By simple definition, compulsory insurance is that class of insurance which by law is made compulsory with the ultimate objective of providing protection to third parties and the general public.
Insurance is made compulsory under several laws, regulations, and guidelines but the compliance level is largely frustrating its implementation.
The immediate past commissioner for insurance, Mr Fola Daniel, had earlier in 2011 promised to commence the enforcement of the law, having realised the lukewarm attitude of agencies of government responsible for its enforcement.
Daniel scheduled March of that year for its start and later September of same year. Prior to that determination, then the National Insurance Commission (NAICOM) in 2010 developed the Market Development and Restructuring Initiative (MDRI) to boost insurance penetration in the country. Part of the objectives of the MDRI is to enforce the compulsory insurance under the Insurance Act of 2003.
Generally, the industry performance has been marred by public apathy following very large negative perception about insurance. For better understanding of the subject, the following types of insurance, the Builders Liability – under the Insurance Act 2003/Lagos State Building Control Law 2010, Construction All Risks; Occupiers Liability – under the Insurance Act 2003 and Lagos State Law; Employers Liability (Group Life) under the Pension Reform Act 2004; and Healthcare Professional Indemnity – under the NHIS Act 1999 are under the compulsory insurances. Others are the Motor Third Party Liability – under the Insurance Act 2003 and Builders Liability Insurance.
These types of insurance requires that all owners or contractors of buildings (of more than two floors) under construction must purchase or provide compensation in event of bodily injury, death, and property damage to workers at construction sites and affected members of the public in the event of the collapse of the building, and other construction risks. The penalty for non-compliance is N250,000 plus three years imprisonment.
A record of conviction, sealing, and demolition of the building are the penalties provided under the federal and Lagos State laws.
Under the Occupiers Liability Insurance, all owners or occupiers of public buildings, whether private or public, are required to provide the National Insurance Act 2003 and the Lagos State Building Control Law 2010.
A public building is any building that is not 100 per cent used by the owner for residential purposes. Public buildings include tenement houses, hostels, residential buildings occupied by tenants, lodgers or licensees, and any other building to which members of the public enter and exit for the purpose of educational, recreational, or medical services (for instance schools, cinemas, hospitals, malls, petrol stations, etc). The Occupiers Liability Insurance provides compensation in events of bodily injury, death, and property damage to the business users and members of the public in the event of building collapse, fire, earthquakes, storm or flood. The penalty for non-compliance is N100,000 plus one year imprisonment, and sealing or demolition of the building under the federal and the Lagos State laws.
The Employers’ Liability (Group Life) Insurance ensures that all employers of labour with more than four employees are required to have the Pension Reform Act 2004. The law requires the employers have insurance that will provide for compensation in the event of death, disappearance, disability, or critical illness suffered by their staff while in service and to subsidise the pension provision in the event of mental or physical disability.
This law applies to both public and private sector employees and means that employees (and their families) have the right to demand for compensation and payment from their employers in the event of injury or death. The penalty for non-compliance with this law is N250,000, record of conviction, and in addition the place of business may be sealed.
For the Healthcare Professional Indemnity Insurance all licenced health care providers and medical practitioners (such as doctors, nurses, pharmacists, etc) are required to have the National Health Insurance Scheme (NHIS) 1999. The law have insurance that will protect their patients in case of accidents or fatalities (death) resulting from professional negligence. This type of insurance provides compensation to patients and their relatives in the event of involuntary murder, disability, shock, and injury suffered by patients as a result of the negligence of health care providers.
The penalty for non-compliance with this law is a possible revocation of licence by the National Health Insurance Council, a record of conviction, and sealing of the premises.
Also for the Third Party Motor Liability Insurance stipulates that all owners and drivers of motor vehicles, motorcycles, and special type vehicles plying the Nigerian roads are required to have the National Insurance Act 2003. The third party motor liability insures the vehicle against liability to death, bodily injury, or damage to the property of a third party arising from the use of the vehicle. The penalty for non-compliance is a fine of up to N250,000 plus one year imprisonment.
The commission, in trying to ensure compliance described said that it is part of a comprehensive programme code-named “The Nigeria Insurance Market Development and Restructuring,” which was put in place to increase capacity and consumer trust in the insurance industry in Nigeria. According to the NAICOM, 16 insurance products are directly and indirectly made compulsory in Nigeria, but five are very prominent and capable of generating about 55 per cent of the industry premium income.
The NAICOM, alongside other stakeholders, perceive the Insurance Act 2003 and Motor Vehicle (Third Party) Ordinance 1945 as key and should be significantly enforced. The policy provides that no person shall use or cause or permit any other person to use a motor vehicle on the road unless a liability which he may incur in respect of death, bodily injury or damages to the property of a third party is insured with an insurer registered under this Act. The penalty for non-compliance is N250,000 or one year imprisonment or both.
The director-general of the Nigeria Insurers Association (NIA), Sunday Thomas, said that he is deeply concerned about enforcement.
In an interview with LEADERSHIP, Thomas simply said, “In the case of enforcement I am not satisfied at all. It is very disappointing.”
According to him, the NAICOM is not an enforcement agency but a regulator.
It has done what is expected of a regulator to restructure and provide operational guidelines, the rest is for players and law enforcement agencies to take it up from there.
For the compulsory insurances the D-G said they were put in place to boost the sector under the MDRI.
“For these classes of insurance, there are different agencies that should take compliance responsibility.
We have the Town Planning, Police, VIO, FRSC and others.
For us in NIA we have been collaborating with them establishing partnerships and structures to encourage enforcement”, he said.