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Tag: Insurance

  • Reps C’ttee invite NNPC, CBN, AMCON, AIICO, First Ins, others over alleged infractions in Insurance biz

    Reps C’ttee invite NNPC, CBN, AMCON, AIICO, First Ins, others over alleged infractions in Insurance biz

    The House of Representatives Committee on Insurance and Actuarial Matters has invited Chief Executives of Nigeria National Petroleum Corporation, NNPC, AMCON, AIICO, First Insurance, and other critical stakeholders to an investigative hearing from August 17th to 28th on alleged infractions in the Nigerian Insurance business environment.

    The invited CEOs are to appear before the House Committee next week Monday.

    Other insurance companies to appear in the first batch include Capital Express Assurance, Leadway Assurance, Mutual Benefits Insurance, Zenith Life Insurance, Hogg Robinson Insurance Brokers Ltd, Worldmark Insurance Brokers Ltd.

    This was contained in a letter signed by the Committee’s Chairman, Hon Darlington Nwokocha entitled:

    ‘INVITATION TO THE UNDER LISTED FOR INVESTIGATIVE HEARING/PRE-FORENSIC AUDIT MEETING’

    The Committee in the letter said:”Based on the resolution of the House of Representatives on “the need to investigate Insurance Breaches, Impunity and other infractions of some Federal Government Institutions”

    ” In line with Section 88 of the 1999 constitution of Federal Republic of Nigeria (as amended), the Chairman and Members of the House Committee on Insurance and Actuarial Matters commences forensic investigation on insurance transactions of Ministries, Department, Agencies, other government institutions, Insurance companies and Insurance brokers.

    This resolution emphasized the House of Representatives’ concerns as follows: Alleged breaches on insurance business by industry practitioners;
    Low retention capacity of dollar-denominated insurance business and the effect on Nigeria economy.

    The investigative hearing will also x-ray”Under-utilization of capacity of Nigeria Insurance industry, the practice and effect(s) of domiciling insurance ventures abroad.

    “The issues and prospects of ineffective regulation of foreign placements of insurances;The alleged loss of billions of naira by the nation through insurances of moribund assets, non- existent assets and high premium rates.

    “Alleged huge unsettled life insurance claims, Poor handling of Group Life Insurance Schemes, its effects on the motivation and productivity of working class citizens and non-payment/un-allowed deductions on entitlements of the surviving families.

  • How suspended NSITF management grew fund to N6b from N326m

    How suspended NSITF management grew fund to N6b from N326m

    The total balance in the account of the Nigeria Social Insurance Trust Fund (NSITF) grew from N326 million as at May 2017 to N6 billion, according to the latest figure obtained in the Fund’s financial record, as at the 2nd of July 2020.

    The feat was achieved by a number of innovations made possible by aggressive training and improvement in staff welfare: the two most formidable challenges that confronted the four hitherto unknown Nigerians who took the bull by the horn bolstered by their ingenuity and administrative competence and pulled the fund back from total irrelevance within a few months in office.

    Since the Fund began to implement the Employment Compensation Scheme (ECS) in 2011 sequel to the passage of Employees Compensation Act (ECA) in 2010 by the Goodluck Jonathan administration, there was no training of the new recruited staff that were hired to midwife the scheme while staff were stagnated as no promotion took place.

    The management team comprised Mrs Kemi Nelson, who heads the Operations of the Fund as Executive Director; Mr. Tijjani Darazzo, a retired high-ranking officer of the Central Bank of Nigeria (CBN), heads the Administration department as Executive Director; Mr. Jasper Azuatalam, a member of the Muhammadu Buhari for President Campaign Council in 2015 and 2019 general elections who is Executive Director Finance and Investment and a former Acting Director in the National Youths Service Corps (NYSC) Barrister Adebayo Somefun as the Managing Director/Chief Executive.

    The initial sign that their tenure would be turbulent was offered by the Minister of Labour and Employment, Dr Chris Ngige, who noted that he did not have an input into the selection process of these Nigerians.

    He opined that it is his responsibility to recommend to Mr President, ‘the proper and fit people to occupy the office’. There are five parastatals in the Ministry of Labour and Employment. They are: Nigeria Social Insurance Trust Fund (NSITF), the National Productivity Centre (NPC), National Arbitration Panel (NAP), Michael Imoudu National Institute for Labour Studies Ilorin (MINILS) and of course the National Directorate of Employment (NDE). In all these parastatals, none was the ‘recommendation’ of Ngige sought before appointments were made.

    In the NDE where the Director General, Dr Nasiru Ladan Mohammed Argungu holds sway, Dr Ngige had to abandon his duty post as the Chairman of the Board for Festus Keyamo when the heat generated by the Director General was too much for him to bear. As a member of the Presidential Campaign Council and an indigene of Kebbi state, Argungu, used his ‘northern connection’ to frustrate the Minister away from the Directorate.

    Upon resumption of office in May 2017, the Managing Director of the Fund, Adebayo Somefun said: “We will place high premium on training and improved welfare of our staff because they are the tool that we will use to deliver creditably. Training is important because it improves employees’ ability and skills and in turn improves performance both in quality and quantity. Staff have to be constantly trained and retrained or they lose their relevance in this new high-tech age.”

