Compulsory Builders Insurance Seven Years After.

Ebere Nwoji of Thisday examines how the Compulsory Builders Insurance has fared seven years after the National Insurance Commission flagged off the campaign for its implementation

The National Insurance Commission (NAICOM), precisely in August 2008 flagged off campaign on the implementation of compulsory builders insurance with a view to not only boosting the insurance industry’s premium but most importantly protecting lives and properties, which were often lost in building collapses.

The immediate past Commissioner for Insurance, Mr. Fola Daniel, during whose tenure the campaign was flagged off at the event listed structures covered under the Act to include: all buildings occupied by government ministries; extra-ministerial departments; statutory bodies; tenement houses; hostels; and any building to which members of the public have access for the purpose of obtaining educational or medical service or for recreational purposes or for business transactions.

Insurers’ expectations

During the launch, which took place at the popular Shehu Musa Yar’ Adua Centre, Abuja, insurance industry operators, who were highly elated and grateful to the regulatory body for the initiative, projected that the builders insurance, if well implemented as planned by the commission would yield a minimum of N10 billion premium to the industry annually.

Their hopes in this regard became higher when in the same year, state governments started enacting compulsory builders insurance in their various states.

The states were led by Lagos State government, followed by Imo State government among others.

To further boost activities in the industry through this particular policy, the federal government, two years ago, approved NAICOM’s recommendation to make possession of compulsory builders insurance certificate a pre- requisite for getting government contract.

It is now five years since the commission flagged off the campaign and THISDAY surveyed the industry to see the performance of the policy.

From available evidence, the policy has performed much more below insurers’ expectations.

Recall that Daniel, shortly after the launch had said that the transformation of the insurance industry into a trillion Naira market, a major dream of the industry from its present N300billion premium income margin was based on the assumption that if all the houses and motor vehicles in Lagos and Abuja alone were insured, the figure would be met.

But a close look at where the industry is today, premium income wise, shows that it is still far from meeting the target mainly because though the motor insurance through the Nigeria Insurance Industry Data base (NIID) has yielded substantial premium to the industry, the builders insurance yield falls below expectation mainly due to lack of enforcement.

Insurance act on builders insurance

Section 64 of insurance act of 2003 makes mandatory the insurance of buildings under construction where more than two floors are envisaged. The section provides that insurance must cover the liability of the owner of the building in respect of the negligence of his servants, agents or consultant.

Section 65 of the same act makes the insurance of public building mandatory.

Public buildings are defined in Section 65(2) of the Act as all buildings occupied by government ministries; extra-ministerial departments; statutory bodies; tenement houses; hostels; lodges; or licences and any building to which members of the public have access for the purpose of obtaining educational or medical service or for recreational purposes or for business transaction.

Section 65 (4) of the act specifies that 0.25% of the premium collected is to be paid into a Fire Services Maintenance Fund to be administered and disbursed by NAICOM for the purpose of providing grants or procurement of equipment to institutions engaged in firefighting services in the country.

The act also provides that where there is a violation of this order which derives from the provision of Sections 64 and 65 of the Insurance Act 2003, such offenders are liable to three years imprisonment or a fine of N250,000 or both.

Also, the law prescribes a fine of N100, 000 for a tenant or owner of such insured building in respect of loss of, or damage to property or bodily injury or death suffered by any user of the premises and third party.

Non enforcement of the policy

But despite these laws and determination by the insurance regulator to enforce the builders insurance, patronage of the policy and compliance with the law has been on a very low key.

This has compelled NAICOM to solicit for support of government in enforcement of builders insurance.

Apparently, non enforcement of the policy has not only affected insurance industry but other allied agencies of government whose services aid insurance such as the fire service.

At a recent forum of insurance brokers in Lagos where the Federal Fire service Department was invited as special guest, the agency was surprised to learn that 0.25 percent of premium from compulsory builders insurance was to go to them to enable them equip their workers for their fighting job.

