Ahead of the April 1, 2018 renewal date for the Nigerian National Petroleum Corporation (NNPC) Group Life insurance for 2018/2019, insurance operators doing life business are pushing for approved minimum rates to be able to underwrite the government oil company’s volatile business.
The insistence on approved statutory rate has become necessary without alternative option because of the high claims record on the NNPC account, put at 200 percent on average, according to analysts.
Industry analysts who spoke to BusinessDay last night said the insurers backed by the regulator, the National Insurance Commission (NAICOM) were having a meeting with the management of NNPC in Abuja to agree on the new rates before commencement of the current year cover in three weeks time.
Premium for the 2017/2018 group life insurance of the corporation which is due to elapse on March 31 was N2.4 billion and it was underwritten by 11 life insurance companies.
The 11 co-insurers was led by Zenith Life Insurance, with a share of 20 percent of the risk, Royal Exchange Life, NSIA and Custodian Life Insurance, with 10 percent each; Mutual Benefit Life, 9 percent; Leadway Assurance, LASACO Assurance and WAPIC Insurance, each with 8 percent share of the business. AIICO Insurance and Ensure Insurance each have 6 percent, while UBA Metropolitan has 5 percent.
NAICOM, the regulator last year released a rate guide for compulsory insurances including group life insurance, in a bid to end rate cutting, unhealthy competition and inability of operating companies to meet claims obligation to policyholders.
A circular signed by Leonard Akah, acting director (A & P) on behalf of the Commissioner for Insurance said, “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.
According to the guidelines for group life insurance policy for employees jointly issued by the National Insurance Commission (NAICOM) and National Pension Commission (PenCom), the employer is required to fully bear all costs in relation to procurement of this policy, and this shall be in addition to the contributions to be made by the employer to each employee’s Retirement Savings Account.
The policy provides cover to the insured against death and the insurance cover is mandatory for all employees as long as they are in employment. This means that the policy provides for the payment of the sum assured in the event of the death of a member of the scheme from any cause, natural and accidental.
An insurance CEO who doesn’t want to be mentioned said, “We are currently engaging the NNPC to see reasons to accept the new rate on commencement of the new insurance year beginning April.”
The insurance Boss said, “You know we have been doing NNPC insurance account at a loss because the claim record is very high, so it is important we charge an appropriate rate.”
“For other aspects of the business, like the consolidated general insurance business, there is no problem with them and I think they are doing well,” the CEO stated.
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