    Recognizing that probity is the most important pillar of the Buhari’s administration, the management promptly reinforced the Procurement department which was virtually non-existence as at the time of resumption of the management.

    To demonstrate its openness to transparency and accountability, the management willingly accepted the Professional that was posted to the Fund from the Bureau of Public Procurement (BPP) to help set up the revitalized department. So, the department was not peopled by loyalists or relatives of any members of the management as the BPP was given the freehand to post officers the Bureau felt were capable and efficient to drive the new vision of the management.

    The breakdown of the income showed that the management invested majorly in public equity investment, real estate, Federal Government bonds and treasury bills.

    The NSITF has estates in many states of the federation that included properties in choice areas in Abuja, Port Harcourt and Lagos, which continually yield high dividends at the end of the year depending on rent renewal agreements.

    So far in 2020, the management has collected total of N14,824,570,415.28 as at the end of June while generating another N26,945,000.00 from rental of properties.

    The management was not unduly focusing on revenue generation alone, it also ensured that other responsibilities do not suffer.

    Hence, to promote propriety and accountability, the accrued revenues are often split between responsibilities and obligation to ensure no department suffers unduly.

    Therefore, money is often split between claims and compensation, administration (inclusive of payment of salaries) and capital expenditure popularly called ‘CAPEX’.

    Indeed, some of the early dividends that the proactive measures taken as soon as the team settled resulted in a sharp rise of contribution from just over N18 billion in 2017 to over N27 billion as at last year 2019.

    Under the supervision of the Managing Director”s Office, staff welfare was improved upon from 2017 to date as all payment of all outstanding staff allowances in batches was initiated and paid to date.

    The Executive Director, Operations (EDOps), Mrs Kemi Nelson facilitated the writing of letters to indebted MDAs who had hitherto registered but had outstanding contributions which brought over N1 billion to the Fund.

    Her team also improved coverage of the scheme and registration of employees by over 25, 000 (a 150% improvement) and over 100,000 employers nationwide.

    The MD/CE and his team successfully coordinated the collaboration with National Assembly to recover outstanding contributions, which bolstered wider publicity coverage of the scheme and increased social media presence for the Fund.

    Management also engendered collaboration with other Agencies in the successful profiling of the Scheme on platforms such as the Arts and Culture group, NOA, BPP, INEC FIRS, Budget Office to reduce the occurrence of fake certificates of compliance and doctoring of employees’ emoluments by some employers.

    In a concerted effort to ensure that the Fund keys into the Federal Governments ‘ease of doing business’, management engineered the process of reducing the length of time for processing and the issuance of compliance certificates from two weeks to 48 hours within Nigeria. Within this period, the Fund ensured regular courtesy visits to sister MDAs such as FIRS, BPP, Lagos, Oyo, Ekiti State governments, NIMASA, NPA, INEC as a way of ensuring their commitment to the Scheme’s obligations, foster good working relationship and engineer the prompt remittance of contribution collections.

    The ED (Ops) also supervised quarterly interactions with the Fund’s registered employers to ensure improved service delivery.

    The Fund re-engineered its claims and compensation process to devolve the effectiveness of paying compensation promptly.

    It also devised the instrument of Inspection to profile underpaying employers, which led to the Fund successful collection of contributions from such employers in excess of N400million.

    As a way of boosting the morale of the workforce, the MD”s Excellence Award was instituted vis-a-vis Operations department also entrenched a system of rewards and recognition Fund-wide to deserving staff by writing letters of commendation and giving awards.

  • Protect your source of livelihood – Francis Ewherido

    By Francis Ewherido

    The sudden loss of a source of livelihood by the breadwinner of a family can put the entire family in financial uncertainty. Daily upkeep, school fees, rents, medical attention, etc., all become endangered. That is the fate that has befallen many traders in markets located in Onitsha, Anambra State, Benin in Edo State and Ughelli, Delta State. Parts of these markets were raised by fire within one week recently.

    Majority of the victims are going to need help from external sources to get back on their feet and that is a major worry. They will look up to family members, friends and government. They will be lucky to get family members and friends, who have the means and are willing to help. We have had many of such fires in the past where state governments made promises, but how many of such promises have been fulfilled. The only one I can recall was when a token was given to each victim, far less than what they lost. So, it is not likely they will get financial support from their state governments. In fact, as at the time of writing, the victims of the fire in Onitsha were lamenting that the Anambra State governor, Chief Willie Obiano, had not visited them.

    There are many variables involved in these fires which are outside the control of the traders, but one of them is firmly within their control. That variance is fire and special perils insurance, which will get them back to business with ease after a fire-related loss without external support from family, friends or government. The traders, as a group, can take up a fire and special perils insurance to protect themselves against losses by fire, storm, flooding, explosion (qualified), etc.

    This will ensure that anytime any of the insured perils occurs, the insurance company will indemnify them; that is, restore them back to the financial position they were before the loss. I advise that traders go as a group because that will give them more bargaining power and help to reduce the rate of premium. But where other traders are not willing to insure as a group, individual traders have an obligation to protect themselves from loss by fire and special perils. The premium is quite small compared to the value of your goods. It can be as little as N10,000 per annum. That is less than what some traders spend on lunch and drinks weekly

    Beyond insurance, traders need to be in control of other variables. They should come together and set up a fire service station in their markets. I do not know the modalities for setting it up, but it should be possible. It is also not out of place in Nigeria. After all, for a long time now, Nigerians have constructed roads for themselves, provided drinking water for themselves and also provided security for themselves. All my life, I have been hearing about the absence or inefficiency of the fire service Very few people have had good stories to tell about the fire service.