Also at the recent insurance industry mega conference held in Abuja, when the issue of compulsory builders insurance came up with its expected aid to the fire service from the premium, the former commissioner for insurance Chief Oladipo Bailey said the service has not received aid from insurers in this regard because no account has been opened to that effect as directed by the law.

The underwriters themselves said not much premium has been realised from the policy.

At the conference, the insurers agreed that government and its relevant law enforcement agencies should help the industry in the enforcement of the policy while the industry should seek for alliance and cooperation from the agencies and help in buying some of their equipment.

The insurers want all hands to be on the deck in the enforcement of the builders insurance arguing that the policy, if patronised will not only save lives and properties in the country but would position insurance to play its role in the economy.

The federal government itself should be at the vanguard of this by getting its law enforcement agents to not only enforce the purchase of the policy but arrest and deal decisively with owners of collapsed building in different pars of the country, especially if such buildings lack insurance cover.

A situation where a building collapsed, killing scores of people and law enforcement agency like the police waited for a whole day before going there , thereby allowing the owner to escape will create room for carefree attitude among Nigerians regarding patronage of the policy.

Also a situation where a public building like the one belonging to the synagogue church in Ikotun Lagos, which collapsed and the former president Goodluck Jonathan only went there to sympathise with the General overseer instead of ordering his arrest from Abuja because of many lives that were lost in the mishap will encourage careless attitude among Nigerians towards construction and towards insurance patronage.

Therefore government should use every available instrument including punitive measure to compel Nigerians to comply with the compulsory builders insurance as well as enforce standard in construction of public buildings in Nigeria.

Insurance underwriters’ experience

Speaking on his company’s experience on the builders insurance, Managing Director Royal Exchange General Insurance, Mr. Olutayo Borokini said his company has not seen much change in the insurance of buildings by Nigerians.

According to him, a lot of public buildings in Nigeria are not insured, adding that this is so whereas the law says that they must be insured.

He observed that most hotels in Abuja as well as schools are not insured and they fall under the public building category.

He observed that there is huge potential for building insurance in the country but that the government needs to help.

On what insurers expect government to do in the enforcement of the builders insurance Borokini said: ‘’ By the time they seal up one or two uninsured buildings, virtually all the operators will wake up. These are the things I think the regulators should be doing in major cities. If buildings don’t have insurance, seal them up.

If you seal them up for one or two hours, they are going to pay. Like what Lagos State government is doing in respect to tax, if you don’t pay your tax, and they have written to you, by the time they come and seal up your premises for even one hour, you will pay. Get people to visit some of these hotels, public places and find out if they have insurance. If they don’t have, seal them up. Enforcement is lacking, and I believe it is only the government that can do something about it. Just get one or two examples, everyone will fall in line and comply’’, he suggested.

Imediate past president, Association of Registered Insurance Agents (ARIAN), Mr. Kingsley Obuvie said one of the reasons the builders insurance is not thriving is lack of enforcement.

He said government has to determine to enforce the policy before insurance marketers and agents could succeed in selling it.

He said it is pretty difficult for insurance agents and marketers to be going from one house to another looking for the owners to come and insure their houses. He said if government comes out with the desired seriousness to enforce the policy and follow it up with awareness, people would willingly go for insurance of their houses.

Cases of collapsed buildings

But while builders in different parts of the country continue to ignore the compulsory builders insurance, cases of collapsed buildings have failed to reduce.

Instead of abating, it has continued to increase and in each case of uninsured building collapse, the victims are left on their own except in situations where state government decides to extend helping hand to them through little financial help.

For instance, in the past ten years precisely between 2006 and 215, cases of collapsed buildings and their attendant waste of lives abound in different parts of the country.

In 2006, up to 3 building collapses were recorded in Lagos killing some occupants because of poor building and construction standard as well as poor materials.

Precisely On March 22, 2006, the top nine stories of a 21-story Nigeria Industrial Development Bank building collapsed in Lagos. This happened after a fire had gutted two stories in the building earlier that month. Heavy winds during a thunderstorm caused the building to cave in from the structural weakness after the fire.

