Operators mull a policy review

By Rosemary Onuoha

THERE are indications that the insurance industry may not meet the N1trillion premium income target set for 2020 following the refusal by many states to implement Group Life Insurance for their workers. This would force the industry to shift, for a second time, the target year for this land mark having failed the earlier 2012 target date.

Fourteen years after the Contributory Pension Scheme, CPS, instituted by the Pension Reform Act (PRA), 2014 which repealed the 2004 Act, mandated employers to maintain group life insurance policy for employees, only four states, Lagos, Niger, Osun, and Rivers have complied.

Section 4(5) of the PRA 2014 states thus, “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 of the cover.

“Where the employer failed, refused or omitted to make payment as and when due, the employer shall make arrangement to effect the payment of claims arising from the death of any staff in its employment during such period.”

While the non compliant states have blamed poor state of their treasury for their default, insurance operators are of the opinion that the absence of penalty for defaulters in the law serves as escape route for the states. As a result insurance operators are gearing up for a review of the law.

Director General of the Nigerian Insurers Association, NIA, Mrs. Yetunde Ilori, said that the absence of sanction in the case of default in compliance has made many states to down-play the policy.

Down-playing of the policy

She stated: “If you look at the PRA 2014, what the section says on anybody that does not put in place the group life for their employees is that the employer will become a carrier of the risk. Although, different states are being approached by life insurance companies, but as regards enforcement, there is no sanction for default. The section on compulsory group life insurance is not strong like the sections backing the Contributory Pension Scheme because it just says ‘where you have not put up a group life in place, if there should be any death, the employer should take up the responsibility.’

“Hence, that is an aspect that we should be looking at when the time for review of the law comes up. We must insist that the law should be reviewed to make implementation of the compulsory group life insurance enforceable.”

Trillion naira market

It will be recalled that the National Insurance Commission, (NAICOM) had, in 2009, launched the Market Development and Restructuring Initiative (MDRI).

The initiative has, among others, the objective of transforming the industry from N160 billion premium income to a trillion naira industry by 2012. This, the Commission said, would be done through the enforcement of compulsory insurances.

However, the industry failed the target as the compulsory insurances have not been fully embraced by the general public.

At end of 2017 financial year, total industry premium stood at about N400 billion, a far cry from the trillion naira targeted. As a result, the industry shifted the target year to 2020 for hitting the one trillion naira premium income mark for the industry.

Managing Director/Chief Executive Officer, of Law Union & Rock Plc, Mr. Jide Orimolade, said that the insurance sector can rake in N1 trillion premium income by 2020 if there is collaboration amongst operators in the industry and the compulsory insurances fully enforced.

Contributory pension scheme

Former President of the Nigerian Council of Registered Insurance Brokers, NCRIB, Mrs. Laide Osijo, said that if all states that have adopted the contributory pension scheme could implement the group life insurance as stipulated in the Pension Reform Act, 2014, the one trillion naira premium income market could be attained by 2020.

Level of compliance by states

Although some states have adopted the contributory pension scheme and commenced pension remittance for their workers, they are yet to implement the compulsory group life insurance. Such states are Jigawa, Ogun, Kaduna, Delta, Zamfara, Kebbi, Ondo, as well as Anambra.

On the other hand, some states have not commenced pension remittance neither have they commenced implementation of group life insurance. Such states are Kano, Imo, Sokoto, Ekiti, Kogi, Bayelsa, Nasarawa, Oyo, Katsina, Akwa Ibom, Edo, Benue,  Kwara, Plateau, Cross River, Enugu, Abia, Ebonyi, Taraba, Bauchi, Borno Gombe, Yobe, and Adamawa.

Operators reaction

Commenting on the development, Head, Research and Corporate Strategy of PenCom, Dr. Farouk Aminu, said that the PRA 2014 mandates employers to maintain a group life insurance policy in favour of each employee for a minimum of three times the annual total emolument of the employee. But he lamented that many states are yet to comply.

Aminu said, “In line with the dictates of the PRA 2014, states are supposed to enact their own pension law similar to the laws of the Contributory Pension Scheme, CPS. However while 27 states have enacted laws on the CPS, eight states are currently at the bill stage of implementation. Yobe State is, however, yet to commence the process of enacting a law on the CPS.

“The challenge with implementation of the compulsory group life is that even while some states have enacted laws on the CPS, many of them have not commenced remittance of pension into retirement savings accounts of their workers. Where a state has not commenced remittance of pension contribution, such state cannot implement the group life insurance. In essence, PenCom is constantly engaging these states to make them realize that it is important that the aspect of that law is implemented.”

Osijo said that the attitude of some states towards the welfare of their staff is disheartening as many states have refused to implement the compulsory group life insurance for their workers.

Osijo stated: “The PRA 2014 mandates states to maintain group life insurance cover for their workers, unfortunately many states are not doing so. Since the pension scheme came into effect, the payment of gratuities to workers at retirement was abolished. However, the PRA 2014 made provision for insurance compensation to workers in the event of death, sadly many states are yet to comply.

“Unfortunately, many workers have been dying while in active service and no insurance compensation is paid to their beneficiaries.

Although, PenCom is trying on their own path in the sense that when you have anything to do with any government agency, they will ask you for the certificate of insurance before you are considered for any contract.”

Certificate of insurance

A Director in NAICOM said, “We have been having meetings with the states on a one-on-one basis to sell the benefits of the group life insurance to them. We have been educating them on how it will benefit their workers. We believe strongly that it is the best way to go.

Presently, we cannot compel them but we can only persuade and we believe that by selling the benefits to them, that will convince them to commence implementation.

We are also entering into various partnerships with states and by the time we are done with the partnership arrangements that we are putting in place, and we come up with a workable guideline on enforcement of the compulsory group life, I am very sure that the group life business in the states will witness tremendous change.”