    The most recent one I witnessed was in my estate. A building caught fire. Luckily some of us in the estate had functional fire extinguishers with which we mitigated the fire. By the time the state fire service came, they had no water! So why exactly did they come, some of us wondered. Luckily, with collective efforts of neighbours, we were able to put out the fire, although we lost a security man, who was badly burnt, a few days later. So traders will fare better with their own fire service for now, just as some companies in the oil and gas sector do. In addition and as an immediate measure, traders should have functional fire extinguishers in their shops. This can be used to put out small fires before they snowball.
    One more thing, traders need to refrain from blocking entrances and the roads in the market. We have had cases where fire devastated markets because the fire service could get to the areas of the market on fire.

    If traders are able to do these, they will enjoy some benefits. For instance, the insurance companies will reduce the premium rate for fire insurance because the presence of a fire station within the market and fire extinguishers in individual shops, would reduce the risk of fire incidents and losses. Also, note that even with a fire and special perils insurance, only material damage is covered when there is a loss. Meanwhile, the traders will suffer loss of income, profit, etc., while they are rebuilding and trying to get back to business after a loss. A fire and special perils insurance will not compensate them for loss of profit. There is another insurance policy that does that. It is called Business Interruption Insurance or Consequential loss insurance.

    Business interruption insurance covers profits that would have been earned had business operations not been disrupted. To ensure that the insurance principle of indemnity is upheld, the profits from prior months are used as a yardstick in the event of claim. This ensures that the insured is placed in the exact position he would have been financially had the loss not occurred. Business interruption insurance also covers operating costs and other costs still being incurred by the business based on previous statements of costs and employee wages.

    The insured might have some vital staff he does not want to lose while the business is closed. Consequently, he continues to pay their wages. Also during the closure, the insured might lose some key staff. The policy provides for training of new staff. In addition, if the old staff are not familiar with the new machines used to replace the damaged ones, the policy also covers the cost of training the staff.

    The challenge insurance practitioners have is that marketing fire and special perils to traders is already a tough task. Marketing a consequential policy (Business Interruption Insurance) is even a more difficult task. But in all honesty, what the traders should actually aim at is a combined policy of fire, special perils and business interruption insurance.

  • Insurance option for the middle aged – Francis Ewherido

    Francis Ewherido

    In fulfilment of our promise two weeks ago, and for the third consecutive week, we continue our focus on middle-aged men, who have not yet prepared well for their retirement. The broad options for preparation for retirement are cash reserves, real estate, stocks, gold and other precious stones, treasury bills and money market instruments, among others, but I want to restrict myself to insurance, which is my turf. Ab initio, let me quickly chip in that cash reserves are very important in retirement and old age. This is because it comes handy when there is an immediate or urgent matter to take care of and there are many of such in old age. There are some old people who are suffering today because they are asset rich and cash poor. The buildings are there, but tenants are not paying rents; the land is there, but no one is buying. Sometimes, it takes time to dispose of a building or land. If money is needed for an emergency, it can be a problem.

    Insurance is in two parts, Life insurance and non-life insurance. While non-life or general business insurance is basically for protection of assets, life insurance is for protection and investment. Wealth stands on a tripod: wealth creation, wealth sustenance and wealth protection. The three are equally important. If you do not create the wealth, then you cannot have it; if you do not sustain it, you are back to square one, and if you do not protect it, you can lose it all and also be back to square one. So, in preparing for retirement/old age, insurance, as a tool for protection, helps you to protect the wealth you have created and sustained.

    But our emphasis today is on life insurance as an investment tool. When you are middle-aged and you still have no concrete financial fall back, two issues preoccupy your mind: your family and life in retirement/old age. Either way, life insurance comes handy. We are going to deal with life insurance under term assurance, whole life assurance and endowment. Term assurance is a policy with a fixed life or term during which the policyholder pays premiums periodically (i.e. monthly, quarterly or annually). When the policy expires, the obligations of the assurance company also end if there had been no incident. But where there are obligations, for instance, death of the policyholder, the assurance company pays benefits to the named beneficiary of the assured. In other words, in term assurance, the policy holder takes the policy for the benefit of others. If the policyholder dies before the expiration of the policy, the beneficiary gets paid the sum assured. For instance, if a policyholder takes a term policy for N50m sum assured, the beneficiary receives this sum if the policyholder dies before the expiration of the policy. That is a good sum of money to leave behind for an average family. Term assurance is the cheapest of life policies and cheapest way to create instant estate for loved ones and dependants.

    Remember we said earlier that middle-aged men’s two primary concerns are their families and life in retirement. So term assurance takes care of the financial needs of the policyholder’s family if he dies prematurely. But some people wonder why they should take a policy that only provides benefits for their families on their demise and nothing for them while they are alive. We (insurance professionals) normally advise such clients to take a combined term assurance policy and personal accident policy. The personal accident section of the policy will pay benefits to the policyholder in the event of an accident, where he suffers temporary disability or permanent disability, like losing a limb or sight or extreme cases of spinal cord injury.

