• Monday, April 22, 2024
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BusinessDay

Why compulsory insurance has not worked

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 The weak legislative capacity to enforce the different compulsory insurances is the biggest bane of the nation’s insurance industry, Olutayo Borokini, managing director/CEO Royal Exchange General Insurance has said.

Borokini stated that there is no consequence for non compliance to the compulsory insurances, and that is why it cannot work.

According to him, except for third party motor insurance where you have little monitoring by security agents, there is no arm of government that enforces the other insurances.

The compulsory insurances included Group Life Insurance in line with the Pension Reform Act 2004; Buildings Under Construction-section 64 of the Insurance Act 200; Occupiers Liability Insurance –section 65 of the Insurance Act 2003; Motor Third Party Insurance –section 68 of the Insurance Act 2003 and the Health Care Professional Indemnity Insurance- section 45 of the NHIS Act 1999.

Borokini lamented that because of the weak legal frameworks, the regulators including the National Insurance Commission (NAICOM) and the National Pension Commission (PenCom), who is their responsibilities to enforce these policies are handicapped.

“This is not what any individual operator can do and that is why companies efforts and investment to drives these policies appear not yielding, so something has to be done from the top.”

Before now, these compulsory insurances existed but were not enforced by past administrations in NAICOM, making the sector lose huge revenue that could have supported its growth and contribution to the general economy.

This inability to take advantage of these opportunities opened the door for fake insurers and quacks that did not have the license to offer insurance services to offer insurance services in the name of genuine insurance.

In this dubious act, they earn illicit income from unsuspecting publics, who regularly patronise them due to ignorance. In the event of loss, the fake insurers were never there to pay claims, creating bad image and loss of confidence on the industry. And this development for many years robbed the insured public the expected benefits from the insurances; cost the industry huge fortunes in terms of revenue and at the same time, created very bad image for the sector.

But worried about the anomaly, Government in 2009 through NAICOM commenced plans to enforce the different compulsory insurances through a vehicle called “Market Development and Restructuring Initiative (MDRI).”

The MDRI project is a reform effort targeted at enhancing industry capacity, market efficiency and consumer protection in the Nigerian insurance market, with focus on enforcement of compulsory insurance products in Nigeria; sanitisation and modernisation of insurance agency system; wiping out of fake insurance institutions and improved regulation through risk based supervision.

With a lot of resources and effort already channelled towards public enlightenment by NAICOM and industry operators, it is expected that citizens embrace these insurances, because not only does it protect against economic wastages, it gives one, rest of mind to go about their daily activities without fear or worry.

Fola Daniel, commissioner for Insurance expressing commitment to the project said the commission was not happy to see Nigerians die in collapsed buildings without any form of compensation, stating that “the situation cannot be allowed to continue like this.”

 

MODESTUS ANAESORONYE