By ROSEMRY ONUOHA

Insurance companies are losing Over N50 billion on annual basis as a result of state governments failure to provide compulsory Group Life Assurance cover for their workforce.

Seven years after the Pension Reform Act made it compulsory for all employers with more than five employees to provide Group Life cover for their workers, no state government out of the 36 in the country, has obeyed the provision of the pension law.

But the federal government has provided Group Life cover for its workers in 2010 and has renewed the scheme for 2011 with N8 billion paid as premium, but the states have made no effort to toe the path of the federal government.

Although, operators in the insurance industry have consistently called on state governors to comply with the law, no positive response has emanated from their quarters.

The Pension Reform Act 2004, Section 9 (3) makes it mandatory for all employer of labour employing five or more employees to maintain a life assurance policy for their employee at a minimum amount of three times their annual total emolument. This is meant to take care of their dependants at their demise while in service.

The life assurance required by the Pension Act is a Group Life Assurance covering death occurring within the period of insurance. In other words a Group Life Assurance scheme enables employer to provide a tax free lump sum benefit to an employee dependent and children, if they die in service.

Chairman of Nigeria Insurers Association (NIA), Mr. Olusola Ladipo-Ajayi, stated that while no state has provided Group Life Assurance for their workforce, many state governments have refused to enact their own Pension Act as stipulated by the Pension Reform Act 2004, thereby depriving their workers of the benefits of the pension scheme.

According to Ladipo-Ajayi, “Let all state governors enact their state Pension Act and insure the Group Life of all their employees as that will help to deepen insurance penetration in Nigeria.”

Mr. Bayo Ajidagba of Industrial & General Insurance Plc noted that provision of a group live assurance scheme goes a long way towards demonstrating an employer’s genuine care for staff welfare as well as encouraging loyalty and reassuring staff that they are valued.

The Pension Reform Act, 2004 which was introduced by the federal government in July 2004 moved the country away from defined benefit to defined contribution pension scheme.

The reform is meant to ensure that every person who has worked in either the public or private sector gets retirement benefits as and when due and to help encourage individuals to save toward catering for their livelihood during old age.

It also established a uniform set of rules and regulations for the administration and payment of retirement benefits in both the public and private sectors while trying to stem the growth of outstanding pension liabilities in the country.