Worried by the increasing sums in compensation payments to families of victims of insecurity across the country and dwindling revenue bases, some state governments are exploring ways of reducing expenditure through the setting up of group life insurance offices in their domains.
For this purpose, the state governments would be paying premiums to insurance companies which would be directly responsible for payment of compensation to affected families whenever such incidents occur.
Delta and Imo states have in this regard, made enquiries from the National Insurance Commission (NAICOM) on what it entails to set up the group life insurance office, while Lagos state has taken the lead in transferring the risk on its workers to the insurance industry.
Group life insurance is part of the reforms initiated under the Pension Act of 2004 and is being pushed by the National Insurance Commission (NAICOM).
BusinessDay gathered that more states are planning to join the league as a way of reducing their expenditure, as the security situation in the country worsens.
The state governments’ efforts are coming six years after the federal government started insuring its workers under the civil service group life insurance scheme. The group life which has its roots in the 2004 pension scheme, commenced in 2008 with a two-year pilot scheme that ended in 2009. It has since been running every year, with billions of naira in premiums from the federal government.
“State governments are now making enquiries on the setting up group life offices and this is part of the reasons why we met with the Nigeria Labour Congress, NLC on group life policies for workers.
“We are leveraging with stakeholders across the sectors to deepen insurance and it is in this regard that we met with town planners on the incessant collapse of buildings and this is why the NLC was taken into consideration,” Fola Daniel, Commissioner for Insurance said.
Daniel, at an interactive session with media executives in Lagos on Monday, said the group life insurance scheme for workers is part of the reforms that have changed the face of the industry and are creating a new image for the sub-sector.
To buttress this he pointed at the upsurge in insurance claims paid, especially to the Police and the Nigerian Armed forces whose personnel are involved in the efforts to curb the scourge.
Nigeria, since the 2010 independence anniversary bomb blast that killed scores of people the capital city of Abuja , has been gripped by insecurity from terrorists attacks. The Boko Haram sect which operates mainly in the Northern part of the country has killed thousands of people .
The commissioner also hinted at the industry’s compliance with the International Financial Reporting Standards, which according to him is commendable.
“We embrace reforms in the industry and this is manifest in the way operators in the industry adopted the IFRS. We have all migrated to IFRS and this is because we started early”, he said.
Of importance to the commissioner is the implementation of the section 51 of the Insurance Act which stipulates that an insurance contract does not exist without the payment of premium .
This, Daniel observed has resolved the cash-flow problem that has hindered the industry from paying genuine claims.
“ We did a survey to find out why insurers are not paying genuine claims and we discovered that it was as a result of outstanding premiums that has affected their cash flow.
“The unfortunate thing is that the underwriters will still go ahead to pay tax to the Federal Inland Revenue Service (FIRS) on the premiums that have not been collected. This impacted negatively on the cash flow and prevents them from honouring genuine claims”.
“With the decision to collect premium as an insurance businesses, we have since noticed tremendous improvement in insurers’ cash flow. This has also impacted positively on claim settlement which has improved”.
By: BADEJO ADEMUYIWA
