Compulsory insurances to thrive on enforcement

With the deepening lull in the Nigeria economy, occasioned by dwindling oil prices and the attendant negative impact on government revenue, a strategic programme of enforcement will be needed to drive compliance on compulsory insurances in 2016, analysts say.

Compulsory insurance is a general term for insurances made mandatory and backed by law.

Analysts believe that with the paucity of funds in the hands of government, corporates and individuals, there is a need to intensify awareness and enforce compliance of compulsory insurances.

They further argue that the reasonable thing to do under the present circumstances to sustain the stimulus and ‘welfarist’ nature of this year’s budget is to ensure that, apart from plugging the loopholes, all the assets, including humans should be protected through insurance with the attendant increase in revenue.

There are about seven compulsory insurances in Nigeria – Motor Third Party Insurance of Section 68 of the Insurance Act 2003; Buildings under construction of Section 64 of the Insurance Act 2003, and Occupiers liability insurance of Section 65 of the Insurance Act 2003.

Others are Group Life Insurance in line with the Pension Reform Act 2004, and Health Care Professional Indemnity Insurance – under Section 45 of the NHIS Act 1999, among others.

Obasi Ngwuta, executive director, West Africa Business School, says the National Insurance Commission (NAICOM) should device a strategic approach to ensure that government ministries, agencies and departments take up insurance of their assets and group life for their employees.

Ngwuta says when the economy is experiencing a lull, the best approach for protection of risk is by taking insurance policies, so that in the event of disaster, insurance companies can take up the burden of compensation. “This is not a time to drop your insurance because of lack of funds, instead, restructure your cover to pay lower premium,” he advises.

“NAICOM should set up a committee made of the regulator and industry players and commence a courtesy visit to public and private sector institutions, and preach compliance and the need for insurance protection in a tough economy,” Ngwuta says.

According to Ngwuta, a lot of progress would have been made when awareness is created among members of the public.

BusinessDay investigations show that some risk managers in corporate institutions, whose insurance budgets for 2016 were slashed for lack of funds, are seeking to restructure their covers.

“We are challenged by lack of fund in the system. We are not going to drop our insurance because it is dangerous, but we are not likely to do the same level we did last year,” Fortune Mbachu, risk manager in a medium-sized Lagos telecoms firm, said.

Chike Mokwunye, former group managing director, Royal Exchange plc says government/regulators and insurance companies should embark on a consciously planned and well co-ordinated programme of insurance education and advocacy to create insurance awareness and equip the public with the required knowledge and capacity to understand insurance products, their benefits and take decisions on how to manage these risks.

Mokwunye says “insurance education and public enlightenment will also help in reshaping public perception of the industry, and that there is need for a coordinated effort and that government through NAICOM and NIA should coordinate the effort.”

He further suggests that insurance companies should contribute to the pool, a certain percentage of their gross premium annually, towards insurance education and advocacy, and government should provide a counterpart funding.

Sunday Thomas, director-general, Nigerian Insurers Association (NIA), in his New Year message, urged the Nigerian public to keep insuring their assets and liabilities to remain assured of the future. “Please, note that there are some insurances that are compulsory. So, as we plan for year 2016, let us remember to include insurances of our valuable assets in our budget,” Thomas advised.

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