By Rosemary Onuoha
THERE are fears that the Federal Government of Nigeria may fail to renew the group life insurance cover for the 2019 financial year, a development likely to further put pressure on the insurance sector while leaving federal civil servants uninsured for the second consecutive year.
Insurance operators have complained that a major challenge they have with ministries, departments, and agencies, MDAs, of the government is that they wait for the budget to be passed before they start planning for insurance. In the past four years when budget delay has become the trend, they said that the process gets dragged by bureaucracy till year end leading to zero insurance cover for the fiscal year.
The planning process involves selection of underwriters and brokers interested in the group life insurance cover and about 20 insurance companies and 100 insurance brokers would be finally selected to underwrite the risk, if the fund is released.
Financial Vanguard learnt that as a result of this bureaucratic process the Federal Government did not renew its insurance scheme in 2018 even with the budgetary allocation of N5.4 billion for the workers’ life insurance policy in the 2018 budget.
Although about N5 billion has been earmarked for the scheme in this year’s budget, there is now uncertainty in the industry over the implementation as the lateness of the budget and further delay in the planning process has brought the circumstance that derailed 2018 scheme into play again.
Consequently, there are fears that the over 80,000 Federal Government workers will be left without group life insurance cover for a second year running. Also payment of group life benefits to the beneficiaries of Federal Government employees who died in active service since July 2017 will remain uncertain into 2019.
An industry chief executive told Financial Vanguard, “A lot of times the group life for Federal Government civil servants overlaps and it is all about bad management. If it is managed well, the premiums will be paid on time. We have advised them to plan ahead and adjust their renewal date to July when the budget would have been passed, so that it will run from July to June of the following year, but they have not accepted.”
Section 4 (5) of the Pension Reform Act (PRA) 2014 states that, “Every employer shall maintain a group life insurance policy in favour of each employee for a minimum of three times the annual total emolument of the employee and premium shall be paid not later than the date of commencement.”
According to the Permanent Secretary (Common Services Office) in the Office of Head of Civil Service of the Federation (OHSF), Mr. Yemi Adelakun, “The premium for Federal Government group life insurance is usually N5.4 billion annually for civil servants. That’s the figure and that had been recurring for the last three or four years.”
Financial Vanguard investigations reveal that Federal Government paid N3.3 billion out of the total premium of N5.4 billion for the group life insurance cover of its workers in June 2017. As a result, about N2.1 billion remains outstanding as premium for 2017 group life cover of its workers.
The group life insurance is an insurance cover undertaken by the Federal Government through the Office of Head of Civil Service of the Federation on behalf of the civil servants for their protection against unforeseen circumstances, such as death and disabilities suffered while in active service.
Former President of the Nigerian Council of Registered Insurance Brokers, NCRIB, Mr. Jide Agbeja, said that even if the Federal Government releases fund for the group life cover, the likelihood of some ministries, departments and agencies, MDAs renewing their policy for the 2019 business year is unclear as most of them did not renew in 2017 when fund was released.
Agbeja stated: “Majority of insurance patronage we saw last year came from the private sector as well as from motor business. In the private sector, we got more patronage from oil and gas, as well as telecommunication sectors because they know the importance of insurance. Hopefully, this year, the MDAs could begin to insure but I am totally not confident in them because in 2017 many of them did not renew their policies. This year we have seen elections come and gone and many MDAs were subsumed in electioneering activities. So the possibility of the MDAs renewing is really slim.
“The matter is made worse by the fact that those at the helm of affairs in the MDAs don’t care about insurance. It is as if they are being forced to insure. They don’t see government property and asset as their own and they believe that if anything happens to the assets, government will replace them. That has been a problem in this country.
“About six MDAs that used to be my clients just stopped insuring in 2017. They just did not renew and we cross-checked to see whether they have transferred the policy to another group of brokers, but they did not. It turned out that they just do not care about insurance. It is not their father’s property, so they just don’t care.
“If we are to abide strictly by the law, if any MDA loses any asset or property that is not insured, the top officials should pay for such loss because the money to recoup it is not in the budget. Unfortunately, when they cry to government, government will replace the loss, so they are just not eager to insure. Government should not assist MDAs that refuse to insure.
“A major challenge we have with the MDAs is that they wait for the budget to be passed before they start planning for insurance. Sometimes they end up not insuring even after the budget is passed.”
However, speaking on the development, Executive Director, Technical and Head, Corporate and Institutional Business, AIICO Insurance, Mr. Adewale Kadri, said that although the Federal Government scheme was not done last year, they are hopeful that it will be done this year, even though it is not guaranteed.
He said, “For government scheme, it was not done last year, but as it is now, we heard from good authority that the government is about to do the group life for this year. As a matter of fact some letters were distributed recently to some insurance companies for the group life. Although we are still negotiating the premium, we believe that it should be concluded as quickly as possible. However, government scheme aside, throughout last year, the industry did more of private sector group life covers because some private sector companies understand the fact that they need to protect the staff in case of death and the rest. Majorly last year, the entire premium from group life was from private sector.
“Hopefully this year, we expect that we are going to record from public sector participation, although it is not something that you can guarantee will come next year. If we have the premium this year, we will take it and make sure that it is well rated.”
Also speaking, President of NCRIB, Mr. Shola Tinubu, said that policy renewals last year were not too exciting due to Federal Government’s failure to renew its group life cover.
Tinubu said, “Last year policy renewals were not as exciting as hoped due to government’s absence from the scene. Government represents 60-70 percent of what goes on in this industry and when they are absent, business will be dull. So we are hopeful that they will renew their policy this year.”