    Medical expenses can also be incorporated to take care of medical bills for treatment of injury sustained in an accident. The payout can be N10m, N50m, N100m or more depending on the sum assured. The premiums paid by policyholders vary, based on the scope of cover, with factors like age, general health, and nature of work, primarily determining the premium rates. The cost of term assurance increases as the policyholder gets older. Typical amounts paid out under term assurance include: lump sums, funeral expenses, education fees for dependents, among others. You will recall that we treated one of such term assurance education products a few weeks ago.

    Whole life assurance is more encompassing that term assurance. In Nigeria, insurance companies cut off age for term assurance is between 60 to 65 years. They scarcely go beyond 65 years. But whole life assurance offers hope for men above 65 years. As long as you pay your periodic premium, whole life assurance covers you for your whole life and pays benefit to your beneficiary at death. But like term assurance, it offers no personal benefit to the policyholder.

    Endowment life assurance, on the other hand, is a policy that offers both death benefits and maturity benefits. In other words, if the policyholder dies before the policy matures, his beneficiary is paid the full sum assured irrespective of how much premium he had contributed before his death. For instance, a man takes a life policy with a sum assured of N100m that will mature in 15 years. After paying just N12m naira premium he dies two years after the inception of the policy. His beneficiary will still be entitled to the whole N100m sum assured. But if he lives and pays his premium until the policy matures, he gets the N100 maturity value.

    On receipt of their sums assured, some policyholders transfer their money to a retirement savings account in a bank from where they pay themselves periodically, and also meet other age-induced expenses. Some others take annuity. “An annuity is an insurance product that pays out income, and can be used as part of a retirement strategy. Annuities are a popular choice for investors, who want to receive a steady income stream in retirement.” In other words, the annuitant (investment owner) will be paid periodically (like receiving salary or pension) probably until he dies. This ensures that he maintains his lifestyle even in retirement.

    One of the advantages of endowment policies for middle-aged people is that it forces them to do what they have not been doing all their life: saving and planning. It can be inconveniencing and “suffocating” at the beginning, but over time, you adjust. Another major advantage is that unlike term assurance, where the premium increases, as you grow older, the premium of whole life assurance, while high, does not increase over time. Once the terms are agreed the premium will remain the same throughout the duration of the policy. Also, unlike term assurance where the policyholder gets no benefit if there is no incident, endowment policies get benefits when their policies mature.

    There is a lot more for those planning their retirement via insurance to know. My advice to them is to approach a Registered Insurance Broker (RIB) for guidance, especially now that the insurance industry is undergoing transition. Get professional guidance. The beauty is that the services are free; no RIB will ask for money before giving you professional advice.

    On the whole, what we have tried to do in the last three weeks is to sensitise middle-aged people, who have not put a retirement plan in place to do so. They say what cannot break you can only strengthen you. You either allow Nigeria to break you or toughen you. The option is yours. You still have time to plan for a self-determined old age in financial stability.

  • Buhari approves proposed recapitalisation of insurance firms

    Buhari approves proposed recapitalisation of insurance firms

    President Muhammadu Buhari on Monday approved the National Insurance Commission (NAICOM’s) directive for the recapitalisation of the insurance firms. He urged the operators not to fight the policy.
    Represented by the Permanent Secretary, Federal Ministry of Finance, Dr Mahmud Isa-Dutse, spoke at the ongoing Insurance Industry Consultative Council’s 2019 National Insurance Conference at Transcorp Hilton Hotel, Abuja.
    He said with the recapitalization directive, it is expected that operators will be true to themselves and consider all regulation available for their continued existence.
    Buhari said insurance companies are facing many challenges in the current environment and as such, they should realise that market innovation and performance of duties such as creating good services and prompt delivery of those services to customers would facilitate the growth and development of the industry.
    He further said the Ministry of Finance will continue to collaborate with NAICOM and the industry to ensure that the target of about 40 per cent penetration rate at the end of year 2020 is achieved as contained in the 2018 revised Financial Inclusion Strategy.
    He said it is imperative to say that this is an industry target where all stakeholders will be expected to work in unison to attain.
    In this regard, he expects the various arms of the sector to support and work with the regulator to ensure the realisation of this and all set targets.
    Buhari said: “With the recapitalisation directive in the country, we expect operators to be true to themselves and consider all regulation available for their continued existence.
    “It should not include fighting the policy just because you cannot raise the required capital. Your industry should be more responsive to the economy. the industry can do more to contribute to the development of Nigerian economy, we can do more to
    “Insurance companies are now facing many challenges in the current constituted environment and as such realised that market innovation and their duty such as creating good services, prompt and delivery of those services to customers would facilitate the growth and development of the industry.
    “This administration is very excited about the recapitalisation and other reforms in the industry and asks the ministry to continue to closely monitor activities in the sector. The insurance industry issues regulations that all insurance companies must follow and this will cause them to understand and implement the new technologies and innovations that can help the sector. However, NAICOM must design ways to acknowledge changes to the existing businesses, considering that we live in a technological human age where technology enhances businesses for profit in the organisation.
    “We must also put in place strategies to mitigate and control such risks so that technology in the insurance sector can be fully realised.”
    Consequently, President Buhari raised four questions for operators at the conference to explore in order to start building the strategy for companies to adopt.
    He asked that to what extent can they use technology first of all to transform the goal structure of the business system; to what extent will it mitigate the disruption to satellite in the industry; to what extent will it give back to new value propositions and markets; and to what extent will building technology give back to the industry?
    “In possession of these question, also ponder on the Federal Government’s expectations of insurance companies which includes increased financial capability to enable local retention; prompt payment of claims; transparency in dealing with quotation policy holders to consumer consumer first; expansion in time consuming insurance policies to better address clients’ needs; increased numbers on outreach of specific sectors such as non-relevant segments; and expansion of the operations to cover the country.
    Commissioner for Insurance, Alhaji Mohammed Kari said from the regulatory standpoint, the need to exploit the opportunities of digitalisation and to tame the cumulative consequence of inflation and devaluation of the naira heightened the necessity for the ongoing reforms of the insurance industry. He said expansion of the insurance distribution channels, financial inclusion, corporate governance enforcement, market discipline, professionalism and the recapitalidation exercise were aimed at strengthening insurance institutions and increasing the spread of insurance in the country.
    These reforms are in furtherance of the Buhari administration’s determination to revamp the economy as encapsulated in the ERGP in order to ensure that the insurance industry becomes a significant contributor to economy of Nigeria, he added.

