Even though not a lot of insured clients understand that third-party motor policy could offer them claims protection in event of accident, the portfolio managed by insurance companies were still running at huge loss.
Insurance being a game of large number requires that a lot of people would come into the pool and from the fund a few that suffer losses are settled.
Therefore, with large percentage of the policy in the hands of quacks who issue fake certificates to motorist, the industry has been running the business at a loss.
Latest figures from the Nigerian Insurers Association’s (NIA) operational team reveals that in 2021, about 43 insurance companies generated N2.5 billion and paid out N4.3 billion on claims.
According to the NIA, this is part of the reason for the recent review of the premium rate for motor insurance because underwriters need to generate the right premium to be able to meet its claims obligations.
Yetunde Ilori, director general, Nigerian Insurers Association (NIA) speaking on ‘Underwriters Perspective’ at a brokers event in Lagos said the increase in premium rate for motor business was long overdue.
According to her, motor third party business in the insurance industry was not profitable, and so running at a loss.
Ilori who was represented by Lanre Ojuola, deputy director, Operations at NIA said “we were not running our motor portfolio at profit, and third party was at a loss.
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She said, about 43 insurance companies in 2021 generated N2.5 billion premium from motor third party and paid out N4.3 billion on claims.
Ilori therefore urged the brokers not to accept the new rate because it was made by the National Insurance Commission (NAICOM), but because it was justifiable given the economic realities.
Ilori said the target is to have a sound insurance industry that is able to meet its expectation at all times, provide employment for teaming youths and contribute reasonably to the country’s GDP.
Nigerian motorist travelling within the West African sub-region with recently adjusted premium rate for Third-party motor insurance will enjoy the benefit in the event of an accident, the Nigerian Insurers Association (NIA) said.
For instance, a registered Nigerian vehicle with third-party motor insurance is covered when in and around any of the West African countries, while also motorist from other West African countries into Nigeria will get third party compensation in event of accident with a Nigerian vehicle.
Segun Omosehin, chairman, NIA said the new premium is in line with Ecowas protocol, stating that the sub-regional institutions are working to liberalise trade.
Omosehin said the Association is in full support of the new premium rates released by the National Insurance Commission (Third Party Property Damage (TPPD)) and has indeed taken steps to ensure that members comply and join in the publicity initiatives that will follow shortly.
“The Association is embarking on stakeholder engagement as a first layer interface with the critical stakeholders to ensure their buy in and support.”
He said, while he will not restate the issues with enforcement of the old rates, he expressed confidence that Nigerians will support the new rates and this will not only lead to increase in premium income for underwriters, but also increase in claims payment to the clients.
With the new tariff on third party motor insurance effective 1st January 2023, NAICOM is driving to see that motorist have adequate cover to protect citizens and assets that become victims of accidents on Nigerian roads and across the ECOWAS Region.
NAICOM is therefore seeking that motorists take genuine insurance policies from registered insurance companies, make claims when there is accident involving third parties, and for own vehicles in case of comprehensive covers.
Under the new tariff, released 22nd December 2022, private vehicles that were paying N5,000 premium for N1 million Third Party Property Damage (TPPD) limit, are now to pay N15,000 premium for N3 million, while owner good vehicles are to pay N20,000 premium for N5 million compensation limit, and staff buses are to pay N20,000 premium for N3 million.
For commercial trucks and general cartage, they are to pay N100, 000 premium for N5 million TPPD limit; tricycles N5, 000 for N2 million TPPD limit, and motor cycles N3, 000 for N1 million TPPD limit.
While for comprehensive motor insurance policy, premium rate shall not been less than five percent of the sum insured after all rebates and discount.
