Insurance regulator, the National Insurance Commission (NAICOM) has released a price guide for compulsory insurances, in a bid to end rate cutting, unhealthy competition and inability of operating companies to meet claims obligation to policyholders.
NAICOM, whose core responsibility is to protect insurance consumers that pass their risks to insurance companies, warned operators to ensure strict compliance, assuring that the Commission will monitor adherence.
Affected policies include statutory Group Life Insurance, Builder’s Liability Insurance, Occupier’s Liability (public building) Insurance, Healthcare Professional Indemnity Insurance and motor third party.
In a circular signed by Leonard Akah, acting director (A & P) on behalf of the Commissioner for Insurance, made available to BusinessDay at the weekend, “Insurance operators are directed to henceforth adhere and comply with existing approved premium rates for all Compulsory classes of Insurance.”
According to the circular, Statutory Group Life Insurance, which is fallout of the Pension Reform Act 2004 as amended in 2014, shall be 6.8 per mil.
Section 4 (5) of the Pension Reform Act 2014 stipulates that every employer to which the Act applies, shall maintain a group life insurance policy in favour of the employees for a minimum of three times the annual total emolument of the employee.
Also Occupiers Liability, which is a provision of Section 64 of the Insurance Act 2003, according to NAICOM will be – sum assured between 10-50 million naira will be charged 0.30 percent for federal and private buildings, 0.35 percent for state and federal capital territory and 0.40 percent for local governments, among others.
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The policy provides that “No person shall cause to be constructed any building of more than two floors without insuring with a registered insurer his liability in respect of construction risks caused by his negligence or the negligence of his servants, agents or consultants which may result in bodily injury or loss of life to or damage to property of any workman on the site or of any member of the public.”
For Professional Indemnity Insurance, according to the circular, rate for less than 20 bed spaces of N10 million sum assured will be N50, 000.00; while 21 to 50 bed spaces of N15 million sum assured shall be N60, 000; while 51 to 100 bed spaces of N40 million sum assured shall be 120,000.00, among others.
This is a form of liability insurance that helps protect professional advice- and service-providing individuals and companies from bearing the full cost of defending against a negligence claim made by a client, and damages awarded in such a civil lawsuit.
Rate for Motor Third Party, which incidentally has been the most abused shall be for private motors N5,000.00; Commercial motor (own goods) N7,500.00; commercial motor (staff bus) N7,500.00; commercial Motor (Trucks/general cartage) N25,000.00.; motor trade(road/premises risks) N5,000.00; special types (Ambulance/Hearses) N5,000.00; Motor Cycle (power bike) N1,500; and official ride N1,500.00.
As provided in the Insurance Act 2003, motor third party insurance policy protects against third party damage. This means that in the event of an accident occurring, the policy holder has a third party property damage limit up to N1 million and no limit to life, in the case of death or permanent disability.
Some operators who reacted to the release of the circular hopes this effort we will help the industry achieve common rates, discourage de-marketing, build capacity to meet claims obligation, make profit, increase shareholder value and also ward off fake operators.
Larry Ademeso, managing director, Custodian Life Insurance said it’s a welcome development because it is in the best interest of the industry. But he however stated that a lot of clarifications need to be made by the regulator for effective implementation.
Ademeso said “What will be the penalty for non-compliance”, because if it’s not stated, you will see some companies circumventing the rule, if there is not a specific penalty,” he said.
According to him, “if NAICOM comes up with a penalty that says for instance, if the rate per mill is 6 percent and you charge 4 percent, you pay 2 percent as fine, then we would have gotten it right.”
He also noted that clarifications should be given concerning long term contracts, either existing or a new contract, so that everyone will be very clear on what is an offence. “But for me it is a good development for our market,” he stated.
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