  • Insurance coys settle N145bn claims

    The National Insurance Commission (NAICOM) on Sunday, said that a total of N145 billion was paid as claims to policy holders by insurance companies in the third quarter.

    The Deputy Commissioner for Insurance, Technical, Mr Sunday Thomas, made this known in an interview with the News Agency of Nigeria in Lagos.

    According to Thomas, the figure represents a 30 per cent increase compared with N110 billion paid in the same period of 2017.

    He said the commission also anticipated that the figure would increase than N145 billion in the fourth quarter, “when the claims paid in the quarter are added’’.

    Thomas explained further that the Gross Premium (GP) generated by insurance industry during the period under review stood at N315 billion.

    “This represents a 22 per cent increase over the N258 billion GP in the third quarter of 2017,’’ he said.

    Thomas said that financial inclusion was one of the tools used by the commission to shoot up insurance penetration.

    “The initiative is premised on the fact that getting the mass of the financially-excluded to embrace insurance in one form or another will have a positive impact.

    “The commission has started seeing the impact.

    “However, insurance companies are still encouraged to take up micro-insurance licence in order to develop the market more.

    “The Takaful Market is still grossly under-accessed by the public. There is, therefore, the need for aggressive promotion in aid of financial inclusion, ‘’ Thomas said.

     

  • Deepening insurance penetration with compulsory insurances, by Francis Ewherido

    Deepening insurance penetration with compulsory insurances, by Francis Ewherido

    By Francis Ewherido

    One of the biggest challenges we have with deepening insurance penetration in Nigeria is the near absence of insurance culture. The insurance culture is either not there or not entrenched. We do not see insurance as a way of life that it is. But we live in a very uncertain socioeconomic and political clime, which makes insurances even more imperative. Insurance is life and ordinarily you cannot avoid insurance anymore than you can avoid living. But there are some classes of insurance that are even more important to life, especially lives of third parties. Consequently, government has made these classes of insurance compulsory. Perhaps we can start entrenching the insurance culture in Nigeria by strict enforcement of compulsory insurances. Ordinarily, you want people to take insurance out of conviction and on their own volition, but if third parties are involved and some classes of insurance have been made compulsory to protect them, then they should be enforced.

    Compulsory insurances are about third parties, who might die, suffer bodily injuries or property damage as a result of actions, inactions, negligence or carelessness of the insured. The insured, on his own, might not have the resources to indemnify (compensate) the affected third parties in the event of an incident likely to lead to legal liabilities, so these insurances are made compulsory to ensure that affected third parties get compensation.

    The commonest of these classes of insurance is Motor (Third Party) Insurance. This insurance protects the insured against third party legal liabilities for death, bodily injuries and property damage whilst using his vehicle on the road. There is no limit of liability for third party death and bodily injuries because life is invaluable, but underwriters (insurance companies) have parameters for calculating the benefits. Relatives of a deceased third party, who earned N1m per annum, for instance, cannot get the same compensation as relatives of a third party, who earned N12m per annum, in the event of death. The limit of liability for third party property damage is N1m, but an insured can increase the limit with payment of additional premium.

    Motor (Third Party) Insurance premium is N5,000 for private vehicles and N7,500 for commercial vehicles. These sums should be within the reach of every vehicle owner. Unfortunately, it is alleged that only one in every eight motor insurance certificates in Nigeria is genuine. There were about 11.5 million vehicles on Nigerian roads as at 2017, according to the Federal Road Safety Commission. This means that if all motorists were to get genuine motor insurance, about 10 million additional Nigerians will automatically have genuine motor insurance and be added to the insuring pool. This automatically deepens insurance penetration.

    Beyond frustrating efforts to deepen insurance penetration and revenue losses to government and the insurance industry, fake motor insurances defeat the purpose of compulsory Motor (Third Party) Insurance because third parties who die, suffer bodily injuries or property damage might not get compensation from the liable motorist because he does not have genuine insurance. To ensure that your motor insurance is genuine, please go the Nigerian Insurance Industry Database (NIID), enter your insurance policy number or vehicle registration to verify your motor insurance status.

