Economic Shocks from COVID-19 and the Assessment of Micro-, Small-, and Medium-Sized Enterprises Emergence of Insurance Coverage in Urban South-West, Nigeria

The COVID-19 pandemic created financial uncertainties which affected economic growth and investments throughout different sectors of the world economy. It created ample setbacks and negatively affected priority sectors such as agriculture, healthcare, defense, finance, and construction. The COVID-19 risk is perceived differently and viewed as a global economic shock. Micro, small, and medium-sized enterprises (MSMEs) have been proven to be the powerhouse of sustainable development of most economies, even though most of them do not have any risk management tool set in place. Insurance coverage is one of the risk management tools that help protect businesses from shocks and enables them to remain in business. This chapter examines the impact of the COVID-19 pandemic on MSMEs’ level of production income and the uptake of insurance coverage in South-West, Nigeria. A quantitative approach is adopted with a representative sample of 192 MSME operators selected by snowballing sampling. Data were analyzed using descriptive and inferential statistics, including the treatment effects model, logistic regression, Pearson correlation coefficient, and Cramer’s V. The average age of the respondents was 37 ± 7.2 years—implying MSME operators in the study area are young and vibrant and, therefore, considered to be in their economically active years. Most MSME operators had at least secondary education in which 68.2% were providing services of some kind and can be classified as micro in nature as they employed less than ten employees. The findings revealed that the uptake of insurance coverage by MSMEs stood at 31%, while 69% were willing to take insurance coverage to mitigate future risks. MSMEs affected by the global pandemic showed more interest in taking up insurance coverage to mitigate future risks than those that were not seriously affected. Over 45% of MSME operators showed interest towards the uptake of fire and special peril insurance products, while about 29% were interested in the uptake of business interruption insurance products—reflecting on the proactive nature of doing business and new normal in the region. It is recommended that insurance companies should develop tailor-made products for MSMEs so as to make insurance more attractive. Given that the high cost of premiums significantly influenced MSMEs’ likelihood of getting insurance, flexible payments methods should be allowed for increased uptake. This will, in turn, boost productivity and confidence that in the event of any adverse market condition and undesirable future occurrences, they will not be worse off.