Life insurance premium currently growing at an average of 32 percent annually since 2014 following implementation of retiree annuity and group life policy in some public and private sector institutions could witness significant growth if the National Pension Commission (PenCom) succeeds in enforcing compliance of life cover among employers of labour this year.
Just like the growth witnessed in pension assets under management because of enforcement, which currently stands at about N10 trillion, insurance could as well see major boost in premiums that will change the face of the industry.
“I see more than 40 percent growth if it’s enforced across all levels of employers,” Larry Ademeso, managing director/CEO, Custodian Life Assurance Company, told BusinessDay.
Ademeso said the only way to look at what the impact of the directive if enforced would be, was to look at the size of the pension contribution.
For instance, registered contributors are now about 8.5 million, if life premium is paid for this number of people it will mean so much for the insurance industry, Ademeso argued.
Though, pension fund assets have contribution of employer and employee, but a steady payment of insurance across all employers would definitely have significant effect on insurance, Ademeso said.
PenCom on Thursday gave employers of labour at the Federal, State and the private sector up to March 31, 2020, to comply with the Pension Reform Act 2014, on provision of life insurance cover for employees, or assume to have breached the law.
Besides that, PenCom also gave employees the mandate to report any employer that fails to comply with this provision as well as other provisions of the PRA 2014, including pension remittances to the Pension Fund Custodians (PFCs).
The directive was contained in a circular notice to all employers of Labour with the theme “Re: Compliance With Guidelines For Life Insurance Policy for Employees And Submission Of Insurance Certificate For 2020.”
It read, in accordance with the provisions of Section 4(5) of the Pension Reform Act (PRA) 2014 and Section 5.5 of the Guidelines for Life Insurance Policy for Employees, Employers of labour covered by the PRA 2014 are required to submit copies of the Insurance Certificates with the schedule of benefits to the National Pension Commission (PenCom).
“The Insurance Certificates shall state that all employees are covered up to an amount not less than 3 times their respective Annual Total Emoluments (ATE).”
According to the notice, employers that have not yet submitted copies of Insurance Certificates for the current year to the Commission are therefore advised to do so before 31 March, 2020, failing which the National Pension Commission would consider such employers in default of Section 4(5) of the Pension Reform Act (PRA) 2014.
To the employees, therefore, PenCom said, “This is to remind all employees in the Public Service of the Federation, Federal Capital Territory and States that have implemented the Contributory Pension Scheme as well as private sector, that it is their rights; under Section 4(5) of the PRA 2014 to have Life Insurance Policy taken on their behalf by their employers for an insured amount of not less than three (3) times their annual total emolument.
“Please note that employees are also required to ensure that all pension contributions deducted from salaries and/or contributed by employers are remitted to the Pension Fund Custodian (PFC) by the Employer not later than seven (7) working days from the date of payment of their salaries.”
Employees are therefore advised to report to the Commission where the employer fails to procure the minimum required Life Insurance Policy in their favour; submit the evidence of compliance with Life Insurance Policy to the Commission and place the certificate in a conspicuous place within the organisation, as well as remit the deducted pension contributions into their Retirement Savings Accounts.
The 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 the National Insurance Commission (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.
Modestus Anaesoronye, Lagos, & Cynthia Egboboh, Abuja
