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Compulsory insurance: NAICOM, insurers target additional N836bn premium

By Patience Saghana
The National Insurance Commission (NAICOM) and insurance operators have teamed up to enforce compliance with the six compulsory insurance products with the aim of generating  additional N836 billion premium income.

The Insurance Act of 2003 makes 16 insurance products compulsory. But insurance companies have only developed  six. The six products are  Third Party Motor Insurance (Section 68 of Insurance Act 2003); Builders Liability (Section 64 of Insurance Act 2003); and the  Occupiers’ Liability (Section 65 of Insurance Act 2003). Others are the  Workmen’s’ Compensation of Section 40 of Workmen’s’ Compensation Act 1897; Health Care Professional Indemnity of Section 45 of the Nigerian Health Insurance Scheme 1995 and the statutory group life of Section 3(2) and Section 9(3) of Pension Reform Act 2004.

Insurance industry operators said  that the products would have generated over N1trillion premium last year if the sector had been serious about them. Rather  the six products  generated only N164billion and some fractions in 2008.

Against this background  the National Insurance Commission (NAICOM)’s Insurance Market Development  & Restructuring Initiative (MDRI) Project seeks to increase the industry gross premium income from N164.5 billion in 2008 to N1.10 trillion by 2012. It is also designed to create about 250, 000 jobs, lower the insurance gap from the current 94 per cent to 70 per cent and ensure an improvement in the level of appreciation of insurance business by the populace.

The project also seeks to increase insurance contribution to the GDP from the current 0.72 per cent to 3.0 per cent and increase the insurance premium per capita from N1,200 to N 7,500 by 2012.

Under the new programme, which took off early this month, the Commission is to  enforce  sections 64 and 65 of the Insurance Act, which mandates  compulsory insurance of public buildings and buildings under construction and other compulsory insurance in the market.

However, the industry regulator has decided to go beyond this  and enforce compliance with  the six compulsory insurance products. Commissioner for Insurance, Mr. Fola Daniel disclosed this at a two-day workshop on compulsory insurance adding  that apart from enforcing the provision of compulsory insurance products on underwriters, NAICOM would also introduce certain initiatives that would further enhance the performance of the industry as a whole.

He regretted that the insurance sector had become an all-comers’ affair and a stopgap measure for job seekers. He therefore said that work was in progress to ensure that the industry provides gainful employment for the citizenry.

“The number of Nigerians engaged in the business is infinitesimally small compared to the population and the available insuring opportunities. A programme of dignifying, modernizing, sanitizing and expanding the scope of this channel of the corporate agency has been put in place by the commission with a view to driving the enforcement of compulsory insurance and generating about 250,000 new jobs between now and 2012″, he said.

“The industry’s claim settlement volume is quite impressive in recent times, yet the Nigerian insuring public is not fully satisfied. A water-tight claim management guideline has been developed in conjunction with the products being handed down to you and the commission will enforce strict compliance with the guidelines”, he told the insurance executives.

Mr. Kunle Awobodu, Chairman, Nigerian Institute of Building said that if the project was properly implemented, the compulsory insurance of buildings would assist in averting the incessant cases of building collapse in the country.

According to him, the policy would also help to reduce the number of defective buildings as no underwriting firm would insure buildings that were likely to collapse, and urged insurance companies to faithfully pursue the implementation of the policy instead of looking at premium collection alone.

He explained that the institute has already established a relationship with the insurance industry to implement the policy, adding that insurance companies must work in collaboration with the construction industry professionals to determine the structural efficiency of buildings to be insured.

“To me, this is a landmark decision from NAICOM. When laws are made and there is no effective enforcement mechanism, people will circumvent such laws with impunity. This has been the case in the industry but with this development, I am convinced that Nigerians will begin to take full advantage of risk protection that insurance offers.

“I believe this is the time the insurance companies need to do more in terms of massive awareness and aggressive marketing about their products that could affect the lives of Nigerian positively.”

Proper enforcement has been one of the factors militating against the development of the country’s insurance business. Out of the 16 insurance policies that are compulsory, just six of them have been developed by the insurance companies and these are generating about 55 per cent of the insurance industry premium income.

The six products include motor third party insurance, builders’ liability insurance, workmen compensation insurance, occupiers’ liability insurance, healthcare professional indemnity insurance and statutory group life insurance. These compulsory products are to be enforced under Section 5 and 69 of the insurance Act of 2003.

The insurance Awareness Project, an initiative of some of the leading insurance companies in the country, is a sensitisation campaign aimed at enlightening Nigerians about the benefits and opportunities in the country’s insurance business.

The campaign, which deploys an integrated marketing communications strategy, is borne out of the need to address the low awareness and patronage level of insurance business in the country. It also seeks to disabuse the minds of some Nigerians on the negative perceptions and widespread misconceptions that attend the industry and its practitioners.

In order to wipe out the menace of fake operators within the third party motor and marine cargo clause “C” market, Daniel said the commission had put in place a new administrative and technological approach that would ensure sanity. He, however, added that as earlier agreed by the associations of insurance underwriters and brokers, industry operators would have to make financial contributions to the projects over the next three years.

Mr Wole Oshin, chairman, NIA during a courtesy visit to the office of Minister of Federal Capital Territory (FCT), Aliyu Modibbo Umar, called for collaboration with the industry to ensure that the culture of insurance is fully entrenched in all activities of his ministry.

Oshin said the insurance industry would like to work with the FCT Minister in the area of ensuring full implementation of compulsory insurance of public buildings and buildings under construction with a minimum of two floors, provision of compulsory life insurance cover and annuity for all the workers under the FCT ministry and the enforcement of compulsory motor insurance for all vehicles plying Abuja roads.

Citing Section 64 of the Insurance Act, he stated. “No person shall cause to be constructed any building of two floors without insuring with a registered insurer his liability in respect of construction risks caused by his negligence or the negligence of his servants, agents or consultants which may result in bodily injury or loss of life to or damage to property of any workman on the site or of any member of the public.”

Similarly, Section 65 of the Insurance Act states that “Every public building shall be insured with a registered insurer against the hazards of collapse, fire, earthquake, storm and flood.”

The NIA boss therefore sought the co-operation of the Minister in ensuring that adequate and relevant insurance covers are taken to protect the assets of the Federal Capital Territory and to ensure that these insurances are backed by adequate budgetary provisions for the premium payment.”

He therefore pledged that insurance companies under the umbrella of the association would live up to expectation by settling all genuine claims arising from the transaction promptly and expeditiously.

He assured that NIA member companies are credible players in the industry and that all claims arising from these transactions would be settled promptly and expeditiously,” he noted.

In his response, the FCT Minister promised that his Ministry would support the association in its effort to promote the culture of taking insurance especially in the Federal Capital Territory.


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