By Rosemary ONUOHA
Operators in the insurance sector have kicked against the reoccurring trend whereby underwriters under-value the Federal Government group life insurance by charging inappropriate premium.
Consequently, it is estimated that the industry will lose over N10 billion on the Federal Government’s group life for this year, which would likely be paid soon. Investigations revealed that the government’s insurance business stands at over N21 billion, but underwriters returned a value of only N11billion.
A company chief executive who spoke on the basis of anonymity, said the premium was undervalued by inexperienced underwriters, who quoted what the Head of Service (HOS) adopted as benchmark for this year’s premium.
Another CEO, who also expressed misgivings on the undervaluation of government insurance business, said his company was denied participation in last year’s group life business because he condemned the losses to the industry arising from improper rating.
According to the sources, such developments will continue to undermine the growth of the insurance sector.
Recall that the Head of Civil Service of the Federation, HOCSF, Goni Aji, said the government was ready to pay the outstanding N7 billion premium for 2011 and 2012.
According to Aji, government prioritized the welfare of its employees and the insurance cover would serve as an encouragement for families of deceased workers, adding that the government had to manage available resources in the light of competing demands.
Aji said what caused the six-month delay in the payment of workers’ insurance policy premium for the current financial year, was because his office could not secure on time the certification from the Due Process Office, which was required for the payment.
The HOS also explained that the process of payment of the group life insurance for the federal workers had changed, as it was now being handled by the office of the Accountant-General of the Federation, AGF.
He explained that the Federal Executive Council had approved that the payment of insurance premium should be carried out by the office of the AGF.
Aji said the OHCSF office had forwarded a letter to that effect to President Goodluck Jonathan for approval and was asked to revert to the earlier approval of FEC for the office of the AGF to pay.
He said, “There will be cover for the workers this year. What we have in the appropriation bill for 2013 insurance cover is N11billion. The total outstanding premium for 2011 and 2012 is about N7billion; that is, N4billion for 2012 and N3bn for N2011.
“The way it is done now is that the Ministry of Finance gives the instruction to the Director-General of the Budget Office and the DG officially sends it to the Accountant-General’s office; the Accountant-General releases the funds to the HOS and the HOS now pays into the respective insurers’ bank accounts and all that.
“So, it is just a question of electronically instructing the office of the Accountant-General to pay so that it can now reduce the time deployed to process it.”
Aji added that whether the full premium for this year would be paid or not depended on the level of revenue generation and inflow to the federal government.
In 2008, the federal government started the group life insurance scheme for its entire workforce with the first premium of N4billion. The regulation backing the scheme is contained in Section 9(3) of the Pension Reform Act, 2004, which states that the employer shall maintain life insurance policy in favour of the employee for a minimum of three times the annual total emolument of the employee.