One person was killed in the incident while 24 were reported injured.

In July the same year, a four-story block of flats collapsed in Lagos, killing at least 25 people , there was evidence by construction experts that the accident was caused by poor construction. The building was under three years old.

In November the same year, an unfinished, three-story building still under construction collapsed. Two construction workers were killed while twelve people were saved with minor injuries.

Efforts towards policy enforcement

Against this backdrop, insurers are in earnest search of ways to promote patronage of the builders insurance so that not only that their premium income will increase, also victims of the incidents will have compensation.

Immediate past president of Nigerian Council of Registered Insurance Brokers, (NCRIM) Mr. Ayodapo Shoderu had during his tenure said that the council would embark on lobby of state House of Assembly to promulgate edicts that would drive public compliance with some of the provisions of the insurance products covered under the insurance law.

Shoderu, who stated this at a press briefing in Lagos noted that the spate of public building collapses and the consequential human and material losses usually recorded all over the country would reduce considerably if states’ legislature have in place laws compelling adherence to section 64 and 65 of the insurance act.

He said that the NCRIB under his tenure would focus more attention on enforcement of builders insurance but from available evidence, his two year tenure which ended last week focused more attention on insurance awareness among Nigerians. It is hoped that his successor Kayode Okunoren will pay more attention on this important area of lobbying the law makers to act on enforcement of insurance among Nigerians.

Media reports say that between 2006 and 2013 there were about 135 cases of collapse buildings in Lagos alone.

The chairperson of the Lagos state tribunal of enquiry on building collapse during governor Baba Tunde Fashola’s tenure Abimbola Ajayi, while presenting the tribunal’s report to Fashola in Ikeja said the state’s building control law of 2010 empowered the relevant government agencies to act and stop the menace of building collapses in the state but that the system did not because of political, cultural and administrative reasons.

Ajayi also blamed the problem on the passive stance of law enforcement agencies and the Ministry of Justice to the arrest and prosecution of violators of building control laws.

“Although there is the provision for summary trial of violators and offenders in the laws examined by the Tribunal, there is no record of persons prosecuted or sanctioned for incidents of building collapse by the Ministry of Justice, Nigeria Police and any other known organ,” she said.

FG promises during the launch

During the campaign flag off in 2010,the then Secretary to the Government of the Federation (SGF), Ambassador Baba Gana Kingibe who reeled out the enforcement order to the public had explained that the Federal Government was worried about the persistent incidence of collapsed buildings with their attendant losses.

He said NAICOM’s action in flagging off the campaign was in line with Federal Government’s concern for the welfare of the citizenry and its sustained policy of ensuring the security of lives and property.

Kingibe said: “The collapse of any building will always leave behind stories of woes which include loss of loved ones, loss of investment and physical and emotional pains to people some of whom may be only passersby who were in the wrong place at the wrong time. Building collapse is not an accident. It occurs as a result of structural default, pure and simple. As such, non can be immune.”

The then Minister for Finance, Dr. Shamsudeen Usman, had at the flag off ceremony promised that federal government’s continued support to the insurance industry to make it competitive in the global arena.

He urged all owners of buildings to take the advantage of the Act to protect themselves and innocent members of the public who are usually the victims of their indiscretion.

From what is on ground especially in the face of incessant building collapse, the objective of flagging off the compulsory building collapse has not been realised spelling the need for government to listen to the yearnings of both the insurers and the regulatory body and put in place the necessary action through the use of law enforcement agents to enforce the compulsory builders insurance .Government should do this by showing good example through ensuring that all its assets are insured and the premium paid.

It is only then that government can have moral justification and courage to compel the private sector to insure their buildings.

This will go a long way to prevent loss of lives and properties and boost the premium of insurers. In a situation where buildings collapse, the victims and their dependants will get necessary succour from the insurers whose duty it is to bear such risks.

Also the resent leadership of NAICOM under Mohammed Kari should continue from where his immediate predecessor Daniel stopped in pushing for government’s assistance in enforcement of insurance to Nigerians.