    The second class of compulsory insurance is Professional Indemnity Insurance. Professional Indemnity Insurance (PII) is a form of liability insurance that helps protect a wide range of professionals and companies from bearing the full cost of defending themselves against a tort claim made by a client and damages awarded in such a civil lawsuit in the conduct their business. Usually, professional indemnity is compulsory for doctors and medical practitioners, medical establishments, insurance brokers, lawyers, chartered accountants and some other professionals, but many of these professionals do not have this compulsory insurance thereby reducing insurance penetration.

    In addition, Section 45 of the National Health Insurance Scheme Act of 1999 specifically requires all medical professionals, institutions and centres to have in place Professional Indemnity Insurance. The law makes provisions for compensation for the NHIS patients who suffer death, sickness, permanent disability, partial disability and injury from mistakes, negligence, errors of commission or omission of insured medical practitioners and institutions. Many medical personnel and establishment do not have this all-important compulsory insurance. And they get away with it because their patients have not held them accountable and nobody has made strenuous attempts to enforce it.

    The third of the compulsory insurances is Occupiers’ Liability Insurance. Section 65 of the Insurance Act of 2003 requires the owners or occupiers of every public building to be insured against liability for loss or damage to property of third parties, and death or bodily injury to third parties caused by collapse, fire, earthquake, storm or flood. The Act defines a public building as one to which members of the public have access for educational, recreational, medical and commercial purposes. You can imagine the level of insurance penetration if all government buildings at the three levels of government, shops, malls, restaurants, offices and other buildings where members of the public have access were to take an Occupiers’ Liability Insurance. Beyond the penetration, so much wealth and so many jobs will be created.

    The fourth compulsory insurance is Insurance of Buildings Under Construction. The Insurance Act of 2003, Section 64, requires every owner or contractor of any building under construction with more than two floors to take out an insurance policy to cover his liability arising from construction risks such as his negligence or that of his servants, agents or consultants, which may result in death, bodily injury or property damage of workers on site or members of the public. This insurance policy also covers liability for collapse of buildings under construction. A census of buildings of three floors and above under construction has shown that many owners and contractors of these buildings do not comply with this compulsory insurance. Meanwhile, some of such buildings have collapsed over time and third parties who suffered bodily injuries and families of those who lost their lives had minimal or no compensation. Enforcement this compulsory insurance will certainly deepen insurance penetration.

    The fifth compulsory insurance is the Group Life Insurance for company employees. Group Life Insurance gained traction since the PENCOM Act of 2004 as amended in 2014 made it compulsory for employers of labour in the private and public sector to provide a group life cover for their staff. Since then the number of companies with Group Life Insurance has quadrupled. Beyond being mandatory for companies under the PENCOM Act, you cannot bid for government businesses and those of some big companies without a Group Life Policy for your employees. This has really helped in deepening insurance penetration and growing the insurance industry in terms of premium income and creation of employment. It has also helped to drive the argument that other compulsory insurances will also gain traction if there are government policies to compel potential policy holders to have these compulsory insurances. But there is still a long way to go for even group life insurance because many companies still do not have Group Life Policy for their employees.

    Finally, though no longer under the purview of insurance companies, is the Employers Liability Insurance. Employers Liability Insurance, as stated by the Employee Compensation Act of 2010 (which repealed the Workmen Compensation Act of 1987), requires every employer, within the first two years of the commencement of the 2010 Act, to make a minimum monthly contribution of 1% of the total monthly payroll of employees to the Employee Compensation Fund. The fund is designated to pay adequate compensation to employees or their dependants for any death, injury, disease or disability arising out of or in the course of their employment. The Nigeria Social Insurance Trust Fund (NSITF) is saddled with the power to implement this act.

    If all these compulsory insurances are strictly implemented, the insurance penetration in Nigeria will move from the current 0.7 per cent to over 1 per cent, while gross premium income of all Nigerian underwriters will cross the N1trillion line thereby contributing more to Nigeria’s Gross Domestic Product. According to National Pension Commission sources, there were 7,823,911 registered contributors to the pension scheme as at November 30, 2017. This represents 4.34 per cent of a population of 180 million Nigerians. Meanwhile only 0.7 per cent of Nigerians have insurance, of which pension used to be a part! Aggregate premium income of all insurance companies in Nigeria was N380b in 2016; meanwhile pension fund as at December 2016 was N6,164.76bn!

    Specific government action and support are needed. Until 2004, the pension fund of all underwriters put together was less than N1trilion. Then in 2004, government enacted the PENCOM Act. The act took pension away from underwriters, which was a heavy blow to the insurance industry, but that is not the point here. The point is, since 2004, pension fund has grown to N7.5t as at the fourth quarter of 2017. This could not have been possible without specific action from the government. These pension statistics bring to fore the inherent potentials of the Nigerian insurance industry even if only compulsory insurances are enforced.

    When specific actions are taken on compulsory insurances, it will be a win/win situation for everybody: government gets more revenue via company and other taxes, state government get more revenue via PAYE, the insurance industry grows in terms of premium income and number of employees, more Nigerians enjoy the benefits of insurance, while third parties who die, suffer bodily injuries or property damage get adequate compensation.

