Group life insurance gap leaves private sector workers exposed

Group life insurance adoption in Nigeria, despite being a legal requirement under the Pension Reform Act (PRA) 2014, remains low, widening the financial burden on families who lose their loved ones.

While employees of the Federal Government Ministries, Departments and Agencies (MDAs) continue to enjoy group life insurance provided through the Office of the Head of Service of the Federation, many of their counterparts in the private sector, at states and local government levels are left to their fate

Section 4(5) of the PRA 2014, provides that “every employer shall maintain a Group Life Insurance Policy in favour of each employee for a minimum of three times the annual total emolument of the employee and premium shall be paid not later than the date of commencement of the cover.*

Read also: Why Group Life Insurance Is a Win for Your Employees (and Your Business)

While, section 4(6) also provides for situations “where the employer failed, refused or omitted to make payment as and when due, the employer shall make arrangement to effect the payment of claims arising from the death of any staff in its employment during such period.”

Section 8(1) of the PRA 2014 provides that “where an employee dies, his entitlements under the Life Insurance Policy maintained under this Act shall be paid by an underwriter to the named beneficiary in line with Section 57 of the Insurance Act”.

“When workplace accidents or unexpected deaths occur, families are frequently left with little support, while employers facing financial strain struggle to provide meaningful compensation. Yet, when group life insurance is in place, the difference can be life-changing for those left behind, says Chika Onwunali, partner at Premium Debate.

He said the consequences of ignoring to take group life insurance for staff are significant, noting that the transformative impact on beneficiaries when such policies exist highlights a critical gap between regulation and reality.

When Adetola Adegbayi, founder, Mutual Aid Specialist Limited speaks about insurance, she does so not as an industry professional, but as someone who has witnessed its impact first-hand.

Her conviction is rooted in a real-life experience from one of her businesses. “In a bid to provide better protection for our workforce, we implemented a group life and personal accident insurance policy that covered not only full-time employees but also outsourced staff. Not long after, tragedy struck,” she narrated.

According to her, over a weekend, when one of the company’s staff members was off duty, they went to a petrol station to assist someone with fuel. In a sudden and devastating incident, a trailer ran into him, and he lost his life.

The loss was heart-breaking, but what followed revealed the often-overlooked power of insurance.

Read also: Mutual Benefits provides group life insurance for photojournalist

“Because the company had taken out a group life and personal accident policy, the employee’s family received a payout of N4.5 million. For the family, it was both shocking and deeply meaningful. They had not imagined that such financial support would be available.”

“Without insurance, the story would have been very different. In many organisations, when an employee dies, employers try to help within their means. This often includes covering funeral expenses and offering some financial assistance, perhaps N50,000, N100,000, or at most N200,000. While well-intentioned, such amounts are rarely sufficient to support a grieving family in the long term.”

For businesses, these payments can also be unpredictable and strain limited resources.

According to her, Group life insurance changes that equation entirely. Instead of relying on discretionary contributions, companies can transfer the financial risk to an insurer for a relatively modest premium. In doing so, they ensure that employees and their families are meaningfully protected, while also safeguarding the company’s finances, she said

“In this case, the employee had not formally designated a beneficiary, and the payout went to his sister. Like many in similar situations, she struggled to believe that her brother’s life could translate into such tangible financial support,” she said.

For Adegbayi, this moment underscored a critical truth: insurance is not just a financial product, it is a tool for dignity. “It ensures that even in tragedy, families are not left completely vulnerable,” she explained

Adegbayi believes companies and state governments have a crucial role to play in changing this narrative. By adopting group life insurance, they are not only protecting their employees but also making a smart financial decision.

In the end, it is about more than compliance or cost, it is about responsibility, foresight, and the kind of support that truly makes a difference when it matters most.

Read also: FG approves N17.3bn group life insurance for 2025/2026

Group life insurance is a critical component of the Nigerian life insurance portfolio, contributing 26 percent of the total life premium as of the third quarter of 2024, as individual life and annuity products dominate market growth.

This market segment is driven by both regulatory mandates under the Pension Reform Act 2014, requiring employers with three or more staff to maintain a life assurance scheme, and an increasing need for financial protection, particularly highlighted during the COVID-19 pandemic.

Compliance at the state level shows that eight states including Lagos, Kaduna, Edo, Osun, FCT, Ekiti, Ondo, have fully implemented the Contributory Pension scheme (CPS,) and Jigawa Contributory December Benefits Scheme(CBDS), meaning they have also instituted Group Life Insurance for their employees.

Just last month, Lagos State Government has disbursed abut N701 million to 232 families of deceased public servants as insurance death benefits. The payments aim to fulfill obligations to workers who died in active service and support their dependents, with some families receiving up to N15 million.