The failure of the Federal Government to procure group life insurance cover for its employees almost one year running means it has taken to self-insurance, according to experts’ analysis.
This means that in the event of loss occurring, particularly death, the government will pay compensation from taxpayers’ money, a burden that could have been transferred to insurance companies who are experts in risk management.
Federal Government’s group life insurance, which is domiciled in the office of the Head of Service of the Federation, was effective up to April 2018 when premium was paid. Since that time, insurance companies that had hitherto provided the group life cover as enshrined in the Pension Reform Act 2004 as amended in 2014 have not picked up new claims in line with the ‘No Premium No Cover’ law.
Dependants of employees (workers) who died in the last one year had nothing to claim from insurance companies, and so the Federal Government has been falling back on taxpayers’ money that should have gone into infrastructure development to pay for these compensations.
According to a CEO of an insurance firm, the industry had to comply with the ‘No Premium No Cover’ policy of the National Insurance Commission (NAICOM) which stipulates that insurance cover could only commence when the premium had been paid.
“We had given government a deadline upon which we could not admit claims and when that period expired, we pulled out,” the CEO said.
Section 9 (3) of the Pension Reform Act 2004 as amended in 2014 stipulates that every employer, both in the public and private sector where the Act applies, must maintain life insurance policy in favour of the employee for a minimum of three times the annual total emolument of the employee.
“Beyond the premium which the insurance industry has lost, which would have added to their portfolio for increased productivity and job creation for the country, the economy is the greatest loser,” Gabriel Ojuola, insurance broker and one of the managers of the group life account, told BusinessDay in a telephone conversation.
Ojuola said the public sector is the biggest spender in the economy, so when the budget is not spent properly, the economy suffers. This has a cyclical effect on the overall economy.
“Mind you again, taking life insurance cover for the employees is a provision of the pension reform law. If government is not implementing the law, how can it be enforced on the private sector? So, it’s a bad precedence being laid by the government,” he said.
Ojuola also pointed out that when government leaves its primary responsibility of providing critical infrastructure to pay compensation for death and accidents at work and all that, then the economy is losing track.
He, therefore, called on the government to implement the budget by making sure that allocations for insurance, as well as other sectors of the economy, are released for their purposes and timely too.
The group life policy provides cover to the insured against death and the insurance cover is mandatory for all employees as long as they are in employment. This means that the policy provides for the payment of the sum assured in the event of the death of a member of the scheme from any cause, natural and accidental.
According to the guidelines for life insurance policy for employees jointly issued by NAICOM and National Pension Commission (PenCom), the employer is required to fully bear all costs in relation to procurement of this policy, and this shall be in addition to the contributions to be made by the employer to each employee’s Retirement Savings Account.
Similarly, the policy provides for the payment of the sum assured for those in common employment in the event that an insured person disappears and is not seen for a period of 12 months and there is sufficient evidence to assume that the member is dead. However, the person receiving the sum will sign an undertaking to refund it if the missing person is subsequently found to be living.
The insurance coverage is for 12 months, from January through December, and is renewable at the end of each coverage year. The premium payable on the policy is pro-rated as applicable where an employee joins the scheme in the course of the year.
Modestus Anaesoronye
