Control, with Natures Help in Europe. The New York Times, th September 6 . Hamilton LS (1987). What are the Impacts of Himalayan Deforestation on the Ganges Brahmaputra Lowlands and Delta? Assumptions and Facts. Mountain Res. Dev., 7(3): 256-263.

Nwafor MC (2005). Introduction to Insurance; Onitsha; the General Studies of Insurance in Nigeria Book Point Ltd. Nwite SC (2004). Element of Insurance, Enugu; Hossana Publications Ltd. Okonkwo VI (2005). Basic Principles and Practice of Insurance; Enugu; Hossana Publications Ltd. Sordlin NS (2007). Global Evidence that Deforestation Amplifies Flood Risk and Severity in the Developing World. Global Change Biol., 13: 2379-2395.