• Monday, April 15, 2024
businessday logo

BusinessDay

Vehicle owners groan on new insurance rate

Vehicle owners groan on new insurance rate

Six months into the enforcement of the new motor vehicle insurance premium in Nigeria, consumers of the product are groaning amid rising compliance rate, according to BusinessDay’s finding.

Investigation shows that across vehicle registration centres in Lagos, Abuja and Port-Harcourt, agents are selling insurance on the new rates and vehicle owners are complying to avoid breaking the laws.

However, the situation is different in rural areas across the country; it is either that they do not know about the increase in rates or enforcement is missing completely.

The Federal Government, through the National Insurance Commission (NAICOM) on December 22, 2022 reviewed upwards the premium rates for motor insurance in Nigeria that became effective on January 1, 2023.

In the directive, private vehicles that were paying N5, 000 premium for N1million Third Party Property Damage (TPPD) limit, are now to pay N15,000 premium for N3 million TPPD limit, while owner good vehicles are to pay N20,000 premium for N5 million, and staff busses are to pay N20,000 premium for N3 million.

Adebayo Adewale, a consultant on vehicle licence and auto-registrations said motorists and vehicle owners in Lagos have aligned on the new rate.

“Motor Third-Party Insurance is now N15, 000.00 and no more N5000.00,” he reaffirmed.

According to Adewale, people are beginning to adapt since commencement of the enforcement.

Nelson Uche, who resides in one of the states in the Southeast said ‘Yes, we have been told about the new premium rate for motor insurance, but for now, both rates depend on what you asked for from licensing offices.

“I contacted the guy that renews my documents and he told me the new rate but I told him I need the old rate. Why should I pay N15, 000.00 for insurance? I told him I need the one for N5000.00 and he promised to give it to me when I come, Uche said.

On whether police checks for the documents on the road in that state, he said yes, they do. What police want to see is the papers being up to date. Whether the insurance is fake or genuine, they don’t know,” Uche said.

He confirmed that checking and verification of vehicle documents in that part of the country was still manual, so there is no way you can distinguish fake from genuine documents, he added.

The umbrella body of insurers, the Nigerian Insurers Association (NIA) had on May 24, 2023 raised the alarm over reports that some insurance companies were selling motor insurance policy below approved rates.

Yetunde Ilori, director-general of NIA in a circular NIA.MTPC/YI/23, titled, “Adherence to the approved rates for motor insurance”, sent to all chief executive of members companies, general business, warmed that it will report such perpetrators to the National Insurance Commission (NAICOM).

Ilori noted that following the decision reached at the 2023 CEOs retreat in respect of the need to implement the new premium rates on motor insurance, it has become pertinent for the association to reiterate the need for companies to sell motor insurance policies at the approved rates.

She stated that the secretariat has received reports that some companies are selling below the approved rates, stressing that this does not augur well for growth of the market even as it brings serious reputation issues to the industry.

She said: “Governing Council is displeased with the activities of agents within licensing offices engaged by member companies to sell third party motor insurance at reduced rates and other such arrangements.”

She said the NIA would not hesitate to report defaulting companies to NAICOM, adding that companies are therefore enjoined to ensure compliance to avoid regulatory sanction.

Olumide Ibidapo, managing director/CEO, FBN Insurance Brokers Limited said the future of motor insurance in Nigeria looks promising as the country continues to experience economic growth and an increase in the number of vehicles on the roads.

Ibidapo said the recently revised motor insurance rates can be a double-edged sword.

“In one instance, it will financially equip insurers to be able to deliver on their promise in the event of claims, especially due to the increasing cost of repair and maintenance. On the other hand, we understand that it may become more difficult for the insured to afford the new premiums but the industry is responding with more flexible products and/or payment options.”

Read also: How insurance companies can reduce fraud amid rising claims

He, however, noted that the industry must address the challenges of fraud and underinsurance, which are prevalent issues in the Nigerian insurance sector.

To address underinsurance, insurance companies can educate the public on the importance of adequate coverage and offer more affordable insurance products that cater to the needs of lower-income earners.

The directive on new rate was contained in a circular issued on December 22, 2022 with the number ‘NAICOM/DPR/CIR/46/2022 to all insurance companies titled “New premium rates for motor insurance,” and signed by Leonard Akah, director, policy and regulation at NAICOM on behalf of the commissioner for insurance.

The circular reads, “pursuant to the exercise of its function of approving rates of insurance premium under section 7 of NAICOM Act 1997 and other extant laws, the commission hereby issue this circular on the new Motor Insurance Premium rates effective from January 1, 2023.