    The insurance industry also needs to do more; we need a multi-pronged approach to redress this appalling and embarrassing situation. The various professional bodies within the Nigerian insurance industry, especially the Nigeria Insurers Association and the Nigerian Council of Registered Insurance Brokers, more than ever, need to pull human and material resources together. The regulatory body, the National Insurance Commission (NAICOM) also needs to be actively involved and, in fact, lead the charge in the enforcement of compulsory insurances.

    Mr. Francis Ewherido, the Managing Director of Titan Insurance Brokers Limited, wrote from Lagos.

  • Proven reasons why you need travel insurance

    A good number of people travel without taking out travel insurance. In some cases, it is not that they cannot afford it, but because they do not consider it as critical or necessary. Jumia Travel, the leading online booking agency shares reasons why you need travel insurance when travelling especially to a foreign destination.

    Loss of baggage

    One of the main reasons why people get flight insurance is for loss of baggage. You need travel insurance especially if you are taking expensive belongings with you just make sure that the insurance covers higher valued products.

    Flight delays

    Flight delays and cancellations happen every day and you can be compensated if your flight is delayed for longer than 12 hours. You always think it might not happen to you, but flight insurance is a great way of covering yourself just in case because it’s always better to be safe than sorry!

    Medical emergencies

    Travel insurance can take care of a medical emergency that may happen when you are travelling. This will not be the case if you didn’t pay for travel insurance. It even worse if you do not have enough money to take care of this emergency.

    Disaster occurs

    Natural or manmade disasters are things that can disrupt your trip and whether you fly or not. travel insurance makes sure you are covered by all of these.

    Trip cancellation

    Nobody plans to cancel a trip that they have looked forward to however it can happen. If you or a member of your party falls ill, are affected by a death or have an accident causing you not to go, your travel insurance will have you covered.

     

  • Protect your assets – Ewherido

    Protect your assets – Ewherido

    By Francis Ewherido

    Two separate fire incidents on Friday, January 12, 2018, made me very depressed. One, I was driving down Adelabu Street, Surulere, Lagos, when I saw part of the former PHCN office in smoke. Unknown to me at that time, the supermarket and three business centres behind the building were also affected.

    In the afternoon, same day, I was already late for an appointment with a friend, former school mate and Chief Executive Officer of American Business Council, Mrs. Margaret Olele, when I noticed an unusually heavy traffic on Eko Bridge as I approached Apongbon. I was wondering what could cause the traffic at that time of the day when I noticed heavy smoke ahead. By the time I got there, a medium-sized bus had been burnt beyond redemption. At least five families lost a source of livelihood in both incidents.

    Losses are bad at any time, but to lose your source of livelihood at the beginning of the year, with so many bills snapping at your feet, is a very tough way of beginning the year. For all the affected individuals, it was certainly a black Friday. Accidents and disasters will always befall humankind, whether or not you accept it or reject them as “not my portion.” So you have an obligation to protect the assets you have laboured very hard to acquire. The first line of defence against such losses is good housekeeping which includes having a fire extinguisher in your vehicle, house and office. Most fires except, explosions, start like a candle light. At that point, a fire extinguisher can put it out.

    The vehicle that got burnt probably did not have a fire extinguisher, or had a non-functioning one. The only reason many motorists keep fire extinguishers is to get the police and road safety officials off their backs. If you are one of those with this mindset, please know from today that your fire extinguisher is one of your first lines of defence to protect your assets against losses arising from fire. Consequently, your fire extinguisher should be functional, not just an item to show law enforcement agents. In addition, it should be serviced regularly (every six months or annually, as the case may be).

    But the case of the shop and business centres could be different. The fire could have started after the close of business, in which case a fire extinguisher is useless. In fact, it will also be consumed in the inferno with other items. This brings us to the next line of defence: INSURANCE. You should have a material damage (fire and special perils) insurance to protect your assets. The policy covers the regular, every day kinds of fire likely to happen in our clime, but not when the policy holder deliberately sets his asset on fire. Special perils include storm and flood damage which are common in Nigeria. The rates are relatively low compared to the value of assets at risk. For instance, it costs less than N100,000 per annum in premium (money paid to procure the insurance) to secure a building, with the contents, of N40m. Landlords can build the insurance premium into the tenants’ rents. The tenant can also insure the building where the landlord has not done so. His tenancy confers insurable interest on him, while ownership of the contents in the building automatically gives him legal right to insure. Insurable interest is one of the six principles (pillars) of insurance and simply means legal right to insure. Other principles are utmost good faith, indemnity, subrogation, contribution and proximate cause.

    For the owner of the bus, the insurance he needs to cover this loss is a comprehensive motor insurance or a third party, fire and theft insurance. The minimum motor insurance policy, which is compulsory, is Motor (Third Party) Insurance. It is an offence to put a motor vehicle on the road without having in place an insurance to cover your legal liabilities for death, bodily injuries and property damage to third parties arising from your usage of the vehicle on the road. But Motor (Third Party) Insurance, as the name implies, only covers third parties; it does not protect the owner in respect of damage to, or theft of, his vehicle. The third party insurance protection in theory is unlimited for bodily injuries and death, because you cannot place a value on life, but has a limit of N1m for property damage. You can increase the limit for property damage with payment of additional premium.

