Kidnapping And Ransom – A New Dawn In Nigeria | By Ọlọbẹ Yoyọn
Kidnapping and ransom (K&R) insurance came into being in the 1930s. However, it did not catch on until the 60s after kidnapping became rampant in Europe. Groups like the Red Army Faction in Germany, Eta in Spain and the Red Brigades in Italy made K&R a viable business in the 60s.
The basic tenet of this insurance is that in the event of a kidnapping, the insurance policy would reimburse the policy-holder the ransom money paid to the kidnappers.
There is a big caveat though, the insurance policy must be kept secret and could be voided if made public by the policy-holder. Also, the policy only pays out once the ransom has been paid. The insurance company does not provide money upfront for the ransom. It is left to the victim’s family and friends to raise the ransom.
Negotiation with the kidnappers used to be the job of the policyholders until mid-70s when a brilliant insurance broker called Julian Radcliffe revolutionised the industry. His approach was to set up a branch jeered towards hostage response by hiring security experts to handle negotiations.
Over the past few decades, a duopoly of Hiscox (UK) and AIG (US) dominates this insurance market. These two behemoths have enjoyed their duopoly status for decades but not anymore! A nimble startup in Lagos, Nigeria has come out into the open to challenge the hegemony of these two grandies with a new risk pricing model.
Dr Olatunde Ojo, a brilliant physicist and the founder of Lagos based Laspoma Insurance has come up with an innovative way of pricing K&R insurance premiums.
Calculating how much a ransom is likely to be is both an art and science. Knowing how to navigate the labyrinth of ransom negotiation is another thing entirely.
Dr Ojo whose parents had been kidnapped three times in Nigeria knows it all. He has created an algorithm that can calculate with surgical precision:
– the probability of being kidnapped,
– by who (Boko Haram, Fulani herdsmen, jobless youths, local hooligans, mafia etc),
– where (on the road, in the house etc),
– on which day
– the amount of ransom
The algorithm can also work in hostage situations and this is what got Hiscox and AIG worried. Afraid that their cash cow is about to be slaughtered by a newbie from Naija, they are in a race to buy Laspoma Insurance. Dr Ojo, however, says he ain’t selling! With the recent spate of kidnappings in the motherland, the business can only go from strength to strength. Moreover, Laspoma has decided to expand its business to Mexico, Iraq, Brazil, India, the Philippines, Lebanon and Columbia before the end of this year.