    So, if all the owner of the bus had was a Motor (Third Party) Insurance, he is on his own and has to source for money to replace the vehicle. But if he has a comprehensive insurance or third party, fire and theft, he is covered. Comprehensive, as the name implies, is the most detailed form of motor insurance. It covers third party liabilities as detailed above and damage as a result of accident or fire to your vehicle. Third party, fire and theft policy is similar, but does not cover damage to your vehicle as a result of collision. The premium for comprehensive insurance is predictably the highest, but it is negotiable. The premium for third party, fire and theft is between 50 and 60 percent of the premium for comprehensive, but also negotiable. Third party premium is fixed; N5000 for private vehicles and N7500 for commercial vehicles.

    Some members of the insuring public have had issues in respect of getting insurance policies, especially motor insurance, from genuine sources (in fact, it is alleged that only one out of every eight motor insurance policies in Nigeria is genuine. You can check the status of your motor insurance policy on the Nigerian Insurance Industry Database, NIID, using the insurance policy number or vehicle registration number), understanding the insurance contracts they enter into and processing their claims. These are no issues at all. The insurance industry has subdivisions; while the insurance companies, as underwriters, carry the risk of the insuring public, the brokers are the intermediaries between the insuring public and the insurance companies.

    Everybody who wants to purchase insurance is advised to go through a Registered Insurance Broker (RIB). The list of registered insurance brokers is on the Nigerian Council of Registered Brokers’ (NCRIB) website. It is also on the National Insurance Commission’s (NAICOM) website. We (brokers) will help you to negotiate a better rate than you can ever do personally, we will structure your risk to suit your circumstances and budget, we will manage your risk portfolio for you and in the event of an incident leading to claim, we will process the claim and get your payment while you sit in the comfort of your home or office. The beautiful part is that all these services are FREE. You pay absolutely nothing because we get our payment (commission) from the insurance company for placing business with them. You have laboured to accumulate and sustain your assets; move a step further by protecting them via a registered insurance broker.

     

  • NHF Act: FMBN blames banks, insurance companies for non -compliance

    The Federal Mortgage Bank of Nigeria (FMBN) has blamed banks and insurance companies for non-compliance with provisions of the National Housing Fund (NHF) Act since its inception.

    The FMBN Managing Director, Mr Ahmed Dangiwa spoke on Tuesday in Abuja at a public hearing on “A Motion on the Need to Ensure Full Compliance with the NHF Act for effective housing delivery in Nigeria’’.

    The public hearing was organised by the House of Representatives Committee on Housing, held at the National Assembly.

    The NewsGuru reports that the NHF is a pool which mobilises long-term funds from Nigerian workers, banks, insurance companies and Federal Government to advance loans at a single digit interest rate to its contributors.

    The NHF was established by Decree No. 3 of 1992 (Now NHF Act Cap N45, LFN 2004).

    Presenting a memorandum on the motion, Dangiwa stated that banks and insurance companies in Nigeria were required to be investing in the NHF scheme, but unfortunately they defaulted.

    Dangiwa said that unless these provisions of the act were complied with, the pool of funds available for mortgage financing at affordable interest rate would continue to be inadequate.

    “This means that the FMBN will be unable to make low interest mortgages available to Nigerians as the 2.5 per cent workers monthly contribution is grossly inadequate, especially that of the medium income earners’’.

    He said that the Central Bank of Nigeria (CBN), and the National Insurance Companies statistics indicated that between 2011 and 2016, total loans and advances by commercial banks and non-life and life funds from insurance companies amounted to N66.996 trillion.

    “At 10 per cent investment of their loan advances and non-life and life insurance with the NHF, about N6.7 trillion should have been invested in the fund by the banks and insurance companies over the period.

    “In 2016 alone, the CBN pursuant to section 11 (1) of NHF Act ought to have credited the fund with the sum of N1.553 trillion by March 2017.’’

    TNG reports that section 11 (1) of NHF Act states that “CBN shall collate funds from commercial and merchant banks at the end of every year and not later than one month thereafter, the percentage of their contribution of the fund as specified.

    He explained that at an average of N6.5 million per housing unit, the amount could have provided 300 units in each of the 774 Local Government in the country.

    According to him, the failure to make the remittances has deprived Nigerians the opportunity of owning houses.

    He said the NHF Act CAP N45 was passed into law with laudable objectives but the implementation of the Act since inception had not made much impact, adding that the public hearing was long overdue.

    Commending the 8thNational Assembly for organising the public hearing, and appealed for effort at ensuring that compliance with the provisions of the act would make impact to the government.

    Earlier, Mr Ahmad Kaita, the Chairman, House Committee on Housing stated that measures listed for consideration in the public hearing would open more sources of funding for the bank to become more efficient.

    Kaita said that the committee, in line with the legislative agenda of the House of Representatives had recognised the need to provide required legal and legislative frameworks to ensure affordable housing for Nigerians.

    “This initiative is also in accordance with the provisions of Section 16 of the Constitution of the Federal Republic of Nigeria 1999, that the state shall direct policy toward ensuring that suitable shelter is provided for citizens.